Tribunal affirms CIT(A) decision, directs AO to allow exemption under sections 11/12 of Income Tax Act

The ITO (E) 1 (1), Mumbai Versus Bhansali Trust, Mumbai

The ITO (E) 1 (1), Mumbai Versus Bhansali Trust, Mumbai - TMI Issues Involved:
1. Entitlement of the assessee for exemption under section 11 of the Income Tax Act, 1961.
2. Validity of the registration under section 12A of the Income Tax Act post amendments in the Trust Deed.

Issue-wise Detailed Analysis:

1. Entitlement of the Assessee for Exemption under Section 11 of the Income Tax Act, 1961:

The primary ground of appeal by the Revenue was that the CIT(A) erred in holding that the assessee is entitled to exemption under section 11 of the Income Tax Act, 1961. The Revenue contended that the terms and clauses of the Trust Deed, which formed the basis of the grant of registration under section 12A, had been altered after such registration, and thus, the foundation of registration was removed by the voluntary act of the assessee. Consequently, the Assessing Officer (AO) denied the exemption under section 11/12, determining the gross total income of the assessee as taxable.

The CIT(A), however, set aside the AO's order, noting that the Trust had been registered under section 12A for over 40 years and that the amendments in the objects did not detract from their charitable nature. The amendments were carried out in 1975 and 1979 and were duly registered with the Charity Commissioner. Furthermore, the exemption under section 11/12 was not denied in scrutiny assessments for the assessment years 2007-08 and 2008-09. The CIT(A) concluded that the denial of exemption was not justified.

2. Validity of the Registration under Section 12A Post Amendments in the Trust Deed:

The Revenue argued that the registration under section 12A did not survive due to the amendments in the objects of the Trust, which were not intimated to the Director of Income Tax (Exemption). The Revenue relied on the Tribunal's decision in the case of Board of Control for Cricket in India vs. ITO and the judgment of the Allahabad High Court in Allahabad Agricultural Institute & Another vs. Union of India And Others, arguing that the registration would not survive if the objects were altered after the grant of such registration.

The assessee contended that the changes in the objects did not cause a wholesale change in the charitable purpose of the Trust. The Trust continued to be registered under section 12A, and its recognition under section 80G was renewed periodically. The amendments in 1975 and 1979 were meant to enlarge the scope of the original charitable objects, not to change them fundamentally. The Mumbai Tribunal's decision in the case of Mehta Jivraj Makandas & Parikh Govindaji Kalyanji Modh Vanik Vidyarthi Public Trust vs. Director of Income Tax (Exemption) was cited, which held that there was no statutory requirement to intimate the change in objects to the DIT(Exemption).

The Tribunal noted that the AO's denial of exemption was based solely on the non-intimation of amendments to the DIT(E). The amendments in 1975 and 1979 did not render the activities non-charitable. The decision in the case of Board of Control for Cricket in India was distinguished as it involved substantial and material changes in the objects, which was not the case here. The Tribunal emphasized that the statutory requirement for cancellation of registration under section 12AA(3) was not met as there was no finding that the amended objects were non-charitable or that the activities were not genuine.

The Tribunal concluded that the amendments were merely enabling clauses to achieve the original charitable objects and did not signify any new objects. The amendments did not render the registration under section 12A nugatory. The reliance on the Allahabad Agricultural Institute case was also distinguished as it involved wholesale changes in the objects, which was not the situation here.

Conclusion:

The Tribunal affirmed the decision of the CIT(A), directing the AO to allow the exemption to the assessee under section 11/12 of the Act. The appeal of the Revenue was dismissed, and the order was pronounced in the open court on 31st August 2015.