2016 (8) TMI 808 - AT - Income Tax

Formal Deed Not Required for Trust Registration under Income Tax Act

Merciful Jesus Church Versus The Commr of Income ax, (Exemption), Kochi

The Tribunal held that the execution of a formal deed of trust is not necessary for granting registration under section 12A of the Income Tax Act. The ... Application for registration u/s 12A refused - denial of benefit of registration for the reasons that original/copy of the instrument is not filed in support of creation of the trust - whether execution of a formal deed of trust is necessary for granting registration u/s 12A ? - Held that:- In the instant case the religious institution was established by an order of a Bishop, called ‘decree’. On perusal of the ‘decree’, it is clear that a religious institution is established. Therefore, we are of the view that it is not correct on the part of the CIT(E) to deny registration to the appellant u/s 12A of the Act, for the reason that copy of the instrument in support of creation of trust is not filed along with Form 10A. - Decided in favour of assessee. Issues Involved:1. Whether execution of a formal deed of trust is necessary for granting registration under section 12A of the Income Tax Act.2. Whether the CIT (Exemption) erred in rejecting the assessee's application for registration under section 12A due to the absence of an instrument evidencing the creation of the trust.Issue-wise Detailed Analysis:1. Necessity of a Formal Deed of Trust for Registration under Section 12A:The primary issue was whether a formal deed of trust is mandatory for granting registration under section 12A of the Income Tax Act. Rule 17A of the Income Tax Rules, 1962, outlines the procedure for applying for registration of charitable or religious trusts or institutions. It specifies that if a trust or institution is established under an instrument, the original instrument and a copy must be submitted. However, if the trust or institution is established otherwise than under an instrument, any document evidencing its creation must be provided. The Tribunal emphasized that Rule 17A itself does not mandate that the institution/trust must be established under an instrument. Instead, it requires only a document evidencing the creation of the trust or institution.The Tribunal referenced the Delhi Bench's decision in the case of Tsurphy Labrant vs. DIT(Exemption), which held that evidence of the creation of a trust or institution, even if not formalized through a deed, is sufficient for registration under section 12A. The Tribunal noted that the Indian Trust Act allows for the creation of trusts orally and that any evidence supporting such creation is adequate for registration.2. Rejection of the Assessee's Application by CIT (Exemption):The CIT (Exemption) had rejected the assessee's application for registration under section 12A on the grounds that the assessee did not produce an original or copy of the instrument supporting the creation of the trust. The assessee argued that it had submitted a certified copy of the decree issued by the Bishop, which established the religious institution. The Tribunal found that the decree issued by the Bishop under Canon law was sufficient evidence of the creation of the religious institution. The Tribunal concluded that the CIT (Exemption) was incorrect in denying registration based on the absence of an instrument, as the decree served as a valid document evidencing the institution's creation.The Tribunal also cited the Madhya Pradesh High Court's decision in Laxminarayan Maharaj and Another Vs. CIT, which held that evidential documents that afford a logical basis for inferring the creation of a trust are sufficient for registration purposes. The Supreme Court had dismissed the SLP against this decision, reinforcing the view that formal instruments are not always necessary.Conclusion:The Tribunal held that the execution of a formal deed of trust is not necessary for granting registration under section 12A of the Income Tax Act. It found that the decree issued by the Bishop was adequate evidence of the creation of the religious institution. Consequently, the Tribunal allowed the appeal filed by the assessee and directed the CIT (Exemption) to grant registration under section 12A.Order Pronounced:The appeal filed by the assessee was allowed, and the order was pronounced in the open Court on the 27th day of July 2016.