Tribunal validates trust with Non-Resident Indian trustees under Indian Trust Act

The tribunal held that the trust is valid under the Indian Trust Act, 1882, despite all trustees being Non-Resident Indians (NRIs). The Commissioner of Income Tax (Exemptions) rejected the registration application citing trustee nationality, but the tribunal found no specific bar against NRIs as trustees. The tribunal directed a re-examination of the trust's charitable nature and activities for potential registration and exemption under relevant Income Tax Act sections. The appeal was allowed for statistical purposes, pending the outcome of the re-evaluation by the Commissioner.

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Issues Involved:
1. Rejection of application for registration under Section 12AA and exemption under Section 80G of the Income Tax Act.
2. Whether the trust is valid under the Indian Trust Act, 1882, given that the trustees are Non-Resident Indians (NRIs).
3. Examination of the charitable nature of the trust’s objects and the genuineness of its activities.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA and Exemption under Section 80G:
The assessee, a trust formed on 8th March 2013, applied for registration under Section 12AA and exemption under Section 80G of the Income Tax Act. The Commissioner of Income Tax (Exemptions) [CIT(E)] rejected the application on the grounds that all trustees were NRIs, which, according to CIT(E), violated the Indian Trust Act, 1882. The CIT(E) reasoned that a non-resident cannot be a trustee of an Indian resident trust unless domiciled in India, citing Explanation-1 to Section 60 and Section 73 of the Indian Trust Act.

2. Validity of the Trust under the Indian Trust Act, 1882:
The CIT(E) argued that the trust could not be valid as all trustees were NRIs. However, the tribunal examined Section 10 of the Indian Trust Act, which states that every person capable of holding property may be a trustee. There is no specific bar under Section 10 against NRIs being trustees. Section 73 addresses the appointment of a new trustee if a trustee is absent for six months or domiciled abroad, but does not invalidate the trust itself. Section 60, which gives the beneficiary the right to proper trustees, does not impinge on the validity of the trust if a trustee is not a ‘proper person’. The tribunal noted that the trust had already substituted one of the trustees with an Indian resident before filing for registration, thus complying with the requirements.

3. Examination of Charitable Nature and Genuineness of Activities:
The tribunal found that the CIT(E) did not examine the objects and genuineness of the trust’s activities, which is a requirement for registration under Section 12AA. The tribunal noted that the trust’s objects, as stated in the deed, appeared charitable. The tribunal directed the CIT(E) to examine the objects and activities of the trust to determine if they are genuinely charitable and benefit the public at large. If found so, the registration under Section 12AA and exemption under Section 80G should be granted.

Conclusion:
The tribunal held that the trust is valid under the Indian Trust Act, 1882, and directed the CIT(E) to re-examine the trust’s objects and activities. The appeal was allowed for statistical purposes, with the direction to grant registration and exemption if the trust’s activities are found to be genuinely charitable.

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