2019 (2) TMI 532 - HC - Income Tax

Trust Deed Dissolution Clause not Required for Registration under Income Tax Act

The High Court upheld the Tribunal's decision, emphasizing that the absence of a dissolution clause in the trust deed should not impede the registration ... Application for registration u/s 12AA rejected - object of the Trust and genuineness of its activities - Held that:- Identical issue had arisen before this Court in CIT [Exemptions]) Vs. Tara Educational & Charitable Trust. [2017 (8) TMI 377 - BOMBAY HIGH COURT] The said appeal was dismissed as not giving rise to any substantial question of law. Issues:Challenge to order of Income Tax Appellate Tribunal regarding registration of Trust under Section 12AA of the Income Tax Act, 1961 based on absence of dissolution clause in the trust deed.Analysis:1. Issue of Registration under Section 12AA:The appeal challenges the order of the Income Tax Appellate Tribunal regarding the registration of a Trust under Section 12AA of the Income Tax Act, 1961. The central question raised by the Revenue was whether the absence of a dissolution clause in the trust deed would impact the registration under Section 12AA, potentially leading to the transfer of net assets to another entity or distribution among trustees upon dissolution. The respondent Trust was registered under the Trust Deed dated 1.1.2009 with the Charity Commissioner but faced rejection for registration under Section 12AA due to the absence of a dissolution clause in the Trust Deed.2. Decision of the Tribunal:The Tribunal's order allowed the respondent's appeal, emphasizing that the absence of a dissolution clause in the trust deed should not prevent the registration of the Trust under Section 12AA. The Tribunal highlighted that the key consideration for registration is the Trust's objectives and the genuineness of its activities. Additionally, reference was made to Section 55 of the Bombay Public Trust Act 1950, which addresses situations where a dissolution clause is absent in the trust deed.3. Judicial Precedent:The counsel for the Revenue acknowledged a similar issue in a previous case, Income Tax Appeal No. 247 of 2015 (CIT [Exemptions]) Vs. Tara Educational & Charitable Trust, where the appeal was dismissed for not raising any substantial question of law. Drawing from the decision in the aforementioned case, the High Court dismissed the current appeal, stating that the proposed question did not give rise to any substantial legal issue and, therefore, declined to entertain it. Consequently, the appeal challenging the Tribunal's order was dismissed based on the established legal precedent.In conclusion, the High Court upheld the Tribunal's decision, emphasizing that the absence of a dissolution clause in the trust deed should not impede the registration of a Trust under Section 12AA of the Income Tax Act, 1961. The judgment underscored the significance of the Trust's objectives and activities in the registration process, ultimately dismissing the appeal based on established legal precedent and lack of substantial legal questions raised.