AI Drafter 
TaxTMI 
TaxTMI 
2022 (11) TMI 320
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.... of law were framed:- (1) Whether the registration once granted under Section 12AA of the Income Tax Act, 1961 could be cancelled on the basis of same set of provision of the Trust which were examined earlier? (2) Whether the Income Tax Authorities have the jurisdiction under section 12AA(3) of the Income Tax Act, 1961 to question the legality and propriety of the Trust Deed of the Assessee or its inquiry is limited to the conditions stipulated under section 12AA(3) namely,- (i) that the activities of the Trust are not genuine, or, (ii) are not being carried out in accordance with the object of the Trust? (3) Whether in the facts and circumstances of the case, findings of the learned I.T.A.T. that the appellant failed to give satisfactory explanation regarding the sale proceeds which is utilized for charitable object of the Trust, is perverse? 4. The Appellant Sri Ramjanki Tapovan Mandir is a Hindu Religious Trust registered under the provisions of the Bihar Hindu Religious Trust Act, 1950 (as adopted). The Appellant is represented through its Chairperson, Mahant Sri Om Prakash Sharan. The Trust was created for the purposes of maintai....
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....Board and after seeking approval of the District Judge, as provided under Section 28(j) of the Bihar Hindu Religious Trust Act, 1950. However, the High Court, prima facie, held that the permission obtained by the Board was by way of mis-representation/fraud which formed the basis of the order of approval passed by District Judge/ Judicial Commissioner, and, the High Court was of the opinion that fraud and mis-representation has been committed in transferring the properties of the Trust and, accordingly, vide order dated 07.06.2017, directed Central Bureau of Investigation to investigate the matter and to take appropriate action including action for restoring the land in favour of the deity depending upon final outcome of CBI investigation. 7. As a sequitor to the aforesaid order dated 07.06.2017 passed by this Court, the Commissioner of Income Tax (Exemption) (for short 'CIT (Exemptions)') issued show cause notice dated 18.12.2017 to the Appellant-Trust for cancellation of its registration under section 12AA of the I.T. Act on the ground that the Trust is violating the aims and objectives mentioned in the Trust-Deed and/or Memorandum of Association. The Appellant appeared and su....
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....hanged the original Trust Deeds of the years 1948 and 1987 contrary to the wishes of the founder of the Trust. On the basis of the above, it was recorded in the order that activity of the Trust was not genuine. Mr. Gadodia, while inviting attention of this Court to the order passed by the Hon'ble Apex Court in Civil Appeal No. 4003 of 2019 (Shree Shree Ram JankiJi AsthanTapovanMandir & Anr. Vs. The State of Jharkhand &Ors.), contended, inter alia, that the Hon'ble Apex Court, in specific terms, has held in its aforesaid Judgment that the finding of the High Court that deity could not transfer its land is not tenable. On the basis of the above, it was contended that the very foundation of the order of cancellation of the Appellant's registration under section 12AA was annulled by the Hon'ble Apex Court. While placing reliance upon section 28(j) and section 44 of the Bihar Hindu Religious Trust Act, 1950, it was contended that the property of the deity can be alienated, developed or given for lease for the benefit of deity and the Income Tax Department cannot contend that the Trust Deed of the year 2005 was contrary to the wishes of the founder of the Trust. Reference in this regard ....
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....der section 263, dated 15.03.2018, Appellant-Trust filed an Appeal before the ITAT, Ranchi, which was allowed vide order dated 20.02.2019, and, in the said order of ITAT, it was clearly held that earlier Trust-Deeds were not relevant for allowing the benefit of exemption, and, income derived pursuant to development agreement was as per object of the Trust. Further reliance was placed upon the Supplementary Affidavit and it was stated that Appellant-Trust, from time to time, has invested the income earned from sale of immovable assets in fixed deposit with the Bank and, as per the Balance-sheet for the year ending on 31st March, 2020, an amount of Rs. 7.00 Crores (approx.) was lying in fixed deposit of the Appellant-Trust. Placing reliance on the Instructions of the Central Board of Direct Taxes (CBDT) bearing Instruction No. 883-CBDT F.N. 180/54/72-IT (AI) dated 24.09.1975 CBDT Bulletin XXI/1/74, it was submitted that the investment of the net consideration on the transfer of a capital asset in fixed deposit with a bank for a period of six months or above would be regarded as utilization of the net consideration for acquiring another capital asset within the meaning of section 11(1....
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....n 12AA(3) contemplates existence of two contingencies for cancellation of the registration already granted, namely.- (i) If the activities of the Trust are not genuine; or (ii) are not being carried out in accordance with the objects of the trust. 15. In the instant case, it is an admitted fact that registration under section 12AA of the I.T. Act was granted to Appellant-Trust on the basis of Trust Deed dated 20.09.2005. It is further an admitted fact that in the Trust Deed dated 20.09.2005, it was specifically recorded, inter alia, that the lands of the Trust were under threat of encroachment by local inhabitants, and, in order to save the land in question, it was felt necessary to utilize the said land by giving it for development for construction of buildings/flats and the proceeds received from consideration amount were to be utilized for the purposes of the Trust. On the basis of the same set Trust Deed, benefit of exemption under Section 12A of the I.T. Act was granted by granting registration to the Trust under section 12AA. However, despite the aforesaid facts, notice was issued to the Trust dated 18th December, 2017 directing the Trust to show cause, i....
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....n the author of the Trust and its trustee, and, the Income Tax Department is not authorized to comment on execution of the Trust Deed. In the present case, CIT (Exemptions), while cancelling the registration, went beyond the terms of the Trust Deed and proceeded to cancel the registration by recording, inter alia, that the Trust Deed dated 20.09.2005 was contrary to the wishes of the founder of the Trust and the earlier instruments of Trust i.e. Trust Deeds of the years 1948 and 1987. Thus, CIT (Exemptions) clearly travelled beyond the scope of inquiry as contemplated under section 12AA(3) for declaring that the activities of the Trust are not genuine. 19. In fact, from bare perusal of the order of the CIT (Exemptions), it would be evident that said order was solely influenced by the order passed by this Hon'ble Court in W.P. (PIL) No. 1590 of 2017. In fact, several paragraphs of the order of this Hon'ble Court were quoted in the order cancelling registration and the finding rendered for treating the activities of the Trust as not genuine was solely based upon the order passed by this Court passed in W.P. (PIL) No. 1590 of 2017. As mentioned above, said order of this Hon'ble Cou....
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....Apex Court, in clear terms, held that under section 44 of the Bihar Hindu Religious Trust Act, 1950, a religious trust has power to transfer its immovable property after taking previous sanction, and, the Hon'ble Apex Court has further held that the deity could transfer its land for fulfilling its objectives. Thus, the finding rendered by CIT (Exemptions) for cancellation of the registration certificate is directly contrary to the order passed by the Hon'ble Apex Court in the case of the Appellant-Trust itself. 22. That apart, once registration has been granted to the Appellant Trust under section 12AA of the Act after satisfying about the genuineness of the activities of the Trust, the same cannot be cancelled on the basis of the same set of provisions of the Trust which were examined earlier. Reference in this regard may be made to the Judgment rendered in the case of 'CIT Vs. Sarvodaya Ilakkiya Pannal' (supra). Relevant paragraphs of the said Judgment are quoted hereunder:- "4. In order to avail of the benefit of exemption under section 11 of the Act, a trust can make an application to the Commissioner for registration under section 12A of the Act. On receipt of the ....
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....eminars, symposium and conferences to propagate Gandhian and Sarvodaya Ideologies. (d) To do all other acts and things incidental to and necessary in the furtherance of the said objects. (e) To apply the profit derived by the society to the activates connected with spreading and propagating of Gandhian and Sarvodaya Ideologies and to help the Sarvodaya movement." 7. The Commissioner of Income-tax, before granting the registration, had gone into the above objects and satisfied himself for grant, of registration. Subsequently, by the order of the Commissioner of Income-tax dated June 31, 2011, the very same objects were considered and were found not to be the activities which are charitable in nature. While carrying on the activities of publication and sale of Sarvodaya Literature and Gandhian Ideologies as charitable activities, referring the same objects as not charity, it cannot be brought under the provisions of section 12AA(3) of the Act. The cancellation was made not on the ground that the activities of the trust were not genuine but the activities of the trust were not in accordance with the objects of the trust. When the trust was registered with th....
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....ider the effect of section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under section 12AA is bad and, hence, to be cancelled." Xxx xxx xxx "47. It is no doubt true that the decision reported in Asst. CIT v. Surat City Gymkhana, (2008) 300 ITR 214 (SC), was in the context of section 10(23) of the Income-tax Act, 1961, nevertheless, the fact remains that the understanding of the scope of the expression "general public utility" would nevertheless is of relevance herein. Admittedly, when the assessee was granted registration, the Revenue recorded its satisfaction that the objects are of charitable purpose. Thus, only possible enquiry under section 12AA of the Act for cancellation is to find out whether the activities of the trust are genuine or in accordance with the objects of the trust, the assessee's income, at best, may not get the exemption under section 11 of the Act. But this, by itself, does not result in straight rejection of the registration as "trust" under sectio....
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....ssessee that the physical aspect of the game was one in accordance with the objects, the quantum of receipt apparently led the Income-tax Appellate Tribunal and the Revenue to come to the conclusion that the activities are commercial and, hence, by section 2(15) proviso to the Act, the receipt from the BCCI could not be called as subsidy. As for the observation of the Income-tax Appellate Tribunal that the twin conditions stood satisfied is concerned, it is not denied by the Revenue that at the time of granting registration, the Commissioner had satisfied himself about the objects of the trust and the genuineness of the activities as falling within the meaning of "charitable purpose", as it stood in 2003. The Revenue does not deny as a matter of fact that the objects remain as it was in 2003 and there is no change in its content to call the assessee's object as not genuine. There are no materials to indicate that the grant of registration was not based on materials indicating objects of general public utility. 55. The assessee is a member of the Board of Control for Cricket in India (BCCI), which in turn is a member of ICC (international Cricket Council). BCCI allots test ....
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.... In the above said circumstances, we set aside the order of the Income-tax Appellate Tribunal." 24. We are in respectful agreement with aforesaid Judgment of the Hon'ble Madras High Court and we declare that once registration has been granted under section 12AA after satisfying about genuineness of the activities of the Trust, the same cannot be cancelled on the basis of the same set of provisions of the Trust. At this stage, we would like to refer to paragraph 11 and 12 of the Appellate Order of ITAT, wherein ITAT assigned reason for upholding the order of CIT (Exemptions). Said paragraphs are quoted hereunder:- "11. We may also point out that neither in the written submissions nor before the Tribunal nor in the reply dated 26.03.2018 to the show cause issued by the CIT(E), it has been mentioned or explained by the appellant that the sale proceeds from sale of land for development have been used or will be used for the development of charitable objects of the trust. Therefore, this factum was sufficient for CIT(E) for satisfying himself that the activities of the trust are not genuine or are not being carried out in accordance with the objects of the Trust. In this sit....