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2025 (5) TMI 200
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....fit any other caste or individual. He analyzed the trust deed and noted certain crucial provisions of trust deed which are as under: (i) Para 2: The trustee and his legal heirs shall be allowed to use the property of the Trust without any payment of rent (ii) Para 4: Benefit of the Trust is to be given only to Marwari Brahmin and Maheshwari Vaishyas and, in their absence, other Brahmins and Vaishyas may be benefitted. (iii) Para 7: The Trustees in future shall be a Brahmin or a Vaishya and at least one of the Trustees shall be the legal heir of the settlor. (iv) Para 9: The trust is a Private Trust" 3. In view of the above explicit provisions in the trust deed he was of the opinion that the trust is not a public charitable trust established with an aim/object of conducting charitable activities for the welfare of the people at large but is a private trust established for the benefit of a particular caste / community. Therefore, he was of the opinion that prima facie the provisions of section 13(1)(a) and 13(1)(b) of the Act applies to the case of the assessee. 4. He, therefore, issued a show cause notice asking the assessee to explain as to....
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....ements of Varnashram as per their rights specified under Varnasharam. Object 4(b) further provides for religious education of such students through the daily pooja and other religious celebrations of Shri Mukund Bhagwanta. Object No.4(d) provides for library of books, daily, weekly, monthly magazines etc but with a restriction that they should be religious one. The note extended to the objects from 4(a) to 4(e) further specifically provides that the beneficiaries shall be with preference to Marwadi Brahmins and then to Vaishyas of Maheshwari Caste and if none from these castes is available, to other brahmin and Vaishya castes (iii) Further, Para 5 of the trust deed provides that the balance out of the income after expenditure on the above objects shall be expended for: To help other educational institutions who accept the Varnashrama elements and give religious and vedic education (iv) Para 6 of the Deed provides that students so admitted for vedic and religious education shall carry out the daily pooja and other religious rituals/celebrations of the deity of Shri Mukund Bhagwanta of the temple which has been transferred by the settlor to the trust ....
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....purposes which does not enure for the benefit of the public (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste. 5 In view of the above, prima facie it is seen that the activities of the trust are not genuine charitable activities and if at all they are considered to be genuine, the trust deed itself provides for application of its income for private religious purposes, which does not enure for the benefit of the people at large and also that the trust has applied its income for the benefit of a particular religious community/caste. Therefore, it is noticed that specified violation in terms of provisions of section 12AB(4) of the Income Tax Act, 1961 is occurred in your case 6. Without prejudice to the above, it further observed from the financial statements that the trust has made huge investments in various companies for eg. Indi Swift Ltd, Plethico Pharmaceuticals, Elder Pharmaceuticals, Net 4 India Ltd Network 18, Microtech Technolog....
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....r the benefits of particular cast and sub-cast and therefore, is not eligible for registration as charitable trust under the IT Act. For provisioning such preferential treatment the trust is found to be involved in specific violation under clause 'e' of explanation to sub-section 12AB(4) ..........As per discussions in para 6.2.23 1. The assessee is a private trust as per the trust deed. Therefore, the trust cannot registered under the IT Act. As such the trust is found to be involved in specific violation under clause 'e' of explanation to sub-section 12AB(4). ..........As per discussions in para 7.3 1. The assessee is not registered with charity commissioner under the BPT Act. Further, it is not even registered under any other Act relevant to Public Charitable activities. Therefore, the same is violation of section 12AB(1)(b)(i)(B) By not registering itself with the Charity Commissioner or any other relevant law applicable to the Public Trust, the assessee is found to be involved in specific violation under clause 'f of explanation to sub-section 12AB(4) ..........As per discussions in para 8.7 1. The as....
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....u Varnashram, which was in direct violation of the provisions of section 13(1) of the Income Tax Act, 1961. - As a sequel, in observing that there is a specific violation under clause (e) of Explanation to sub section 12AB(4) of the Income Tax Act, 1961. - in observing that the appellant is a private trust. - in observing that the appellant trust not being registered under the Bombay Public Trust Act is violation of section 12AB(1)(b)(i)(B) of the Income Tax Act, 1961 thereby constituting a specific violation under clause "f" of the Explanation to subsection 12AB(4) of the Income Tax Act, 1961. - in observing that the appellant trust has made substantial investment of funds in modes other than prescribed under section 11(5) which is a specific violation under clause "e" and "f" of the Explanation to subsection 12AB(4) of the Income Tax Act, 1961. - in observing that the appellant trust is involved in activities on commercial basis earning rental income which cannot be said to be incidental to the main objects which is a specific violation under clause "b" of the Explanation to subsection 12AB(4) of the Income Tax Act, 1961. - in....
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....not a part of the show cause notice the assessee had not replied to the same. Referring to the order of the Ld. CIT(E), he submitted that a reading of the said order makes it clear that the Ld. CIT(E) has not even considered the submissions of the assessee nor dealt with the judicial precedents. Referring to para 7(c) of the submissions at page 12 of the paper book and para 5(b) and 5(c), he submitted that the Ld. CIT(E) has not even dealt with the judicial precedents relied on by the assessee. This clearly shows the lack of any opportunity of hearing given by the Ld. CIT(E). 9. So far as the allegation of the Ld. CIT(E) that the trust was established for a particular caste who had belief in Hindu Varnashram, which was in direct violation of the provisions of section 13(1) of the Act considered to be a violation of clause (e) of section 12AB(4) is concerned, he drew the attention of the Bench to provisions of section 13(1)(b) which reads as under: "13(1)... (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or establis....
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.... paper book which read as under: "7.(b) Nothing could be further from the truth. There is nothing either in the trust deed nor in the activities of the trust that can lead us to this inference. 7.(c)The distinction between a private & public endowment is that whereas in the former, the beneficiaries are specific individuals, in the latter they are the general public or a class thereof. (Deokinandan V. Murlidhar (SC) 1957 AIR 133 (04.10.1956) (while deciding whether a Thakurdwara of Sri Radheshyamji is a private temple or public one in which all Hindus are entitled to worship) For a trust to be considered public, they should be constituted for the benefit of the public. A trust would be private if the beneficial interest in vested in absolutely one or more individual who are uncertain and who will be competent to control, modify or determine that trust. A public trust is for the benefit of the members of an uncertain & fluctuating body and the trust itself in of permanent and indefinite character. (Farman All Khan v Mohd. Raja Khan (ALC) AIR1950 All 62 Para 18)." 14. He submitted that the Ld. CIT(E) does not controvert the above submissions of the assessee. The ....
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....ever has this issue been questioned including while granting registration on 24.09.2021. He submitted that the case of New Noble referred to by the Ld. CIT(E) is not applicable as it was a case of fresh registration while in the case of the assessee it is a case of cancellation of registration based on no change in facts. Further, in the case of New Noble (supra) it was a case of registration u/s 10(23C) of the Act whereas in the case of the assessee it was a case of registration u/s 12AB. Further, the case of the New Noble was a pure educational trust, which could have a State law which directly applies to education. He submitted that the question before the Hon'ble High Court was "whether registration under AP Charities Act was a pre-requisite for registration or approval under the Income Tax Act" while the present case is not one of pre-requisite but a post registration alleged imperative. Referring to the decision of the Hon'ble Supreme Court in the said case, he submitted that the Hon'ble Supreme Court has clearly spelt out that compliance under other laws can weigh in deciding approvals under section 10(23C). Referring to various decisions, he submitted that the Ld. CIT(E....
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....e main object of the trust but donated substantial amount to other trusts and therefore such set up to earn income cannot be said to be inspired by benevolence and raises serious doubt over its genuineness which is a specific violation under clause "e" of the Explanation to subsection 12AB(4) of the Act is concerned, he submitted that the Courts have time and again held that it is not necessary for the trust itself to carry out charitable activities and that it is permissible to donate to other charitable trusts. He submitted that in any case breach of trust which does not affect the vires of validity of the trust cannot lead to denial of benefits of section 11 and cancellation of registration. For the above proposition, he relied on the decision of the Hon'ble Jharkhand High Court in the case of CIT vs. Karimia Trust reported in 302 ITR 57 (Jha) where it has been held that the breach of the conditions of the trust deed, if any, committed by the assessee trust will not disentitle it from getting the benefits which it has been getting in the past, exemption u/s 11 cannot be denied to the assessee trust on the part of alleged violation of provisions of section 13(1)(bb). 22. The L....
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.....387, dated 07.06.1984 vi) CIT vs. ST. George Forana Church 170 ITR 62 (Ker) vii) CIT vs. Karimia Trust 302 ITR 56 (Jha) viii) CIT vs. Birla Janahit Trust 208 ITR 372 (Cal) ix) CIT vs. Ganga Charity Trust Fund (1986) 162 ITR 612 (Guj) x) CIT vs. Trustees of the Jadi Trust (1982) 133 ITR 494 (Bom) xi) CIT vs. Hindusthan Charity Trust 139 ITR 913 (Cal) xii) CIT vs. Sarladevi Sarabhai Trust 172 ITR 698 xiii) CIT vs. Shri Ram Memorial Foundation 269 ITR 35 (Del) xiv) CIT vs. Agricultural Produce and Market Committee 291 ITR 419 xv) CIT vs. Sun Engineering Works (P) Ltd. 198 ITR 297 (SC) xvi) CIT vs. Arya Vysya Kalyana Nilaya Sangam 159 ITR 324 (AP) xvii) Ramjanki Tapovan mandir vs. CIE(E) and Anr. 451 ITR 458 (Jha) xviii) CIT vs. Sarvodaya Ilakkiya Pannai (2012) 343 ITR 300 (Mad) 24. He accordingly submitted that the Ld. CIT(E) was not justified in cancelling the registration of the trust u/s 12A of the Act. 25. The Ld. DR on the other hand heavily relied on the order of the Ld. CIT(E). He submitted that the Assessing Officer has no power to verify the objects / ge....
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....ting the submissions made by the assessee and the relevant provisions of the Statute has cancelled the registration which is not in accordance with law. 28. We find some force in the above arguments of the Ld. Counsel for the assessee. The first issue i.e. the assessee was established for a particular caste i.e. Marwari Brahmin and Maheshwari Vaishyas who had belief in Hindu Varnashram, as such the assessee trust is in direct violation of the provisions of section 13(1) of the Income Tax Act, 1961 considered to be a violation of clause (e) of section 12AB(4) is concerned, we find it is an admitted fact that the trust came into being in the year 1930 and was granted approval on 25.08.1975 and again on 24.09.2021. We find the provisions of section 13(1)(b) of the Act read as under: "13(1)... (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste" 29. A perusal of the same would show that the provisions of section 11 not to apply in certain cases....
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....ept when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the Judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." 30. We find the Hon'ble Supreme Court in Parashuram Pottery Works Ltd. v. ITO [1977] 106 ITR (SC) has held as under: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a ....
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....ic violation of clause (e) of Explanation to subsection 12AB(4) of the Act. 35. So far as the next objection of the Ld. CIT(E) that the assessee is not registered with the Charity Commissioner under BPT Act is concerned, it is an admitted fact that the assessee truest has not been registered under the BPT Act. However, it is also an admitted fact that the trust was enjoying the benefits of sections 11 to 13 of the Act in the past years and there was no requirement of registration under that Act. We find the Hon'ble Bombay High Court in the case of CIT vs. Agricultural Produce and Market Committee, Hinganghat & Ors. reported in 291 ITR 419 (Bom) has held as under: "24.... The contention of the Revenue that the assessee's are not registered as trust and hence not entitled for registration is also without any merit, because, there is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust." 36. We further find merit in the submissions of the Ld. Counsel for the assessee that if this was a mandate u/s 12A, then it would have been so specified as is the case u/s 80G(5)(v). ....
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....hall operate in breach as there would be a number of statutes whether Central, State or Local where the trust may never be registered. Further, a trust operating in multiple States may find itself liable to register in each such State. This in our opinion is not envisaged by the provisions. The present trust has been a trust in operation since 1930 and has been registered under the Income Tax Act since 25.08.1975 and never has this issue been questioned including while granting registration on 24.09.2021. 40. So far as the decision in the case of New Noble (supra) referred to by the Ld. CIT(E) is concerned, the same in our opinion is not applicable as that was a case of fresh registration while this is a case of cancellation of registration based on no change in facts. Further, that was a case of registration u/s 10(23C) while the instant case is a case of registration u/s 12AB. New Noble and it was a case of a pure educational trust which could have a State law which directly applies to education whereas in the instant case it is not so. We find the question before the Hon HC was "whether registration under AP Charities Act was a pre-requisite for registration or approval under....
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....)(d), maximum marginal rate of tax under s. 164(2), proviso is applicable only to that part of income of the trust which has forfeited exemption and not to the entire income." 43. Since the Ld. CIT(E) in the instant case has proposed to cancel the registration relying on the basis of section 12AB(4) without referring to violation in any specific previous year, therefore, he is not justified without pointing out as to in which specific previous year the assessee has violated the provisions. Therefore, we find merit in the arguments of the Ld. Counsel for the assessee that there are no tangible reasons for cancelling the registration on this ground. 44. So far as the next allegation of the Ld. CIT(E) that the assessee truest has over the years not conducted activities related to the main object of the trust but donated substantial amount to other trusts and therefore such set up to earn income cannot be said to be inspired by benevolence and raises serious doubt over its genuineness which is a specific violation under clause "e" of the Explanation to subsection 12AB(4) of the Act is concerned, we find the Courts have time and again held that it is not necessary for the trust it....
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....t handing over of income of charitable trust to another charitable trust is application for charitable purposes eligible for exemption u/s 11. We find para 16 of the order reads as under: "16. So far as the provision of s. 11 of the Act which was in force at the material time is concerned, we do not think that the legal position is in any way different. As already pointed out when a trust which holds property for charitable or religious purposes hands over a donation to another trust which is also a trust made for the application of its funds for charitable or religious purposes there can hardly be any doubt that it would amount to an application of income for charitable or religious purposes by the donor trust. As already pointed out it would be permissible for a trust either to directly apply the income for charitable purposes or to a charitable work in the field as put by Slade J., or the same funds or income could be utilised through the medium of another charitable institution which applies its funds or income to charitable purposes. The Tribunal is, in our view, right in holding that the assessee was entitled to the relief under s. 11 (1)(a) of the IT. Act, but the p....