Case Law Details
Brief of the Case
ITAT Delhi held In the case of Tsurphu Labrang vs. DIT (Exemptions) that Rule 17A itself provides that it is not necessary that the Institution/Trust should be established under an instrument. The Rule 17A does not prescribe that in case the Institution/Trust is established otherwise than under an instrument, what type of document evidencing the creation of the Trust or the establishment of the Institution, has to be filed, meaning thereby that the document evidencing the creation of Trust or the establishment of Institution could be of any type. As per the provisions of the Indian Trust Act, the Trust can be created even orally and if the assessee is able to give some evidence of creation of such Trust by a word of mouth, the same shall be eligible for registration u/s 12AA/12A, provided such evidence is filed and the other conditions under the statute are satisfied.
Facts of the Case
The assessee trust applied for registration u/s 12AA/12A on the prescribed form 10A with the Commissioner of Income Tax, Delhi. The claim of the assessee that it was a charitable and religious trust and all its aims, objects and purposes were wholly charitable and religious in nature and it has complied with all statutory conditions for registration u/s 12AA/12A was rejected by the DIT (Exemptions), against which, the present appeals before the Tribunal.
Contention of the Assessee
The ld counsel of the assessee submitted that there is no legal requirement of filing of the original trust deed, as in this case, the trust was created in the year 1159 AD and, at that time, there was no law for execution of a trust deed and the trust relates to the period before coming into force the Indian Trust Act or the Income Tax Act, 1922 or 1961. He submitted that the assessee has filed a duly sworn declaration of trust dated 29th March, 2011 wherein it was unequivocally declared that the trustees stand possessed of the ‘trust fund’ comprised of both movable and immovable properties which are duly accounted for in the books of account of Tsurphu Labrang and all the income arising there from upon trust shall be applied for the aims and objects of the trust. He submitted that the aims and objects and purposes of the trust have been detailed in the said declaration of the trust.
He further submitted that all the aims and objects and purposes of the trust were charitable in nature without any discrimination on account of origin, colour, religion, caste, creed or gender. The objects of the trust include establishment and running of educational institutions, the training of students, vocational training institutions, medical care institutions and other social institutions and relief camps or projects in the unfortunate event of visiting calamities and to render assistance to helpless destitute, physically challenged, downtrodden and weaker sections of the society and to give assistance to the deserving students and scholars and to undertake projects of general public utility, publication and distribution of books, to aid restoration and renovation of old monasteries and other cultural establishments, to undertake and or aid programmes and projects for the preservation and protection of environment and so on.
He relied on the decision of Hon’ble Apex Court in CIT Vs. Dawoodi Bohra Jamat – [2014] 364 ITR 31 (SC). He submitted that Circular No.108 of the CBDT dated 20th March, 1973 applies to the facts of the case of the assessee. He submitted that the law does not compel a person to do some impossibility and relied on the decision of Hon’ble Apex Court in Krishnaswamy S.PD. and Another Vs. Union of India and Others – [2006] 281 ITR 305 (SC). He submitted that the Hon’ble Courts have laid down in a series of decisions that a trust or association of persons holding properties for the benefit of a particular caste or community and performing charitable activities for the purpose are entitled to the exemption from tax and registration u/s 12AA. He relied on the decision of Hon’ble Supreme Court in Ahmedabad Rana Caste
Association Vs. CIT, Gujarat – [1971] 82 ITR 704 (SC), and of Hon’ble Allahabad High Court in CIT Vs. Pt. Ram Shanker Misra Trust – [1996] 222 ITR 252 (Allahabad) and CIT Vs. Surji Devi Kunji Lal Jaipuria Charitable Trust (No.1) – [1990] 186 ITR 728 (Allahabad) in support of his arguments.
He further submitted that DIT (Exemptions) while making enquiries during the course of proceedings u/s 12AA/12A for grant of registration could make enquiry only regarding the genuineness or otherwise of the objects of the trust but not regarding the application of income of the trust for charitable or religious purpose, which is a subject matter of the assessment, to be considered by the Assessing Officer at the time of assessment. For this proposition, the learned counsel for the assessee relied on the various decisions.
Contention of the Revenue
The ld counsel of the revenue submitted that under the scheme of the Act and in particular in the provision of Section 12AA, the Department is to satisfy itself not only with regard to genuineness of the trust but also with regard to genuineness of the activities of the trust. He submitted that in this case, the assessee could not file any evidence to prove that the trust was created in the year 1159 AD and was doing charitable activities.
He further submitted that the onus was on the assessee to file evidence that the objects exist in the year 1159 AD and amendments to the objects of the trust were made by the trust with the resolution passed from time to time and credible evidence has to be filed by the assessee trust to prove the same. He submitted that a plain reading of the objects of the trust as detailed in the declaration of the trust dated 29th March, 2011 makes it clear that these could not be the aims and objects of the trust in the year 1159 AD. He submitted that the trust is stated to be created in the year 1159 AD in China and there is no evidence brought on record by the assessee to prove that they have passed a resolution that they have settled in India or are “in exile” in India
He further submitted that the copy of form No.10A, i.e., application for registration u/s 12AA shows that the address of the assessee trust is shown in a chamber in Tis Hazari Court in Delhi, although there was no activity undertaken by the assessee trust in Delhi. He submitted that the 17th Karmapa, the head of the assessee trust has come to India in the year 1974 but has applied for registration in the year 2011 and there was no valid reason for such inordinate delay in applying for registration u/s 12AA.
He submitted that there was a violation of foreign exchange laws by the assessee trust and the assessee has spent Rs. 30.28 lakhs under the head ‘legal expenses’ and violation of the law was clearly against the public policy. He submitted that the 17th Karmapa, as head of the assessee trust, was taking food and clothes and meeting his personal expenses from the resources of the assessee trust and which is in violation of the provision of Section 13. He submitted that the assessee should prove that from where the 17th Karmapa has spent for his personal requirements. He relied on the order of the learned DIT (Exemptions).
Held by ITAT
Whether, for registration u/s 12AA/12A, the execution of a formal deed of trust is necessary, without which the registration could not be granted to the institution/trust
We find that there is no such condition laid down by the Legislature under the provisions of the Income-tax Act, 1961 or the Rules made there under. A plain reading of Rule 17A (a) makes it clear that where the Trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof, has to be filed along with prescribed Form No.10A for registration of the Institution/Trust u/s 12A. However, the second limb of Rule 17A (a) provides that where the Trust is created, or the Institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof, has to be filed along with the statutory Form No.10A for registration of the Institution/Trust u/s 12AA/12A. Thus, the applicable Rule 17A itself provides that it is not necessary that the Institution/Trust should be established under an instrument. The Rule 17A does not prescribe that in case the Institution/Trust is established otherwise than under an instrument, what type of document evidencing the creation of the Trust or the establishment of the Institution, has to be filed, meaning thereby that the document evidencing the creation of Trust or the establishment of Institution could be of any type. As per the provisions of the Indian Trust Act, the Trust can be created even orally and if the assessee is able to give some evidence of creation of such Trust by a word of mouth, the same shall be eligible for registration u/s 12AA/12A, provided such evidence is filed and the other conditions under the statute are satisfied.
The argument of the learned CIT-DR that the assessee has not filed the names and addresses of the donors, we find that the donation can be anonymous also and the taxability thereof can be decided at the time of assessment to be framed by the Department. The plea of the learned CIT-DR, that the trustees took refuge in Sikkim which is part of India since 1975 for 35 years, no return of income was filed by the assessee nor any application for registration u/s 12A was submitted and that the returns for the assessment year 2005-06 to 2010-11 do not contain the stamp affixed by the Department showing the date of receipt thereof, has no relevance as the assessee has sought the benefit of registration u/s 12AA/12A from assessment year 2011-12 onwards only and not the earlier years.
In Laxminarayan Maharaj and Another vs. CIT – [1984] 150 ITR 465 (MP), the trust was created 100 years ago without any instrument of document. However, the revenue records relating to land held by the trust, orders relating to property tax and affidavits and declaration of citizens were in support of existence of trust and were filed along with application for registration u/s 12A of the Act. The Commissioner of Income Tax rejected the application on the ground that though documents evidenced existence of trust but did not evidence the creation of the trust. Hon’ble Madhya Pradesh High Court held that the document accorded a logical basis for inferring creation of the trust and matter was remanded back to the Commissioner to reconsider the application of the trust in the light of the observations made by the Hon’ble High Court. The SLP against this decision of Hon’ble Madhya Pradesh High Court in CIT Vs. Laxminarayan Maharaj and Another was dismissed by the Hon’ble Apex Court in 186 ITR 32 (St.)(SC).
In the case of the assessee before us, the assessee has claimed that the Institution/Trust was created centuries ago in the year 1159 AD and that no formal deed for the Trust was executed at that time. We find that the Indian Trust Act has not come into existence in the year 1159 AD and it was not possible to execute a deed of Trust on stamp paper or in writing centuries ago. However, the supreme Head of the Trust, i.e., 17th Karmapa, who is the supreme spiritual Head of Karma Kagyu lineage, has made a declaration of Trust on stamp paper on 29th day of March, 2011 at Delhi, wherein the entire history of the Trust along with their aims, objects and purposes of the Trust, various provisions with regard to the management of the Trust and its properties and maintenance of accounts etc. have been detailed on solemn affirmation.
Further, it was declared in the declaration of the Trust that the trustees stand possessed of the “Trust Fund” comprised of the moneys and other properties, both movable and immovable, which are duly accounted for in the books of accounts of Tsurphu Labrang and is carried forward every year on its balance sheet and the income arising there from is applied to the administration or execution of the aims and objects of the Trust. Thus, we hold that in accordance with the provisions of the Income-tax Act, 1961 and rules made there under, the execution of a formal deed of trust was not necessary for grant of registration u/s 12AA/12A.
Whether the aims and objects and purposes of the assessee trust were charitable in nature, qualifying for registration u/s 12AA/12A
From a reading of various aims, objects and purpose of the Trust, we find that the aims and objects as detailed above were wholly charitable and religious in nature without any discrimination on account of origin, colour, religion, caste, creed or gender. It provides the objects of running educational Institution, vocational training institutions, medical care Institutions, social institutions, relief camps in the unfortunate events of calamities, assistance to the helpless, destitute, physically challenged, downtrodden and weaker sections of the society at large, to give financial help to the deserving students and scholars, to undertake any Institute or project of general public utility, printing and publishing of books, literature, to aid restoration and renovation of old monasteries, to aid programmes and projects for the preservation and protection of environment and put all incidental or ancillary work in accordance with the aims and objects detailed in the declaration of Trust and not in derogation of the tenets of the Dharma and the aims and objects of the Trust.
We find that it has been specifically provided time and again in the aims and objects and purpose of the Trust that it should be without any discrimination on account of religion, colour, origin, caste, creed or gender and shall be for the benefit of the entire mankind and public at large. We find that the Revenue could not point out even a single aim and object of the assessee-trust which could be called not charitable in nature. The assessee has filed various other evidences in support of its case that the assessee trust existed centuries ago and exists till date. The second issue is also decided in favour of the assessee and it is held that the aims and objects and purposes of the assessee trust were charitable in nature, qualifying the trust for registration u/s 12AA/12A.
Whether the DIT (Exemptions) could go into the issues relating to income and expenditure account of the assessee, which were the subject matter of assessment and whether they were relevant for the purpose of granting or otherwise of registration u/s 12AA/12A
We find that while making enquiry during the course of proceedings of granting registration u/s 12AA/12A, the DIT(E)/CIT(E) is to examine the aims and objects of the trust and that whether they are charitable in nature. The stage for application of income shall arrive when such trust or institution files its return of income with the Assessing Officer. In a case where the DIT(E)/CIT(E) is satisfied after examining the aims and objects of the institution/trust that they were genuine and were charitable in nature and the institution/trust has fulfilled other statutory conditions for grant of registration u/s 12AA/12A , the DIT(E)/CIT(E) shall allow the registration to the institution/trust. If any misapplication of income is found during the course of assessment proceedings, the Revenue authorities are free to take note of it and tax the same in assessment.
In Sanjeevamma Hanumanthe Gowda Vs. DIT(E) – [2006] 285 ITR 327 (Karn), the assessee trust was carrying on its activity by letting out the marriage hall on hire. The Hon’ble High Court held that authorities have to satisfy themselves about the genuineness of the activities of the trust or institution and how the income derived from the trust property was applied to charitable or religious purpose and not the nature of the activity by which the income was derived by the trust. The Hon’ble High Court further held that sufficient safeguard is provided under the Act for cancellation of registration obtained by the assessee in the event of its misusing the provisions.
In CIT Vs. Surya Educational and Charitable Trust and another – [2013] 355 ITR 280 (P&H), the Hon’ble Punjab & Haryana High Court held that the object of Section 12AA is to examine the genuineness of the objects of the trust, but not the application of income of the trust for charitable or religious purposes. The stage for application of income is yet to arrive, i.e., when such trust or institution files its return.
Whether the activities of the trust for the benefit of a particular case or community or performing charitable activities for the purpose would debar a trust or an institution from exemption from tax and registration u/s 12AA/12A
We find that the institution/trust having objects for the benefit and betterment of a particular community would be eligible for registration u/s 12AA/12A. The law does not compel a charitable institution/trust to do charity for the whole planet. In case an institution/trust exists for charitable purposes for the benefit of an indeterminate group of people, the same shall be eligible for registration u/s 12AA/12A of the Act. It is now well-settled that an object beneficial to a section of the public is an object of general public utility. The intention of the institution/trust should be impersonal in nature and for a sufficiently defined and identifiable section of the public.
In Ahmedabad Rana Caste Association Vs. CIT, Gujarat – [1971] 82 ITR 704 (SC), the facts were that the assessee, an association of persons, held properties for various purposes including management of the movable and immovable properties of the Rana caste or community of the city of Ahmedabad and doing acts of improving the education of the community, giving medical help to the community etc. Hon’ble Apex Court held that it is well-settled that an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the objects should be to benefit the whole of the mankind or all persons in a country or state. The Hon’ble Apex Court further held that it is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present and the section of
the community sought to be benefited must be sufficiently definite and identifiable or some common quality of a public or impersonal nature.
In CIT Vs. Surji Devi Kunji Lal Jaipuria Charitable Trust (No.1) – [1990] 186 ITR 728 (Allahabad), it was held by the Hon’ble High Court that in order to make a purpose charitable, it is not necessary that it should be beneficial to the poor only and what is required is benefit to a section of the public as distinguished from specified individual.
Whether the supreme head of the trust taking food and clothes etc. from the funds of the trust was violative of the provisions of Section 13 particularly when he was not drawing any salary for his services rendered to the trust
We find that it is an admitted fact in this case that the 17th Karmapa who is the supreme head of the trust was taking food and clothes and meeting his basic needs from the funds of the trust. However, the provisions of Section 13 do not debar the main whole time trustee/trustees from meeting their basic needs from the funds of the institution/trust particularly when they are not deriving any monetary benefit from the institution/trust. The intention of the legislature in inserting the provision of Section 13 is not to debar the genuine basic expenditure of the Mehant or supreme head of the trust or trustees.
The provision is meant to debar the author or the trustees of the trust from parting away part of the income or any property of the institution/trust for their personal benefit. In the case before us, it is an admitted fact that the supreme head of the trust, the 17th Karmapa, has renounced the world and the offerings made to him are diverted at source to the funds of the trust and no part of the income or property of the trust is kept by the 17th Karmapa for his personal benefit and that he is whole time committed to work for the fulfillment of the aims and objects and purposes of the trust and has never drawn any salary or remuneration for his services rendered to the trust. The food and clothes and similar expenditure are the basic needs of a person for survival and the expenditure incurred for fulfillment of these basic needs of the supreme head of the institution/trust could not be held as violative of the provisions of Section 13.
The assessee in this case has fulfilled all the preconditions for grant of registration u/s 12AA/12A and, accordingly, we direct the learned DIT (Exemptions) to grant registration to the assessee trust u/s 12AA/12A with effect from assessment year 2011-12 onwards, within a period of fifteen days from receipt of this order.
Accordingly appeal of the assessee allowed.
