Case Law Details
Kalumal Shorimal Nathumal Rangwala Pvt Vs CIT (Exemptions) (ITAT Amritsar)
Rejection of registration u/s 12AB unsustainable as payment of remuneration to full-time trustee doesn’t violate section 13
ITAT Amritsar held that rejection of application for registration u/s 12AB of the Income Tax Act unsustainable as there is no violation of section 13(1)(c) by paying remuneration to the full-time working trustee.
Facts- The assessee is a charitable trust registered on 21.09.1942. After the amendment of Finance Act 2020 the assessee made an application for registration u/s 12A(1)(ac)(iii) before the ld. CIT(E). The ld. CIT(E) rejected the application applied for registration on the basis that one of the trust members is withdrawing salary Rs.12,60,000/- as allowance which contravening the section 13(1) (c) of the Act and also the main object of the trust works to member which is not the general public at large this is a benefit of the family and future generation. The assessee filed the submission but without considering the same the registration was cancelled which was covered u/s 12AB or 12AA of the Act. Being aggrieved assessee filed an appeal before us.
Conclusion- Held that the assessee had not violated section 13 by paying of the remuneration to the trustee for his full-time work for the trust. During passing the order ld. PCIT had not considered the certificate of renunciation letter executed by the beneficiaries of the trust. The ld. DR had not able to submit any contrary fact or any judgment against the submission of the assessee. We dismiss the order of the ld. PCIT. It is directed that the registration of the trust should be restored.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The assessee has filed appeal against the order of the ld. Commissioner of Income Tax (Exemption) Chandigarh,[in brevity the ‘CIT (E)’] order passed u/s 12Aof the Income Tax Act 1961 [in brevity the ‘Act’], r.w.r. 2C or 17A of the Income Tax Rule 1962.
The assessee has taken the following ground:
“1 That the Ld. Commissioner of Income Tax- Exemptions rejected registration u/s 12AB without considering the fact that the appellant trust has came into existence before commencement of Act and claiming exemption U/s 11 since long time & same has been accepted in scrutiny assessment.
2 That the Ld. Commissioner of Income Tax- Exemptions rejected registration u/s 12AB without considering the fact that the appellant trust has came into existence before commencement of Act and eligible for exemption u/s 11(1) (b) and same has been allowed in scrutiny assessment framed from time to time.
3 That the Ld. Commissioner of Income Tax- Exemptions rejected registration u/s 12AB without considering the fact that all beneficiaries of trust except one beneficiary having 1/36 share in Income has already renounced their share for charitable purposes and no personal benefit has been taken from the income of trust and also the said beneficiary has declared his share of income in his ITR.
4 That the Ld. Commissioner of Income Tax- Exemptions rejected registration u/s 12AB without considering the fact that the appellant trust is already registered u/s 12AA and it was case of renewal for 5 year in accordance with Amendment in Finance Act 2020 & no order for rejection can be passed.
5 That the Ld. Commissioner of Income Tax- Exemptions rejected registration u/s 12AB without considering the fact that the appellant trust has come in to existence before commencement of Act and there is no violation of section 13(1) (c) of I T Act.
6 That the Assessee craves fo9 permission to add, amend, alter or withdraw any grounds of appeal with approval of the hon’ble bench.”
5. Brief fact of the case is that the assessee is a charitable trust registered on 21.09.1942. After the amendment of Finance Act 2020 the assessee made an application for registration u/s 12A(1)(ac)(iii) before the ld. CIT(E). The ld. CIT(E) rejected the application applied for registration on the basis that one of the trust members is withdrawing salary Rs.12,60,000/- as allowance which contravening the section 13(1) (c) of the Act and also the main object of the trust works to member which is not the general public at large this is a benefit of the family and future generation. The assessee filed the submission but withoutn considering the same the registration was cancelled which was covered u/s 12AB or 12AA of the Act. Being aggrieved assessee filed an appeal before us.
3. The ld. AR filed a written submission which is kept in the record.
3.1 The ld. AR further placed that the assessee trust is form for general public utility the trust deed was registered on 21.09.1942. The copy of the trust deed is with English translation are annex at APB pages 1 to 32.
3.2 The ld. AR further argued that the assessment order u/s 143(3) for A.Y. 1992-93 dated 30.03.1997 where the object of the trust was accepted, and the assessee was allowed to deduction u/s 11 and 12. The copy of the assessment order at APB pages 33 to 34. The ld. AR further placed that all the trust deed other than one and 1/36 renunciate the obligation on the trust property and the letter was issued dated 09.07.2004 which is annexed in APB pages 61 to 100.
3.3 The ld. AR also placed that the trustee is full time service holder of the trust for running his livelihood withdrawing the salary Rs.12,60,000/- from the trust which is not contravening any of section 13. The ld. AR further relied on the order of the Hon’ble Supreme Court in the case of
3.3.1. Radhasoami Satsang v.Commissioner of Income-tax [1992] 60 Taxman 248 (SC). The relevant paragraphs are extracted as below: –
“13. 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 assess ment 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 subsequent year.
14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter—and if there was no change it was in support of the assessee—we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12.
15. The counsel for the revenue had told us that the facts of this case being very special, nothing should be said in a manner which would have general application. We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application.”
3.3.2. In the case of Commissioner of Income-tax v. Smt. Kasturbai Walchand Trust, [1967] 63ITR656 (SC) .
“Section 11 of the Income-tax Act, 1961 [Corresponding to section 4(3) of the Indian Income-tax Act, 1922] – Charitable or religious trust – Exemption of income from property held under – Assessment years 1956-57 to 1959-60 – One ‘S’ and his wife ‘B’ settled certain properties in a trust – Trustees were both of them and three brothers of ‘S’ – Under trust deed trustees after meeting certain expenses were liable to pay to ‘B’ for her benefit income arising from trust properties – After death of ‘S’, ‘B’ executed a deed under which she surrendered and transferred trust properties in favour of trustees to utilise same for charitable purposes mentioned in settlement – Whether, subsequent to execution of deed by ‘B’, income arising from trust properties was exempt from tax under section 4(3)(i) of 1922 Act in hands of trust”
4. The ld. DR fully relied on the order of the revenue authorities& has not submitted any contrary judgment against the assessee’s submission.
5. We heard the rival submission and considered the documents available in the record. The assessee was granted a provisional registration on dated 23.09.2021 in Form -10AC. After getting the regular registration in Form 10AB, the registration was cancelled by the ld. PCIT. The assessee was formed this trust in 1942 and continuously doing the same activity. According to ld. AR the “rule of consistency”, is applicable for the assessee. We respectfully relied on the orders of the Hon’ble Supreme Court in the case of CIT vs. Radhasoami Satsang and CIT vs. Smt. Kasturbai Walchand Trust (supra). The assessee had not violated section 13 by paying of the remuneration to the trustee for his full-time work for the trust. During passing the order ld. PCIT had not considered the certificate of renunciation letter executed by the beneficiaries of the trust. The ld. DR had not able to submit any contrary fact or any judgment against the submission of the assessee. We dismiss the order of the ld. PCIT. It is directed that the registration of the trust should be restored.
6. In the result, the appeal of the assessee bearing ITA Nos. 229/Asr/2022 is allowed.
Order pronounced in the open court on 24.05.2023
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