ACIT (Exemptions) Vs Everwin Educational & Charitable Trust (ITAT Chennai)
Summary: The case concerns an appeal filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2016–17, wherein exemption under Section 11 of the Income Tax Act was allowed to a charitable trust despite properties being registered in the names of its trustees.
The assessee, a registered charitable trust, filed its return declaring NIL income after claiming exemption under Section 11. The original assessment under Section 143(3) accepted the return. Subsequently, the Commissioner of Income Tax (Exemptions) invoked revisionary powers under Section 263, holding that the trust had violated Section 13(1)(c) by purchasing properties in the names of trustees using trust funds, thereby conferring benefit to specified persons.
During reassessment, the Assessing Officer (AO) concluded that the registration of property in the individual names of trustees constituted a violation, as legal ownership rested with them. The AO rejected explanations that the registration was a bona fide mistake and treated subsequent actions, including execution of wills and affidavits, as afterthoughts. The AO denied exemption under Section 11 and made an addition of Rs.14.70 crore.
On appeal, the assessee explained that the trustees had transferred their proprietary schools along with assets and funds to the trust, and the land in question was acquired using those funds. It was contended that the registration in trustees’ names was inadvertent and that the trust was the beneficial owner from inception. The trust had recorded the property as its asset in its books, while trustees had not reflected it in their individual accounts. The trust also constructed a school on the land and obtained approvals and affiliations in its own name.
