Trust Registration can’t be cancelled for amendments in trust deed, if its objects remain charitable
Case Law Details
The question is whether the amendment of the trust deed in any way makes the assessee non-charitable. We have perused the deed of amendment of the trust dated 07-03-2005. The amendment talks about substitution of sub-clause-a of clause-3 of original deed. The substituted clause refers to imparting education including technical and medical among the masses in all the fields, subjects, culture and literature, irrespective of religion, caste or creed. Similarly, sub-clause-d, of Clause-3 was substituted whereby scholarship to the poor and needy and meritorious students have to be awarded. Similarly, sub-clause (e) of clause-3 of original deed was amended to make the benefits of the trust open to all caste, creed and religion. We fail to see how the above amendment will make the assessee not existing for the purpose of education or not existing for charitable purposes. As already mentioned in the decision of the Hon’ble Allahabad High Court in the case of in the case of Allahabad Agricultural Institute Vs Union of India, 163 Taxman 67(Alhd.) supra there was a total change of the objectives of the charitable institutions, it was in those circumstances, that the Hon’ble Allahabad High Court held that it was not in a position to interfere in exercise of discretionary jurisdiction under article 226 of the Constitution of India for quashing the order u/s 12AA(3) of the IT Act, 1961. In the present case, as we have already observed that there was no wholesome change in the objective of the assessee. We are also of the view that the decision of the Chennai Bench of the Tribunal and the Hon’ble Uttarakhand High Court are the cases where the challenge was to refusal to grant registration u/s 12A of the Act. In the present case, as we have already seen, the revenue was fully satisfied with the objects of the assessee was charitable and registration u/s 12A of the Act was already granted. In proceedings u/s 12AA(3) it was not open to the revenue to review its earlier registration granted u/s 12A of the Act. We are also of the view that the complaint with regard to violation of sec. 13(1)(c) of the Act are not relevant for the purpose of the proceedings u/s 12AA(3) of the Act and as rightly submitted by the learned counsel for the Assessee before us, it was open to the AO to examine any such violation in the assessment proceedings for the relevant assessment year of the assessee.
We are also of the view that the other reasons given by the DIT(E) in the order u/s 12AA(3) of the Act, do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. The fact that the Assessee was paying commission to persons who solicit students for studying in the Assessee’s institution cannot lead to the conclusion that the Assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non maintenance of regular books of accounts, violations of provisions of Sec.13(1)( c) of the Act in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the Assessee was pursuing education as its main object. There are no facts brought out in the impugned order regarding the genuineness of the activities of the trust or as to whether the object of education was not pursued by the Assessee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The complaint of the revenue seems to be that education is being imparted but on commercial lines. The definition of Charitable Purpose is given in Sec.2(15) of the Act. The same refers to “relief to poor, medical relief, education and the advancement of any other object of general public utility”. The proviso to Sec.2(15) of the Act introduced by the Finance Act, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of “advancement of any other object of general public utility”. It does not apply to the other categories of charitable purpose viz., “relief to poor, education and medical relief”. As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assesse, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1)(c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumstances, we are of the view, that the order u/s 12AA(3) of the Act, cannot be sustained.
IN THE ITAT BANGALORE BENCH ‘B’
Krupanidhi Educational Trust
versus
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object clause change in a trust -ways and means