Assessee-trust did not cease to be a public trust merely because all its trustees are members of one family

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Assessee-trust did not cease to be a public trust merely because all its trustees are members of one family

 

JUPITER MEDICAL RESEARCH CENTRE TRUST vs. DIRECTOR OF INCOME TAX (EXEMPTION)

ITAT, AHMEDABAD ‘B’ BENCH

T.K. Sharma, J.M. & N.S. Saini, A.M.

ITA No. 2513/Ahd/2007

7th August, 2009

(2009) 28 CCH 0467 AhdTrib

(2010) 128 TTJ 0118 (UO)

Legislation Referred to

Section 12AA(3)

Case pertains to

Asst. Year -,

Decision in favour of:

Assessee

Charitable trust—Registration under s. 12AA—Cancellation—There is no violation of any provision of the Act—Merely because all the trustees are members of one family, it cannot be said that the trust is not a public trust—There is no finding or allegation in the impugned order that the activities carried out by the trust are not in accordance with its objects—Fact that the assessee has not carried out any activity in the past does not mean that it has totally stopped its activities forever—Thus, no case is made out for cancellation of registration under s. 12AA—Impugned order set aside

Held:

There is no violation of any of the provisions contained in the Act. Merely because, all the trustees are family members, it does not mean that trust is not public trust. As a matter of fact the trust is genuine and because of this, the Director of IT (Exemption) granted the exemption under s. 12AA. There is no finding or allegation in the impugned order that activities carried out by the trust are not in accordance with the objects of the trust or institution. Merely because the assessee has not carried out any activities, that does not mean that the trust has totally stopped the activity forever. In these circumstances, the Director of IT (Exemption) has not made out a case justifying cancellation of the registration granted under s. 12AA. Therefore, the impugned order of the Director of IT (Exemption) is set aside. However, the Director of IT (Exemption) is at liberty to pass any order under sub-s. (3) of s. 12AA if any of the conditions under that section is fulfilled in future.—Deoki Nandan vs. Murlidhar & Ors. AIR 1957 SC 133 applied.

(Para 3)

Conclusion:

Assessee-trust did not cease to be a public trust merely because all its trustees are members of one family, and it cannot be said that the trust has totally stopped its activities forever simply because it has not carried out any activity in the past and, therefore, no case is made out for cancellation of registration granted to it under s. 12AA.

In favour of:

Assessee

Counsel appeared:

J.M. Trivedi, for the Appellant : P.M. Shukla, for the Respondent

ORDER

T.K. SHARMA, J.M. :

ORDER

The assessee-trust has filed this appeal against the order dt. 18th April, 2007 of the Director of IT (Exemption), Ahmedabad passed under  s. 12AA(3) of the IT Act, 1961 withdrawing the registration granted under s. 12AA on 7th July, 2005.

  1. The assessee-trust applied for registration under s. 12AA in Form No. 10A on 20th May, 2004 and registration under s. 12AA was granted on 7th July, 2005 and exemption under s. 80G(5) on 7th July, 2005. The renewal under s. 80G(5) was also granted vide order dt. 2nd Aug., 2006. Subsequently, the Director of IT (Exemption), on the ground that the nature of the constitution of the trust is purely a family affair and not a public charitable trust, issued show cause as to why the registration granted under s.12AA on 7th July, 2005 should not be withdrawn. The assessee-trust filed its reply on 12th Feb., 2007 and after considering the same, the Director of IT (Exemption) has withdrawn the registration granted under s. 12AA on 7th July, 2005 holding that the activities of the trust cannot be said to be genuine in the absence of any such activities carried out till 31st March, 2006.
  2. Having heard both sides, we have carefully gone through the impugned orders of the authorities below. Sub-s. (3) of s. 12AA of the Act empowers the CIT to cancel the registration of a trust or institution granted under cl. (b) of sub-s. (1) of s. 12AA when subsequent to grant of registration the CIT is satisfied that activities of trust or institution are not genuine or are not being carried out in accordance with objects of the trust or institution. We find that the registration granted under s. 12AA on 7th July, 2005 has been withdrawn by the Director of IT (Exemption) mainly on two counts and they are—(1) On tendering resignation of one of trustees i.e., Yogesh Hiralal Oza, with the remaining trustees the nature of the constitution of the trust is purely a family affair and not a public charitable trust, as according to the AO no trustee from the public is appointed/nominated except the family members, and (2) there was no activity carried out till 31st March, 2006. It is pertinent to note that the assessee-trust applied for registration under s. 12AA in Form 10A on 20th May, 2004. The trust was granted registration under s. 12AA on 7th July, 2005 and exemption under s. 80G on 7th July, 2005. Subsequently, by the impugned order, the learned Director of IT (Exemption), cancelled the registration. Power regarding cancellation of registration is contained in sub-s. (3) of s. 12AA which was inserted by the Finance (No. 2) Act, 2004 w.e.f. 1st Oct., 2004, which is reproduced as under :

“(3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) and subsequently the CIT is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution :

Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.”

The learned counsel of the assessee has filed the copy of acknowledgement of return of income for the asst. yrs. 2005-06 and 2006-07 along with audit report for the year ending 31st March, 2005 and 31st March, 2006. It is pointed out that from the perusal of the same, no activities are carried out by the trust. There is no violation of any of the provisions contained in the Act. Merely, all the trustees are family members, it does not mean that trust is not a public trust. This proposition finds support from the decision of Hon’ble Supreme Court in the case of Deoki Nandan vs. Murlidhar & Ors. AIR 1957 SC 133 (copy placed on record). As a matter of fact the trust is genuine and because of this, the learned Director of IT (Exemption) granted the exemption under s. 12AA. There is no finding or allegation in the impugned order that activities carried out by the trust are not in accordance with the objects of the trust or institution. Merely because the assessee has not carried out any activities, that does not mean that the trust has totally stopped the activity forever. In these circumstances, in our considered opinion, the learned Director of IT (Exemption) has not made out a case justifying cancellation of the registration granted under s. 12AA. We, therefore, set aside the impugned order of the Director of IT (Exemption). However, we may clarify that the learned Director of IT (Exemption) is at liberty to pass any order under sub-s. (3) of s. 12AA if any of the conditions under that section is fulfilled in future. Subject to this clarification, we allow the appeal of the assessee.

  1. In the result, the appeal of the assessee is allowed subject to the clarification made in the foregoing para.

 

 

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