ORDER
I.C. Sudhir, J.M.:
The assessee has questioned refusal of registration under sections 12A/12AA of the Income Tax Act, 1961, by the learned Commissioner on several grounds.
2. The assessee-trust has applied for registration under section 12A(a) of the Income Tax Act under the prescribed format on 18-6-2002, praying for registration with effect from 26-9-1956, which has been refused by the learned Commissioner vide order dated 26-12-2002, on the basis of several reasons which have been questioned before us.
2. The assessee-trust has applied for registration under section 12A(a) of the Income Tax Act under the prescribed format on 18-6-2002, praying for registration with effect from 26-9-1956, which has been refused by the learned Commissioner vide order dated 26-12-2002, on the basis of several reasons which have been questioned before us.
3. The facts in brief are that one Seth Maluk Chand Hiranand in S.Y. 1840 constructed a temple, for the family of Seth Maluk Chand Hiranand. Eleven persons hailed from Barnagar created a trust for the temple and the property available with the temple was made a part of the trust. A trust deed so framed was not registered with the Sub-Registrar on 26-9-1956, with certain objects. Thereafter, certain amendments were made in the trust deed on 30-10-1989. The basic aim and object of the trust was religious for the purpose of Digambar Jain Society and for their religious, cultural and social upliftment. As per clause No. 5 of the trust deed it was also the duty of the trust to protect and manage the entire movable and immovable properties of the temple and whenever necessary to extend and renovate the same from time to time Vide clause No. 12 of the deed, the trustees were also empowered to constitute other rule, aim or planning for the progress of the trust. Vide clause No. 13 it was made clear that neither the trustees nor any other person will have any personal right over the movable or immovable property of, the trust, nor would they be able to use the property of the trust for their personal benefit but they will have their right on these properties in the capacity of trustees only. Some amendment in the objects and in the procedures related to trustees were made by the trustees on 31-10-1989 and the amended trust deed was got registered on 20-11-2001 under the provisions of “Madhya Pradesh Lok Nyas Adhiniyam, 1951”. In this amended trust deed a new provision was introduced that other persons will have also place in the trust besides the trustees mainly from the Digambar Jain Bees Panthi Khandelwal community. The learned Commissioner has rejected the application for registration mainly on the basis that :
3. The facts in brief are that one Seth Maluk Chand Hiranand in S.Y. 1840 constructed a temple, for the family of Seth Maluk Chand Hiranand. Eleven persons hailed from Barnagar created a trust for the temple and the property available with the temple was made a part of the trust. A trust deed so framed was not registered with the Sub-Registrar on 26-9-1956, with certain objects. Thereafter, certain amendments were made in the trust deed on 30-10-1989. The basic aim and object of the trust was religious for the purpose of Digambar Jain Society and for their religious, cultural and social upliftment. As per clause No. 5 of the trust deed it was also the duty of the trust to protect and manage the entire movable and immovable properties of the temple and whenever necessary to extend and renovate the same from time to time Vide clause No. 12 of the deed, the trustees were also empowered to constitute other rule, aim or planning for the progress of the trust. Vide clause No. 13 it was made clear that neither the trustees nor any other person will have any personal right over the movable or immovable property of, the trust, nor would they be able to use the property of the trust for their personal benefit but they will have their right on these properties in the capacity of trustees only. Some amendment in the objects and in the procedures related to trustees were made by the trustees on 31-10-1989 and the amended trust deed was got registered on 20-11-2001 under the provisions of “Madhya Pradesh Lok Nyas Adhiniyam, 1951”. In this amended trust deed a new provision was introduced that other persons will have also place in the trust besides the trustees mainly from the Digambar Jain Bees Panthi Khandelwal community. The learned Commissioner has rejected the application for registration mainly on the basis that :
(i) declaration of new trust on 30-10-1989, deviating from the trust deed dated 26-9-1956, by extending the benefits of the trust to other people of the society besides people belonging to Digambar Jain community, was changed in the objects and subjects of the trust deed dated 26-9-1956, which was not permitted as per the judgments in CIT v. S. Ramaswamy Iyer (1977) 110 ITR 364 (Mad), CED v. K.A. Kadar & Ors (1974) 96 ITR 289 (Mad), CIT v. J.K. Charitable Trust (1992) 196 ITR 31 (All) and CIT v. Palghat Shadi Mahal Trust (2002) 254 ITR 212 (SC);
(ii) during the assessment year 1989-90 the immovable property of the trust situated at 25, Abbas Tayyab Ali No. 3, Barnagar, Ward-III, was sold to the trustees and their relatives below the market price;
(iii) the assessee for the assessment years 1984-85 and 1985-86 was assessed under section 143(3) of the Act vide order dated 29-12-1986, as a private religious trust. This was not questioned by the assessee in appeal and its registration on 20-11-2001 under the provisions of “M.P. Lok Nyas Adhiniyam, 1951” was done on the basis of new declaration dated 31-10-1989. And if it was a public trust, then it had to take prior permission of the District Collector under rule 14 of the M.P. Lok Nyas Adhmiyam to sell the immovable property of the trust which was not done, and
(iv) the assessee was not regular in returning the income, and the account books and audit report were not reflecting the true position of the assessee.
4. Besides the above, the learned Commissioner has also observed that the list of immovable property furnished with the declaration letter dated 26-9-1956, before the Sub-Registrar indicated 13 building properties whereas in the new declaration dated 31-10-1989, the list of immovable properties showed only 10 immovable properties. Thus, the account books of the trust did not reflect the true position of the properties of the trust. The learned Commissioner denied the claim of the assessee that it had applied for registration under section 12A(a) to the learned Commissioner, Bhopal, on 14-12-1998, on the basis that the assessee had neither applied in the prescribed format nor had it applied to the learned Commissioner having jurisdiction for the same. It was applied before the learned Commissioner at Ujjain whereas the jurisdiction was lying with the learned Commissioner, Bhopal. The learned Commissioner was further of the view that there was no question of granting registration with effect from 26-9-1956 to 20-11-2001. Because the assessee had not furnished sufficient reason for moving application after one year from the date 1-7-1973. So far the rejection of application for registration with effect from 20-11-2001, is concerned, the same has been denied on the basis already discussed hereinabove.
4. Besides the above, the learned Commissioner has also observed that the list of immovable property furnished with the declaration letter dated 26-9-1956, before the Sub-Registrar indicated 13 building properties whereas in the new declaration dated 31-10-1989, the list of immovable properties showed only 10 immovable properties. Thus, the account books of the trust did not reflect the true position of the properties of the trust. The learned Commissioner denied the claim of the assessee that it had applied for registration under section 12A(a) to the learned Commissioner, Bhopal, on 14-12-1998, on the basis that the assessee had neither applied in the prescribed format nor had it applied to the learned Commissioner having jurisdiction for the same. It was applied before the learned Commissioner at Ujjain whereas the jurisdiction was lying with the learned Commissioner, Bhopal. The learned Commissioner was further of the view that there was no question of granting registration with effect from 26-9-1956 to 20-11-2001. Because the assessee had not furnished sufficient reason for moving application after one year from the date 1-7-1973. So far the rejection of application for registration with effect from 20-11-2001, is concerned, the same has been denied on the basis already discussed hereinabove.
5. The learned authorised representative in support of the ground submits that the trust deed was executed and registered with the Registrar Trusts, in the same year which was notified in the public gazette. On 14-12-1998, an application for registration was filed before the learned Commissioner, Bhopal, along with a letter addressed to the Assistant Commissioner (Inv.), Ujjain. The learned Asstt. Commissioner issued a letter on the application dated 22-12-1998, and asked for certain information which was complied with (pp. 1 to 8 of the paper book). The learned authorised representative points out that at that time the directions of the learned CIT were there to file an application to the Assistant Commissioner, Ujjain, and forward the same along with his report to the learned Commissioner, Bhopal, to avoid delay but the department did not issue a certificate. The assessee filed a fresh application dated 18-3-2002 with the learned Commissioner, Ujjain, because the office of the learned Commissioner was established in Ujjain. He submits that two issues were there before the learned Commissioner for consideration, i.e., (i) whether in the case of a trust created/established prior to 1-4-1962, the provisions of section 13(1)(b) are not applicable on the trust, and (ii) whether the trust is genuine and entitled to registration. The learned authorised representative submits that the learned Commissioner has rejected the application for registration on the basis that (i) application had not been made in time and no reason was advanced for delay and (ii) the property sold by the trust for which no order from the court was obtained. The learned authorised representative submits that for registration under section 12A of the Act only general enquiry regarding the aims and objects of its activities is required to be made. He submits that the trust was created prior to 1-4-1962. Therefore, the bars provided under section 13(1)(b) of the Income Tax Act, 1961 were not applicable in the case of the assessee.
5. The learned authorised representative in support of the ground submits that the trust deed was executed and registered with the Registrar Trusts, in the same year which was notified in the public gazette. On 14-12-1998, an application for registration was filed before the learned Commissioner, Bhopal, along with a letter addressed to the Assistant Commissioner (Inv.), Ujjain. The learned Asstt. Commissioner issued a letter on the application dated 22-12-1998, and asked for certain information which was complied with (pp. 1 to 8 of the paper book). The learned authorised representative points out that at that time the directions of the learned CIT were there to file an application to the Assistant Commissioner, Ujjain, and forward the same along with his report to the learned Commissioner, Bhopal, to avoid delay but the department did not issue a certificate. The assessee filed a fresh application dated 18-3-2002 with the learned Commissioner, Ujjain, because the office of the learned Commissioner was established in Ujjain. He submits that two issues were there before the learned Commissioner for consideration, i.e., (i) whether in the case of a trust created/established prior to 1-4-1962, the provisions of section 13(1)(b) are not applicable on the trust, and (ii) whether the trust is genuine and entitled to registration. The learned authorised representative submits that the learned Commissioner has rejected the application for registration on the basis that (i) application had not been made in time and no reason was advanced for delay and (ii) the property sold by the trust for which no order from the court was obtained. The learned authorised representative submits that for registration under section 12A of the Act only general enquiry regarding the aims and objects of its activities is required to be made. He submits that the trust was created prior to 1-4-1962. Therefore, the bars provided under section 13(1)(b) of the Income Tax Act, 1961 were not applicable in the case of the assessee.
He submits that originally the trust was created as a religious trust and there were various objects stated in the trust deed. Vide para No. 6 p. 5 of the trust deed, the trustees were authorised to make necessary amendments in the trust deed as per the prevailing public policies. On 30-10-1989, certain amendments in respect of the trustees as well as in other clauses including the object clause of trust deed which were well within the framework of the trust deed, were made. The trust was created/established originally on 26-9-1956, and registered with the Registrar as a public trust. The amendments made were also registered with the Registrar of the Trusts on 20-11-2002. In fact, it was not a registration of new trust, but amendments made in the original trust deed were got registered. So far the income-tax is concerned, it is not necessary that the trust must be registered with the Registrar of Trusts. Regarding selling of property situated at 25, Abbas Tayyab Ali Ward 3, Barnagar, at lower price to the trustees and their relatives, the learned authorised representative submits that the property was sold on the fair value. The guidelines of 1998 were adopted for registration and the same is not a real value of the property as held by various courts. The selling of the property was in the interest of the trust since the property was let out to one Shri Madan Mohan Joshi, an advocate, @ Rs. 41 per month on 19-3-1969 vide an agreement. It was decided by the trustees that the property be sold and, accordingly, best possible efforts were made to sell on the available price in the market but could not succeed since it was a tidious job to get the property vacated from an advocate tenant. In these circumstances, the property with tenant in occupation was sold to three persons stated to be trustees and their relatives at the total price of Rs. 4 lakhs. An agreement was entered into and advance was received in the months of September and November, 1991, then part payment was received in 1993, 1994 and 1995. These funds were received through account payee cheques and with these funds as per the trust resolution, a new property adjoining the temple was constructed. The money received in instalments were utilised in the said construction. The ground floor of the new property was let out to LIC at the initial rent of Rs. 6,700 per month which has now been increased to Rs. 10,250 per month. The property was sold in the year 1991, but registration was done in the year 1998 as per the guidelines of the local authority which has got nothing to do with the sale price. On the basis of these guidelines for the purpose of registration, it cannot be said that the purchaser has been given undue favour or advantage. The learned authorised representative submits that if a property is sold with a reasonable amount under a particular facts and circumstances, the provisions of section 13(1)(g) of the Act do not apply. On the contrary, the trust was benefited by the disposal of the property and instead of rent of Rs. 492 per year now the trust is getting around Rs. 1,20,000 per annum. Therefore, it cannot be said that the sale proceeds were detrimental to the interests of the trust. He points out that clause No. 5 of p. 3 of the trust deed (pp. 62 to 64 of the paper book) suggests that the trustees will look after and maintain the properties and extend the same from time to time and increase or renovate the same. He submits further that the returns for the assessment year 1984-85 were filed when the excess of income over expenditure was very nominal and there was no financial impact and, therefore, the appeal was not filed but if the Income Tax Officer has treated the trust as private, it was not correct because it was registered as a public trust with the Registrar and no reasons have been assigned in the order impugned for treating it as a private trust. While concluding his arguments, the learned authorised representative submits that the trust is a public and religious trust created before 1-4-1962, and, thus, entitled to registration. He cited the following decisions :
1. CIT v. Shri Maheshwari Agrawal Marwari Panchayat (1982) 136 ITR 556 (MP)
2. Fifth Generation Education Society v. CIT (1990) 185 ITR 634 (All)
3. Laxminarayan Maharaj v. CIT (1984) 150 ITR 465 (MP)
4. Shantagauri Ramniklal Trust & Ors. v. CIT (1999) 239 ITR 528 (Guj).
He also cites other judgments shown in the list of citations filed on 16-4-2004.
6. The learned Departmental Representative, on the other hand, justifies the rejection of application for registration by the learned Commissioner and submits that the trust is for the benefit of specific community. He submits that the amendment in the original trust deed is not permissible and cites the following decisions
6. The learned Departmental Representative, on the other hand, justifies the rejection of application for registration by the learned Commissioner and submits that the trust is for the benefit of specific community. He submits that the amendment in the original trust deed is not permissible and cites the following decisions
1. CIT v. Ramaswamy Iyer (supra)
2. CED v. K.A. Kadar (supra)
3. CIT v. J.K. Charitable Trust (supra), and
4. CIT v. Palghat Shadi Mahal Trust (supra)
The learned Departmental Representative cites further the judgment of the Hon’ble Supreme Court in the case of Trustees of the Charity Fund v. CIT (1959) 36 ITR 513 (SC) and submits that even private religious trust was taxable before the amendment w.,e.f. 1-4-1962. He also refers the order of this Bench of the Tribunal in the case of Dhakad Samaj Dharamshala v. CIT (ITA No. 468/Ind/2003, dated 24-11-2003).
6.1 The learned authorised representative submits in rejoinder that if it would have been a private trust, then the beneficiary clause must have been there. He also refers pp. 91 and 92 of the paper book and submits that computation of income therein was not made as a private trust during the assessment years 1984-85 and 1985-86. He refers the contents of pp. 41 to 48 of the paper book and submits that a detailed reply was filed on behalf of the assessee before the learned Commissioner. He submits further that the application for registration was also made on earlier occasion on 28-9-1998, with the required documents along with Form No. IOA under rule 17A and compliance was made by the assessee to the queries raised by the learned Commissioner. He also refers pp. 3 to 48 of the paper book in this regard.
6.1 The learned authorised representative submits in rejoinder that if it would have been a private trust, then the beneficiary clause must have been there. He also refers pp. 91 and 92 of the paper book and submits that computation of income therein was not made as a private trust during the assessment years 1984-85 and 1985-86. He refers the contents of pp. 41 to 48 of the paper book and submits that a detailed reply was filed on behalf of the assessee before the learned Commissioner. He submits further that the application for registration was also made on earlier occasion on 28-9-1998, with the required documents along with Form No. IOA under rule 17A and compliance was made by the assessee to the queries raised by the learned Commissioner. He also refers pp. 3 to 48 of the paper book in this regard.
7. We have considered the rival submissions of the parties in view of the material available on record, the order of the learned Commissioner as well as the judgments relied on by the parties. The learned Commissioner has rejected the claim of the assessee regarding the furnishing of application for registration under section 12A(a) of the Act before the learned Commissioner, Bhopal, 14-12-1998, on the basis that no such application was made. And the learned Commissioner has annexed Annex. ‘Kh’ the photocopy of the aforesaid application dated 28-9-1998 received. on 14-12-1998 (at bottom) in support with the observation that the application was addressed to the Assistant Commissioner (Inv.), Ujjain, whereas under section 12A(a) an application for registration is supposed to furnish in the prescribed Form No. 10A to the learned Commissioner, Bhopal, having jurisdiction for the same. The learned Commissioner has accordingly rejected the claim vide para 6 of his order, We, however, having gone through the contentions of the assessee and the documents placed at page Nos. 3 and 4 of the paper book find force in the submission of the learned authorised representative that on 14-12-1998 application for registration was filed with the then learned Commissioner, Bhopal, through the Assistant Commissioner (Inv.), Ujjain, and while passing the order in question, the learned Commissioner has only referred the letter to the Assistant Commissioner (p. 3 of the paper book) and has failed to refer the furnishing of required information in Form No. 10A (p. 4 of the paper book) addressed to the learned Commissioner, Bhopal. The submission of the learned authorised representative remained that at that point of time applications were forwarded by the Assistant Commissioner to the learned Commissioner, Bhopal, to save time. We, thus, allow the claim of the assessee that the application for registration under section 12A(a) of the Act with the information required in Form No. 10A was furnished to the learned Commissioner, Bhopal, (page No. 4 of the paper book) through the Asstt. Commissioner (Inv.), Ujjain (page No. 3 of the paper book) on 14-12-1.998. The letter dated 22-12-1998 (p. 8 of the paper book) by the Assistant Commissioner (Inv.), Ujjain, addressed to the assessee for further compliance in response to the application dt. 28-9-1998 for registration under section 12A(a) supports the claim of the assessee that the application for registration was filed with Form No. 10A since in case of non-filing of the same, a defect should also have been pointed out by the department in their letter dated 22-12-1998 (page No. 8 of the paper book), addressed to the assessee.
7. We have considered the rival submissions of the parties in view of the material available on record, the order of the learned Commissioner as well as the judgments relied on by the parties. The learned Commissioner has rejected the claim of the assessee regarding the furnishing of application for registration under section 12A(a) of the Act before the learned Commissioner, Bhopal, 14-12-1998, on the basis that no such application was made. And the learned Commissioner has annexed Annex. ‘Kh’ the photocopy of the aforesaid application dated 28-9-1998 received. on 14-12-1998 (at bottom) in support with the observation that the application was addressed to the Assistant Commissioner (Inv.), Ujjain, whereas under section 12A(a) an application for registration is supposed to furnish in the prescribed Form No. 10A to the learned Commissioner, Bhopal, having jurisdiction for the same. The learned Commissioner has accordingly rejected the claim vide para 6 of his order, We, however, having gone through the contentions of the assessee and the documents placed at page Nos. 3 and 4 of the paper book find force in the submission of the learned authorised representative that on 14-12-1998 application for registration was filed with the then learned Commissioner, Bhopal, through the Assistant Commissioner (Inv.), Ujjain, and while passing the order in question, the learned Commissioner has only referred the letter to the Assistant Commissioner (p. 3 of the paper book) and has failed to refer the furnishing of required information in Form No. 10A (p. 4 of the paper book) addressed to the learned Commissioner, Bhopal. The submission of the learned authorised representative remained that at that point of time applications were forwarded by the Assistant Commissioner to the learned Commissioner, Bhopal, to save time. We, thus, allow the claim of the assessee that the application for registration under section 12A(a) of the Act with the information required in Form No. 10A was furnished to the learned Commissioner, Bhopal, (page No. 4 of the paper book) through the Asstt. Commissioner (Inv.), Ujjain (page No. 3 of the paper book) on 14-12-1.998. The letter dated 22-12-1998 (p. 8 of the paper book) by the Assistant Commissioner (Inv.), Ujjain, addressed to the assessee for further compliance in response to the application dt. 28-9-1998 for registration under section 12A(a) supports the claim of the assessee that the application for registration was filed with Form No. 10A since in case of non-filing of the same, a defect should also have been pointed out by the department in their letter dated 22-12-1998 (page No. 8 of the paper book), addressed to the assessee.
8. The learned Commissioner has rejected the request of the assessee to grant registration under section 12A(a) of the Act with effect from 26-9-1956 to 20-11-2001, on the basis that the assessee has not shown reason for not furnishing the application for the same within the one year from the prescribed dated 1-7-1973 nor had the permission taken under rule 14 of the M.P. Lok Nyas Adhiniyam, 1951, for selling the property and the Registrar Trusts, has also registered it on 20-11-2001. The contention of the assessee remained that the trust was originally created on 26-9-1956 and was registered on the same date. Therefore, it cannot be said that the said trust was again registered on 28-11-2001 but certain amendments made therein vide trust deed dated 30-10-1989 were got registered on 28-11-2001. Accordingly, it was submitted to consider the date of creation/establishment of the trust than the date of registration for the purpose of registration under section 12A(a) of the Act. From these submissions of the assessee, we are unable to find any reason for not applying before the prescribed dated 1-7-1973, or before the expiry of a period of one year from the date of creation of the trust whichever was later as per the provisions of section 12A(a) of the Act. The reason for delay shown in the application dated 28-9-1998, received by the department on 14-12-1998 (p. 3 of the paper book), in furnishing the application for registration shows that the trustees were not aware about the provisions of registration which is not sufficient to condone the inordinate delay. In these circumstances, as per the provisions (ii) to section 12A(a) the provisions of sections 11 and 12 shall apply in relation to the income of such trust from the first day of the financial year in which the application is made. We order accordingly.
8. The learned Commissioner has rejected the request of the assessee to grant registration under section 12A(a) of the Act with effect from 26-9-1956 to 20-11-2001, on the basis that the assessee has not shown reason for not furnishing the application for the same within the one year from the prescribed dated 1-7-1973 nor had the permission taken under rule 14 of the M.P. Lok Nyas Adhiniyam, 1951, for selling the property and the Registrar Trusts, has also registered it on 20-11-2001. The contention of the assessee remained that the trust was originally created on 26-9-1956 and was registered on the same date. Therefore, it cannot be said that the said trust was again registered on 28-11-2001 but certain amendments made therein vide trust deed dated 30-10-1989 were got registered on 28-11-2001. Accordingly, it was submitted to consider the date of creation/establishment of the trust than the date of registration for the purpose of registration under section 12A(a) of the Act. From these submissions of the assessee, we are unable to find any reason for not applying before the prescribed dated 1-7-1973, or before the expiry of a period of one year from the date of creation of the trust whichever was later as per the provisions of section 12A(a) of the Act. The reason for delay shown in the application dated 28-9-1998, received by the department on 14-12-1998 (p. 3 of the paper book), in furnishing the application for registration shows that the trustees were not aware about the provisions of registration which is not sufficient to condone the inordinate delay. In these circumstances, as per the provisions (ii) to section 12A(a) the provisions of sections 11 and 12 shall apply in relation to the income of such trust from the first day of the financial year in which the application is made. We order accordingly.
9. So far as the objection of the learned Commissioner regarding the amendments made in the objects and subjects of the trust deed is concerned, we find force in the contention of the learned authorised representative that vide clause No. 5 of the registered deed dated 26-9-1956, the trustees were empowered to make necessary amendment in the trust within the framework of public policy and in the interest of the trust by majority. The decision of the Hon’ble Madras High Court in the case of CIT v. S. Ramaswami Aiyar, relied on by the learned Departmental Representative, is of ho help to the department since in that case the trustee in the trust deed had no power to alter the purpose of the trust deed and, accordingly, it was held that the trustee cannot alter the purpose of a trust deed without a power being reserved therefor in himself in the trust deed itself. Similar was the position in the case of CED v. K.A. Kadar (supra) relied on by the learned Departmental Representative as there was no specific power reserved under the Wakf Nama for alteration of the beneficiaries of the objects. The judgment of the Hon’ble Supreme Court in the case of CIT v. Palghat Shadi Mahal Trust (supra) is also not helpful to the department as in that case the objects of the trust constituted on 14th April, were not changed by a circular, the Hon’ble court held that the resolution dated 20-4-1975 did not decide the meaning and scope of a clause of the trust deed, but had the effect of altering the object of the trust deed which could be done only by means of an amendment of the trust deed by the settlors, whereas in the present case before us the amendments in the trust deed have been made and registered with the Registrar of Trusts after 33 years of creation of the trust. We, thus, do not find substance in one of such basis of rejection of registration by the learned Commissioner.
9. So far as the objection of the learned Commissioner regarding the amendments made in the objects and subjects of the trust deed is concerned, we find force in the contention of the learned authorised representative that vide clause No. 5 of the registered deed dated 26-9-1956, the trustees were empowered to make necessary amendment in the trust within the framework of public policy and in the interest of the trust by majority. The decision of the Hon’ble Madras High Court in the case of CIT v. S. Ramaswami Aiyar, relied on by the learned Departmental Representative, is of ho help to the department since in that case the trustee in the trust deed had no power to alter the purpose of the trust deed and, accordingly, it was held that the trustee cannot alter the purpose of a trust deed without a power being reserved therefor in himself in the trust deed itself. Similar was the position in the case of CED v. K.A. Kadar (supra) relied on by the learned Departmental Representative as there was no specific power reserved under the Wakf Nama for alteration of the beneficiaries of the objects. The judgment of the Hon’ble Supreme Court in the case of CIT v. Palghat Shadi Mahal Trust (supra) is also not helpful to the department as in that case the objects of the trust constituted on 14th April, were not changed by a circular, the Hon’ble court held that the resolution dated 20-4-1975 did not decide the meaning and scope of a clause of the trust deed, but had the effect of altering the object of the trust deed which could be done only by means of an amendment of the trust deed by the settlors, whereas in the present case before us the amendments in the trust deed have been made and registered with the Registrar of Trusts after 33 years of creation of the trust. We, thus, do not find substance in one of such basis of rejection of registration by the learned Commissioner.
10. So far as the allegation of 8elling of the old property situated at 25, Abbas Tayyab Ali Ward No. 3, Barnagar, to the trustees and their relation is concerned, we agree with the contention of the assessee that any immovable property with tenant has no potential to fetch proper market value and further that the guidelines are meant for the purpose of registration and the same cannot be taken as real value of the property. The transaction of sale was authorised by the trust resolution and the purchaser had all the right to get the property registered in different names. As discussed above, the tenant in the property was an advocate occupying the premises since 19-3-1969 vide an agreement at the monthly rent of Rs. 41, i.e., Rs. 492 per year. A resolution, therefore, was passed in the interest of the trust to dispose of the property and with that fund to construct house adjoining the temple. The payments were received through account payee cheques and with these funds, as per the trust resolution, a new property adjoined to the temple was constructed and ground floor of the property was let out to LIC at initial rent of around Rs. 6,700 per month which later on increased to Rs. 10,250, i.e., around Rs. 1,20,000 per year. Thus, it could not be said that the sale proceeds were detrimental to the interests of the trust nor any comparable instance has been furnished by the department to establish the allegation that the property was sold to the trustees or their relatives on a low price. We, thus, do not find substance in rejecting registration prayed for by the learned Commissioner on this basis also because as per clause 5 p. 3 of the trust deed the trustees were empowered to look after, maintain the property and extend, renavate the same from time to time.
10. So far as the allegation of 8elling of the old property situated at 25, Abbas Tayyab Ali Ward No. 3, Barnagar, to the trustees and their relation is concerned, we agree with the contention of the assessee that any immovable property with tenant has no potential to fetch proper market value and further that the guidelines are meant for the purpose of registration and the same cannot be taken as real value of the property. The transaction of sale was authorised by the trust resolution and the purchaser had all the right to get the property registered in different names. As discussed above, the tenant in the property was an advocate occupying the premises since 19-3-1969 vide an agreement at the monthly rent of Rs. 41, i.e., Rs. 492 per year. A resolution, therefore, was passed in the interest of the trust to dispose of the property and with that fund to construct house adjoining the temple. The payments were received through account payee cheques and with these funds, as per the trust resolution, a new property adjoined to the temple was constructed and ground floor of the property was let out to LIC at initial rent of around Rs. 6,700 per month which later on increased to Rs. 10,250, i.e., around Rs. 1,20,000 per year. Thus, it could not be said that the sale proceeds were detrimental to the interests of the trust nor any comparable instance has been furnished by the department to establish the allegation that the property was sold to the trustees or their relatives on a low price. We, thus, do not find substance in rejecting registration prayed for by the learned Commissioner on this basis also because as per clause 5 p. 3 of the trust deed the trustees were empowered to look after, maintain the property and extend, renavate the same from time to time.
11. We also agree with the contention of the learned authorised representative that it remained a public trust as it is also evident from the trust deed placed at page Nos. 75 to 86 of the paper book which has been shown registered with the Registrar of Public Trusts, Barnagar. We agree with the learned authorised representative that the requirements of section 13 of the Income Tax Act are clear that the trust must be created or established, it does not suggest registration as a condition precedent. The computation filed with the returns for the assessment years 1984-85 and 1985-86 (page Nos. 91 and 92 of the paper book) wherein total expenditure has been shown more than 75 per cent do not suggest that it was a private trust.
11. We also agree with the contention of the learned authorised representative that it remained a public trust as it is also evident from the trust deed placed at page Nos. 75 to 86 of the paper book which has been shown registered with the Registrar of Public Trusts, Barnagar. We agree with the learned authorised representative that the requirements of section 13 of the Income Tax Act are clear that the trust must be created or established, it does not suggest registration as a condition precedent. The computation filed with the returns for the assessment years 1984-85 and 1985-86 (page Nos. 91 and 92 of the paper book) wherein total expenditure has been shown more than 75 per cent do not suggest that it was a private trust.
12. Besides the above objections, the learned Commissioner has made several other observations in his order that the property was sold without prior approval of the authority concerned, proper account books were not maintained, price of the property was paid in instalments, etc. but as per the judgment of the Hon’ble Allahabad High Court in the case of Fifth Generation Education Society v. CIT (supra) relied on by the learned authorised representative at the stage of registration under section 12A, Commissioner has to see only whether objects of the trust are charitable or not. The Hon’ble Gujarat High Court in the case of Shantagauri Rarnniklal Trust v. CIT (supra) held that the duty of the Commissioner at the stage of granting registration of a trust is to enquire into the nature of the trust and the Commissioner must make a clear distinction between the requirement of registration and the requirements for claiming tax benefit. The latter clause falls squarely to be considered by the assessing officer. It was further held by the Hon’ble court that section 12A neither makes registration of trust a condition precedent for claiming benefit under sections 11 and 12 read with section 13 nor does registration obviate enquiry into the conditions envisaged under section 13 by the Act before the tax benefit can be allowed.
12. Besides the above objections, the learned Commissioner has made several other observations in his order that the property was sold without prior approval of the authority concerned, proper account books were not maintained, price of the property was paid in instalments, etc. but as per the judgment of the Hon’ble Allahabad High Court in the case of Fifth Generation Education Society v. CIT (supra) relied on by the learned authorised representative at the stage of registration under section 12A, Commissioner has to see only whether objects of the trust are charitable or not. The Hon’ble Gujarat High Court in the case of Shantagauri Rarnniklal Trust v. CIT (supra) held that the duty of the Commissioner at the stage of granting registration of a trust is to enquire into the nature of the trust and the Commissioner must make a clear distinction between the requirement of registration and the requirements for claiming tax benefit. The latter clause falls squarely to be considered by the assessing officer. It was further held by the Hon’ble court that section 12A neither makes registration of trust a condition precedent for claiming benefit under sections 11 and 12 read with section 13 nor does registration obviate enquiry into the conditions envisaged under section 13 by the Act before the tax benefit can be allowed.
13. We also find substance in the contention of the assessee that the trust created before commencement of 1961 Act for upliftment of a particular religious community will not come within the prohibition provided under section 1.30)(b) of the Act which is also supported by the judgment of the Hon’ble M.P. High Court in the case of CIT v. Maheshwari Agrawal Marwari Panchayat (supra) relied on by the learned authorised representative. In the present case, there is no dispute that the trust was created and registered in the year 1956, i.e., well before section 13(1)(b) of the Act coming into force in the year 1961.
13. We also find substance in the contention of the assessee that the trust created before commencement of 1961 Act for upliftment of a particular religious community will not come within the prohibition provided under section 1.30)(b) of the Act which is also supported by the judgment of the Hon’ble M.P. High Court in the case of CIT v. Maheshwari Agrawal Marwari Panchayat (supra) relied on by the learned authorised representative. In the present case, there is no dispute that the trust was created and registered in the year 1956, i.e., well before section 13(1)(b) of the Act coming into force in the year 1961.
14. In view of the aforesaid discussion and the findings on different objections raised by the learned Commissioner for justifying the rejection of the application for registration, we are definitely of the view that while considering the application for registration the learned Commissioner was supposed to inquire into the nature of the trust and since there was nothing substantive or serious to doubt the nature of the trust being charitable, the learned Commissioner was not justified in rejecting the application for registration on the aforesaid basis. The order of the learned Commissioner is, thus, set aside with the direction to grant registration on the application received on 14-12-1998, in view of the provisions laid down under section 12A(a) of the Act condoning the delay prayed for in the application dated 28-9-1998 received on 14-12-1998 (pp. 3 and 4 of the paper book), with effect from the first day of the financial year in which the said application was made.
14. In view of the aforesaid discussion and the findings on different objections raised by the learned Commissioner for justifying the rejection of the application for registration, we are definitely of the view that while considering the application for registration the learned Commissioner was supposed to inquire into the nature of the trust and since there was nothing substantive or serious to doubt the nature of the trust being charitable, the learned Commissioner was not justified in rejecting the application for registration on the aforesaid basis. The order of the learned Commissioner is, thus, set aside with the direction to grant registration on the application received on 14-12-1998, in view of the provisions laid down under section 12A(a) of the Act condoning the delay prayed for in the application dated 28-9-1998 received on 14-12-1998 (pp. 3 and 4 of the paper book), with effect from the first day of the financial year in which the said application was made.
15. In the result, the appeal is partly allowed.
15. In the result, the appeal is partly allowed.