ORDER
N.K. Saini, A.M.
1. This is an appeal by the assessee and is directed against the order of the CIT, Udaipur, dt. 26th Nov., 1999, passed under Section 12A of the IT Act, 1961. 2. Following grounds have been raised in this appeal :
1. The learned CIT grossly erred in law as well as on facts in refusing to grant registration to the trust under Section 12AA of the IT Act, 1961, in the circumstances of the case.
2. The learned CIT grossly ignored the fact that trust has complied with all the requirements as provided under Section 12A of the IT Act, 1961, and as such entitled to registration.
3. The issue, in brief, is that the assessee preferred an application under Section 12A(a) of the IT Act, 1961, in the prescribed form, i.e., Form No. 10A, on 14th May, 1999. The ITO (Judl.) for CIT, Udaipur, pointed out to the assessee that as per trust deed, all the trustees are closely related and belong to one family and as per Clause ‘C’, in the event of a vacancy in the board of trustees, the remaining trustees are to co-put another person from the very family of the outgoing trustee. The trust, therefore, appears more in the nature of a family affair/settlement than a public charitable trust. The assessee replied vide letter No. 1158 dt. 10th Nov., 1999, in the following manner:
“With reference to your honour’s above cited letter, we beg to state as under:
Your honour has drawn our attention towards board of trustees where trustees are closely related and belonging to one family and further mentioned above Clause c of the board of trustee for whatever reasons, the remaining trustees shall co-opt another major male or female person out of the family members of that person to fill up the vacancy. In this connection, we have to state that for constituting public trust one of the conditions is that the beneficiary thereof should be general public and that the object should not be such as resulting in private gains. If your honour go through the Clause 13 of the trust deed and both the proviso of Clauses 1 to 13 of the trust deed at p. 3, your honour will find that objects of the trust are such as to be carried out for the public at large and charitable purpose and the trust property and its income shall be spent and utilised for the charitable purpose of the trust. It was further provided that no part of the trust property or income thereof shall in any circumstances whatever be paid or lent, etc. or applied for the benefit of the settlor or trustees. The trust shall be irrevocable. In such circumstances it is not correct to say that trust itself is family affair or settlement than a public charitable trust. The objects of the trust and the genuineness of its activities are carried out for the public at large and its income has been spent and utilised for the charitable purpose of the trust. No income of the trust is applied for personal benefit of the trustees. Simply the trustees are from same family does not disentitle the claim of registration under Section 12AA of the IT Act, 1961. The trust fulfils the conditions as laid down in Section 12A of the IT Act, 1961, and as such deserves registration under Section 12AA of the IT Act, 1961.
Hope your honour will find the above explanation in order and very kind enough in granting the registration under Section 12AA of the IT Act, 1961.”
However, the learned CIT did not find any merit in the aforesaid submissions made by the trustee on behalf of the assessee-trust. He refused registration to the trust by holding that the trust does not stand for any public charitable purpose because trust belongs to one family. The trust, therefore, appears more in the nature of a family affair/settlement than a public charitable trust. Aggrieved by the order of the learned CIT refusing to grant registration under Section 12A, the assessee has preferred the present appeal before us.
4. The learned counsel for the assessee reiterated the submissions made before the authorities below and vehemently argued that it was a charitable trust since the main objects of the trust are such as to carry out for the public at large charitable purpose and the trust property and its income shall be spent and utilised for the charitable purpose. Accordingly, it was submitted that the learned CIT was not justified in declining registration to the trust. Reliance was also placed on the following case laws :
(i) Malli Ram Charitable Trust v. CIT (2003) 260 ITR 118 (Asr)(AT) and
(ii) Fifth General Education Society v. CIT (1990) 185 ITR 634 (All).
5. In his rival submissions, the learned Departmental Representative strongly supported the order of the CIT, Udaipur.
6. We have heard the learned representatives of both the parties at length and also gone through the order of the learned CIT along with the material available on record. On perusing the copy of the trust deed dt. 10th June, 1998 (available on record), it would be clear that the objects of the trust are as under:
“4. Aims and objects :
The objects for which the trust has been created and established are education, relief to the poor, medical relief and advancement of any other charitable objects of general public utility or construction of dharamshala, rain-basera, temple and school, etc., not involving the carrying on of any activity for profit and for such purposes:
1. To establish, maintain and/or grant aid in cash and/or in kind to hospitals, sanitorium, charitable, medical schools, medical college, nursing institute, and/or mobile dispensaries, after-care clinics, sanitoriam, charitable medical schools, medical college, nursing institute, and/or mobile dispensaries, aftercare clinics, maternity homes, nature cure clinics, child/welfare center and/or such other similar charitable institutions for the benefit and use of the students and/or for the benefit and use of public in general.
2. To establish, support, maintain, acquire, run and/or grant aid and assistance to schools and college hostels, boarding like nature for use of the students and the staff, to distribute books and literature on ethical, cultural, social and national subjects and also generally for the development and/or advancement of education and diffusion of knowledge amongst the public in general.
3. To establish, maintain and/or run studentship, scholarships and other kind of aid to poor students including supply of books, stipends, meals and other incentives to the study and to provide boarding and residence for poor students in general.
4. To grant aid, to promote establishment, support and/or maintain institution for the promotion of science literature and fine arts, diffusion of useful knowledge, schools, colleges, laboratories, reading rooms, libraries, research and other institutions having the similar objects for the benefit of the public in
general.
5. To open, found, maintain or contribute to the opening and maintaining of such institutions where work on living wages can be provided to poor and middle class people and as may be conducive to the development of such industries in any part for the benefit of poors.
6. To establish, maintain and grant aid to widows’ homes, orphanages or other establishments for relief of and to give help to the poor and destitute people, orphans and widows and otherwise provide for them.
7. To grant relief during natural calamities such as famines, earth-quake, floods, fire, triumphant, pestilence and other occasions of calamities of similar nature and to give donations, subscriptions or contributions to institutions, funds, established and/or persons carrying on such relief works.
8. To render assistance and/or grant aid to recognised public charitable trusts or institutions.
9. To construct, build and maintain dharamshalas, parks, hospitals, rain-baseras and temples for public use of benefit.
10. To distribute food, blankets, rugs, quilts and all kinds of cotton or woollen clothes to the needy persons and poors.
11. To help the Indian military personnel and their families who from time to time make and/or made sacrifices, becomes disabled and lay their lives for the nation.
12. To aid and promote the family planning movement and other national causes as enumerated in the current twenty-point programme, for the upliftment of the down-trodden and poors.
13. To do any other act for the advancement of general public utility (not involving the carrying on of any activity for profit) without distinction of any caste colour or creed.”
7. In the present case, it is not in dispute that application for registration has been made in the prescribed form, i.e., Form No. 10A. It is also not the case of the Department that the property held by the trust and income therefrom had not been utilised for the purposes of charity/public utility. The only reason for not granting registration was that there is a clause in the trust deed that “in the event of a vacancy arising in the board of trustees for whatever reasons, the remaining trustees shall co-opt another major male or female person out of the family members of that person to fill up the vacancy”. Only on that basis, the learned CIT considered that the trust was a family affair/settlement. However, he has not brought any material on record that by co-opting a person from the family of the previous trustee, how the object of the trust has been changed or by co-opting another family member of the trustee oh account of vacancy as to how the income was not utilised for the public charity. In the context of the present case, it is necessary to discuss the conditions as to registration of trusts, which have been prescribed in Section 12A of the IT Act, 1961 which states as under:
“12A. The provisions of Section 11 and Section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely,–
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the CCIT of CIT before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under Section 12AA :
Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of Sections 11 and 12 shall apply in relation to the income of such trust or institution,–
(i) from the date of the creation of the trust or the establishment of the institution if the CCIT or CIT is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;
(ii) from the first day of the financial year in which the application is made, if the CCIT or CIT is not so satisfied.
(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below Sub-section (2) of Section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.”
For the instant case, it is also relevant to point out the Rule 17A of the IT Rules, 1962, which provides as under:
“17A–An application under Clause (a) of Section 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form No. 10A and shall be accompanied by the following documents, namely:
(a) where the trust is created or the institution is established, under an instrument, the instrument in original, together with one copy thereof, and where the trust is created, or the institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment for example the institution, together with one copy thereof:
Provided that if the instrument or document, in original cannot conveniently be produced, it shall be open to the CCIT or CIT to accept a certified copy in lieu of the original.
(b) where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up.”
It is also noticed that Form No. 10A has been prescribed for filing the application for registration. Thus, on a combined reading of the above provisions, it would be clear that the application for registration under Section 12A of the IT Act, 1961, has to be made in Form No. 10A prescribed by Rule 17A of the IT Rules, 1962, before the expiry of one year from the date of the creation of the trust or establishment of the institution whichever is later. It has to be made by the person who is in receipt of the income of the trust, After receiving the application, learned CIT is required to examine whether the application is made in accordance with the requirements of Section 12A of the IT Act, 1961 r/w Rule 17A of the IT Rules, 1962, and whether Form No. 10A has been properly filed up. He is further required to see as to whether the objects of the trust are charitable or not.
8. In the present case, it is not in dispute that the application had been furnished in the prescribed Form No. 10A within the time allowed under Section 12A of the IT Act, 1961 r/w Rule 17A of the IT Rules, 1962. It is also not in dispute that the documents evidencing the creation of the trust was filed along with Form No. 10A. The learned CIT has also not doubted the objects of the trust and also has not stated that the trust was not created for public charity and its income had not been utilised for that purpose or the property held by it was used for the benefit of the trustees or their families but the only objection of the learned CIT was that in the event of vacancy, the trustees shall co-opt another person out of the family members of that person to fill up the vacancy. That reason cannot be a valid ground for refusing registration to a trust which is created having the main object of charitable purpose. In view of clear provisions of law referred to above, we are of the considered view that registration under Section 12AA of the IT Act, 1961 cannot be refused to trust on the basis that there is a clause in the trust deed that in the event of a vacancy in the board of trustees, another family member of the trustee can be co-opted from the very family of the outgoing trustee. While taking such a view, we are fortified by the judgment of Hon’ble Allahabad High Court in the case of Fifth Generation Education Society v. CIT (supra), wherein it has been held that the CIT was required to see as to whether the objects of the trust were charitable or not. He was further required to see as to whether the application was made in accordance with the requirements of Section 12AA of the IT Act, 1961 r/w Rule 17 of the IT Rules, 1962. Furthermore, it has been held in the said case that the CIT was not required to examine the application of income.
9. In view of the above discussion, we are of the view that the learned CIT was not justified in refusing registration to the assessee merely on the basis that in case of a vacancy in the board of trustees, the remaining trustees are to co-opt another person from the very family of the outgoing trustee and as such the trust appears more in the nature of a family affair/settlement than a charitable trust. We accordingly reverse his order and direct him to grant registration under Section 12AA of the IT Act, 1961.
10. In the result, the appeal is allowed.