VIKRAM SINGH YADAV, A.M. :-
These two appeals filed by the assessee are against the order of learned CIT (Exemptions), Jaipur dt. 28th June, 2017, refusing to grant registration under s. 12AA of the Act and exemption under s. 80G of the Act.
2. Briefly the facts of the case are that the assessee is a charitable trust constituted under deed of trust dt. 11th Feb., 1998. It filed an application with the learned CIT (Exemption) for registration under s. 12AA of the Act. In its order, the learned CIT (Exemption) states that while considering the case for registration under s. 12AA, the object of the Trust/Society and the genuineness of its activities are to be examined and as per the rules, the certified copy of instrument establishing the Society/Trust needs to be verified. The applicant was asked to file certain information/documents which were duly filed and considered by the learned CIT (Exemption). Subsequently, vide show-cause dt. 30th May, 2017, the assessee was asked to show cause as to why its application for registration should not be rejected as no specific dissolution clause is provided in the deed of trust. In response, the assessee filed its submission which was not found acceptable by the learned CIT (Exemption) and his relevant finding are as under :
"The applicant in its replies mainly has stressed upon that absence of dissolution clause in the deed cannot be made a ground for refusal of registration under s. 12AA. Reply of the applicant is not found acceptable because the constitution of the trust has no dissolution clause. The dissolution clause ensures that in the event of dissolution of the trust, the balance funds are not mis-utilized. In absence of dissolution clause it is not known that in the event of dissolution of the trust how these funds will be utilized. There has to be check that balance fund on dissolution do not go to the office-bearers of the trust. As this clause is not there in the trust deed, there is no security of proper utilization of the funds."
3. The learned CIT(E) accordingly, rejected the application of the assessee seeking registration under s. 12AA of the Act and consequently, the application for exemption under s. 80G was also rejected for want of registration under s. 12AA of the Act. Now, the assessee is in appeal before us.
4. During the course of hearing, the learned Authorised Representative drawn our reference to the trust deed dt. 10th Feb., 1998 wherein it is stated as under :
;g lkjh lEifr Hkxoku dikys'oj egknso efUnj dh gS bldks egUr] lUr] VzLV ds dksbZ Hkh lnL; csp ugh ldrs gS A e.My djus dk lHkk dks vf?kdkj gS] [kk.Mu djus dk fdlh dks dksbZ vf?kdkj ugh gS vxj djsxkk fu;eks ds fo:} rks og jkT; njckj >qBk jgsxk A
Drawing our attention to the said clause in the trust deed, the learned Authorised Representative submitted that neither the trust nor any member of the trust is empowered to sell any part of the property of the trust. Further, the learned Authorised Representative submitted that it is a public charitable trust registered with Devsthan Vibhag and in the event of dissolution of the trust, all the assets and properties of the trust shall vest with the Charitable CIT Devsthan Vibhag, Government of Rajasthan in accordance with the relevant provisions of the Rajasthan Public Trust Act, 1959.
5. The learned Authorised Representative further submitted that looking to the objects of the trust, there is no dispute at all raised even by the learned CIT that such objects fall very well within the definition of a "charitable purpose" as defined under s. 2(15) of the Act nor there is any adverse remark on the genuineness of the activities of the trust after the detailed examination carried out by him as evident from the detailed query letters and detailed replies thereto. Thus, so far as the objects of the trust being charitable in nature are concerned, there is no dispute between the parties. It is a public charitable trust registered with Devsthan Vibhag.
6. It was further submitted that the sole basis for refusal to grant registration was the absence of the dissolution clause in the trust deed which firstly, is not at all a valid ground and in any case is not at all required by the limited scope of s. 12AA(1) and by considering such a ground, the learned CIT has rather exceeded his jurisdiction/enhanced the scope of enquiry than what is conferred by the statute upon him.
7. It was further submitted that even otherwise, such a clause is already there i.e., clause at page 15 of the deed of trust according to which the possibility of the dissolution of the appellant Trust has been ruled out. In such a situation, the property shall vest in the Charity CIT - Devsthan Vibhag of Government of Rajasthan in accordance with the relevant provisions of the Rajasthan Public Trust Act, 1959.
8. In support, reliance was placed on the decision of Umiya Charitable Trust vs. CIT (2014) (Rajkot) wherein it was held that :
"5.2 The last ground of rejection pointed out by the learned CIT is that the trust deed of the trust does not contain the dissolution clause in the event of its dissolution. This issue has already been covered in favour of assessee-institution/association by the decision of Tribunal Ahmedabad ‘C’ Bench in the case of Sitaram Kutir Charitable Trust vs. CIT in ITA No. 71/Ahd/2013, decided on 17th May, 2013, wherein it was held that in case the trust registered with the Sub-Registrar as a charitable trust and the trust being an irrevocable trust, the obvious position shall be that the Charity CIT should take over the assets on dissolution; hence rejection of registration by the learned CIT on the ground that there was no specific clause in the instrument in regard to the treatment to be given in the vent of dissolution was not on a sound footing.
In view of the foregoing, I am of the view that the registration under s. 12AA of the IT Act, 1961, as sought by the assessee-institution/ association, cannot be refused and I, therefore, direct the learned CIT, Rajkot-III, Rajkot to grant the registration under s. 12AA to the assessee-institution/association."
The learned Authorised Representative also relied on the following decisions :
• Agarwal Panchayat vs. ITO (2015) 173 TTJ (Jd)(UO) 61
• CIT vs. Tapagachha Sangh Mota (2015) 232 Taxman 715 (Guj)
• Dharma Sansthapak Sangh (Niyas) vs. CIT (2008) 118 TTJ (Del) 823 : (2008) 13 DTR (Del) 589
• Director of IT (Exemption) vs. Vanchhara Tirthadhipati- Chintamani Paraswaprwabhu (2015) 233 Taxman 1 (Guj).
9. It was further submitted that there several cases on the scope of examination by the learned CIT in the context of s. 12AA and it has been repeatedly held that the allegations of the misutilization of the funds or the unreasonableness of the expenditure incurred or the misapplication of income, utilization of the funds, are all required to be examined at the time of assessment only with respect to the benefit provided under ss. 11 & 12 and it is not at all the stage where the CIT is expected to look into this aspect.
10. There apart, the Courts have gone to the extent that even where there was no commencement of activities, registration could not have been denied. Therefore, it is too remote and out of scope to examine the existence or otherwise of the dissolution clause and the suspected ill consequences of absence thereof. Kindly refer CIT vs. Vijay Vargiya Vani Charitable Trust (2014) 271 CTR (Raj) 698 : (2014) 110 DTR (Raj) 207 : (2014) 369 ITR 360 (Raj) held that :
"Registration must be granted under s. 12AA to assessee when it is meant for charitable purpose on basis of genuineness of objects of trust and not income of trust."
11. Regarding refusal to grant exemption under s. 80G of the Act, the learned CIT (Exemption) held that since the assessee trust has been denied registration under s. 12AA of the Act. Per contra, the learned Authorised Representative submitted that the CIT has refused simply as a consequence to the rejection of s. 12AA registration hence, it is consequential. However, assuming, the rejection of s. 12AA registration is upheld does not by itself means that the assessee does not deserves grant of approval under s. 80G more particularly when the learned CIT has not adversely commented upon any of the conditions mentioned in s. 80G(5).
12. We have heard the rival contentions and perused the material available on record. Firstly, the tests which are germane and are to be satisfied before the grant of registration under s. 12AA of the Act are the objects of the trust whether charitable or not and secondly, the genuineness of activities of the assessee-trust. The learned CIT (Exemption) has not recorded any adverse finding or dissatisfaction about the objects and the genuineness of activities of the assessee-trust. Hence, there is no dispute regarding the objects and the genuineness of activities of the assessee-trust.
13. The limited issue raised by the learned CIT (Exemption) relates to absence of the dissolution clause in the trust deed dt. 11th Feb., 1998. In this regard, the learned Authorised Representative has drawn our reference to the relevant clause at p. 15 of the trust deed (referred above) and submitted that neither the trust nor any member of the trust is empowered to sell any part of the property of the trust. To our mind, the event of sale of the assets or the property of the trust could be during the continuation of the trust or at the time of its dissolution. This clause therefore, effectively restricts the sale of the property of the trust at all times. But can it be said that the trust which holds such property cannot be dissolved at all times to come and what are the consequences thereto. In our view, the matter relating to the dissolution and the consequences thereof has not been spelt out in the trust deed.
14. Now coming to the another contention of the learned Authorised Representative that it is a public charitable trust registered with Devsthan Vibhag and in the event of dissolution of the trust, all the assets and properties of the trust shall vest with the Charitable CIT Devsthan Vibhag, Government of Rajasthan in accordance with the relevant provisions of the Rajasthan Public Trust Act, 1959. Here, we refer to the decision of the Co-ordinate Bench in case of Sitaram Kutir Charitable Trust vs. CIT (supra) wherein it was held that "in case the trust registered with the Sub-Registrar as a charitable trust and the trust being an irrevocable trust, the obvious position shall be that the Charity CIT should take over the assets on dissolution; hence rejection of registration by the learned CIT on the ground that there was no specific clause in the instrument in regard to the treatment to be given in the event of dissolution was not on a sound footing". We have no hesitation but to concur with the view taken by the Co-ordinate Bench and we accordingly, find force in the above-said contention of the learned Authorised Representative. At the same time, we find that there is no specific finding of the learned CIT (Exemption) regarding whether the trust is an irrevocable trust or not, and whether the assessee trust is registered with the Devsthan Vibhag and the consequences on its dissolution as contended by the learned Authorised Representative. We are accordingly setting aside the matter to file of the learned CIT (Exemption) to examine the above said contentions of the learned Authorised Representative and where the same is found to be correct, grant the necessary registration under s. 12AA of the Act.
15. Further, the grant of approval under s. 80G has been denied for want of registration under s. 12AA. Since we have set aside the matter relating to grant of registration under s. 12AA, the matter relating to approval under s. 80G is also set aside to file to the learned CIT (Exemption).
In the result, both the appeals of the assessee are allowed for statistical purposes.