IN THE INCOME TAX APPELLATE TRIBUNAL
Bench 'A' Chennai
BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER
M/s. Sri Navaladiyaan The Income Tax Officer, Educational and Charitable Ward 1(1), Trust, Vs. Namakkal. No.12A-2,K K P Building,
Namakkal District 637 001.
(PAN No.AAITS 2702 B )
Assessee by : Shri G.Baskar &
Department by : Shri Shaji P Jacob
Per DR.O.K.NARAYANAN, VICE PRESIDENT:
These two appeals are filed by the Assessee . The appeals are directed against the orders of CIT, Salem passed under sections 12AA and 80G(5)(vi) of the Income Tax Act, 1961. 2 Page of 6 ITA. 1799/1800 /Mds/09
2. The Commissioner of Income Tax has denied registration to the assessee u/s.12AA on various grounds stated in his order dated 29.09.09. As a consequence, he has also rejected the application of the assessee for approval u/s. 80G(5)(vi) through another order dated 29.09.09.
3. Assessee-trust was created by a Trust Deed executed on 25.06.2008, that is in the financial year 2008-2009. Assessee filed its application for registration u/s.12AA in the same financial year on 30.03.2009. For the various reasons stated, the Commissioner of Income Tax rejected the application. The predominant reason to reject the application of the assessee is that out of total 18 trustees, the trust deed provided voting rights in proportion to the contributions of the trustees, which is against the provisions of the Indian Trusts Act, 1882. As per clause-4(i), 6 trustees have two votes each, 4 trustees have 3 votes each and 1 trustee has four votes and the remaining trustees have one vote each.
4. When this objection was pointed out to the assessee's trust, they amended the original trust deed by executing a deed of amendment on 10.09.09. As per the amended provisions, the differential voting right was abolished and equal voting right was conferred on all trustees at one vote per head. The amendment deed also provided that the amendment would be effective retrospectively from 25th June, 2008, i.e. the date of execution of the original deed. 3 Page of 6 ITA. 1799/1800 /Mds/09
5. The Commissioner of Income Tax relying on the judgement of the Hon'ble Delhi High Court in the case of Bhiguraj Charity Trust, reported in 228 ITR 50 and on the decision of Hon'ble Supreme Court in the case of Kamla Town Trust reported in 217 ITR 699 held that amendment could not be made retrospective and the amendment would be only prospective.
6. We considered this objection raised by the Commissioner of Income Tax. Even though the Commissioner has stated that the amendment could not be retrospective with effect from 25th June, 2008, he has not expressed any view on the question whether the amendment would be effective prospectively from the date of execution of the deed of amendment on 10.09.2009. Learned Counsel appeared for the assessee has submitted in the course of hearing that the assessee is not pressing for any retrospective benefit. Assessee will be satisfied, if the amendment was considered prospectively with effect from 10.09.09.
7. We find that the above proposition by the Learned Counsel appearing for the assessee is acceptable. There was a doubt raised at the time of hearing whether a trust deed could be amended without the intervention of a Civil Court or not. But the involvement of Civil Court is not necessary to amend the clauses of a trust, if the trustees are unanimously carrying out the amendment to bring out the clear intention of the trust. This is true more in the case of a technical defect as found in the present case. The Hon'ble Rajasthan High Court in the case of Laxminarain Lath Trust Vs. CIT 170 ITR 375 4 Page of 6 ITA. 1799/1800 /Mds/09
has considered the question whether a mistake in the original settlement deed could be rectified to put on record the true intention of the settlor and of the trust created by him. It was also held by the Rajasthan High Court that it was permissible for the settlor to clarify his intention in creating the trust under the original settlement deed by executing supplementary deed. This judgement of Rajasthan High Court has been referred to by the Hon'ble Supreme Court with approval in the case of CIT Vs. Kamla Town Trust reported in 217 ITR 699 at page 717-G. The decision of the Rajasthan High Court in the case of Laxminarain Lath Trust Vs. CIT 170 ITR 375 accepts the legal proposition that a trust deed can be amended. The judgment of the Hon'ble Supreme Court in the case of CIT vs. Kamla Town Trust (supra) and the judgment of the Delhi High Court in the case of Bhiguraj Charity Trust, reported in 228 ITR 50 have only held that an amendment in the trust deed would not be retrospective. In these two cases, the Courts have considered the amendment made in the trust deeds through the decree of competent Civil Courts. In this context, we may also refer to the judgement of Hon'ble Madras High Court in the case of Sakthi Charities Vs. CIT in 149 ITR 624, relied on by Revenue. In that case, even in the absence of an enabling clause in the original trust deed, amendment was sought for by the trustees. In the present case, the amendment has been made by the settlors themselves. Therefore, the decision in the case of Sakthi Charities does not directly apply to the present case.
8. The principles churning out of the above decisions are that a Civil Court has jurisdiction to amend a trust deed; the interference of 5 Page of 6 ITA. 1799/1800 /Mds/09
a Civil Court is not called for in all cases as the settlors themselves could amend the trust deed. If there is amending clause and no dispute among the trustees, they can make amendment and the amendment at any rate will be operative only prospectively. Therefore there is no taboo on trustees amending the trust deed through an unanimous voice.
9. Therefore, in the facts and circumstances of the case, we find that the assessee has rectified the defect pointed out by the Commissioner of Income Tax through its amendment deed made on 10.09.2009.
10. The other objections raised by the Commissioner regarding absence of minutes books, taking over of another school etc. are not at all relevant in deciding the nature of charitable activities carried on by the assessee. Another defect pointed out by the Commissioner is that the assessee is running the school on commercial line and fees are collected from students. The CIT has no case that the fees collected by the school are exorbitant and only a selected few are admitted in school or they alone can join the school or such discrimination exists. It may be necessary for the assessee to collect fees to run the school. So, collecting fees from the students is not a reason to overlook the educational activities carried on by the assessee trust.
11. Therefore, in the facts and circumstances of the case, we find that the only surviving defect pointed out by the Commissioner was 6 Page of 6 ITA. 1799/1800 /Mds/09
the question of differential voting right conferred on the trustees of the assessee. The said defect has been cleared by the assessee through amendment deed dt.10.09.09. Therefore, the assessee trust is entitled for claiming registration u/s.12AA with effect from 10.09.2009.
12. In the facts and circumstances of the case, we direct the Commissioner of Income Tax to grant registration to the assessee trust u/s.12AA of the Income Tax Act, 1961.
13. In view of our decision in the matter of registration u/s.12AA, the CIT is also directed to grant approval to the assessee u/s.80G.
14. In result, the appeals filed by the assessee are allowed.
Order pronounced on Friday the 8th of April, 2011 at Chennai.
Sd/- Sd/- (HARI OM MARATHA) (Dr.O.K.NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT
Dated the 8th April, 2011.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file