Madhya Pradesh High Court
Commssioner Of Income Tax vs The President Seth on 25 January, 2023
Author: Sushrut Arvind Dharmadhikari
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI
&
HON'BLE SHRI JUSTICE PRAKASH CHANDRA GUPTA
ON THE 25th OF JANUARY, 2023
INCOME TAX APPEAL NO.107/2004
Between:-
COMMSSIONER OF INCOME TAX, DISTRICT
UJJAIN. (MADHYA PRADESH)
APPELLANT
(BY MS. VEENA MANDLIK - ADVOCATE)
AND
THE PRESIDENT SETH MALUKCHAND
HIRACHAND DIGAMBAR JAIN GOTH BEES
PANTHI MANDIR DHARMIK AVAM
PARAMARTHIK TRUST, BARNAGAR
(MADHYA PRADESH)
.....RESPONDENT
(BY SHRI PRADEEP CHOUDHARY, SENIOR ADVOCATE WITH SHRI
ANAND PRABHAWALKAR - ADVOCATE)
---------------------------------------------------------------------------------------------------------------------
This Income Tax Appeal coming on for final hearing this day,
Hon'ble Justice Shri Sushrut Arvind Dharmadhikari passed the
following:
JUDGEMENT
This appeal has been filed under Section 260(A) of the Income Tax
Act, 1961(for short "the Act") by the Commissioner of Income Tax,
Ujjain, assailing the order dated 31.05.2004 passed by the Income Tax
Appellate Tribunal ( for short "the Tribunal/ITAT"), Indore, in ITA No.
97/Ind/2003 whereby the appeal filed by the assessee has been partly
allowed by setting aside the order of Commissioner of Income Tax(CIT)
dated 26.12.2022. The present appeal was admitted on the following
substantial questions of law:-
"1.Whether the Hon'ble ITAT erred in directing the CIT, Ujjain to grant
registration under Section 12A of the Income Tax Act on the basis of
application submitted with the ACIT (Inv.), Ujjain (which is not by any
stretch of imagination the part of the Office of the CIT, Bhopal
prescribed authority under Section 12A/12AA read with Rules 17A)?
2.Whether Hon'ble ITAT erred in ignoring the facts placed on record
and in appreciating the fact on record while deciding the case in
favour of the assessee that the provisions of Section 13 (1) (c) was
not hit in this case?
3.Whether the Hon'ble Tribunal erred in holding that the CIT was
required to see only whether the objects of the Trust are charitable or
not and he was not required to see beyond it?
4.Whether Hon'ble ITAT erred in holding that CIT was not at all
required to look into the audited accounts and statement of affairs of
Trust before taking decision egarding granting / refusing registration
under Section 12A / 12AA read with Rule 17A and Form 10A?
5. Whether Hon'ble ITAT erred in holding that Trustees were
competent to make amendment to the Trust deed on these facts?
6. Whether Hon'ble ITAT erred in granting registration under Section
12A of the IT Act to the Trust w.e.f. 1998?"
2. The brief facts of the case are that one Seth Malukchand
Heeranand in S.Y. 1840 constructed a temple for his family. 11 Persons
hailing 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 was
framed and got registered with the sub-Registrar on 26.09.1956 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-5 of the Trust deed, it was the duty
of the Trust to protect and manage the entire movable and immovable
properties of temple and whenever necessary to extend and renovate the
same from time to time. Vide Clause-12 of the deed, the Trustees were
also empowered to constitute other rule, aim or planning for the progress
of the Trust. As per Clause No.13, neither the Trustees nor any other
person has 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 amendments in the objects and in the
procedures related to Trustees were carried out 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 the said
amended Trust deed, a new provision was introduced that all other
persons will have also place in the Trust besides the Trustees mainly
from the Digmabar Jain Beas Panthi Khandelwal Community.
3. Learned CIT rejected the application for registration on the
following grounds:-
(i) Deviation from the original Trust deed frustrates the objects and
purpose of the original Trust deed dated 26.09.1956 which is
impermissible.
(ii) During Assessment year 1989-1990, the immovable property of
the Trust situated at 25, Abbas Tayyab Ali, No.3, Badanagar,Ward-III was
sold to the Trustees and their relatives below the market price.
(iii) The assessee for the A.Y. 1984-1985 and 1985-1986 was
assessed under Section 143(3) of the Act vide order dated 29.12.1986 as a
private religious Trust. The Trust being a public Trust, a prior permission
of the District Collector under Rule 14 of the Madhya Pradesh Lok Nyas
Adhiniyam, 1951 was required to be taken to sale/alienate the immovable
property which was not done.
(iv) The assesse was not regular in returning the income and the
account books and audit reports were not reflecting the true position of
the assessee.
4. The respondent/assessee filed an application dated 18.03.2002
before the C.I.T., Ujjain since the office was established in Ujjain. Two
issues were there before CIT, Ujjain for consideration:-
(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.
(ii) whether the Trust is genuine and entitled to registration. The
contention of the assessee was rejected.
5. Learned CIT rejected the request of the assessee for grant of
registration under Section 12(A)(a) of the Act since the assessee had not
shown reason for not filing the application for the same within one year
from the prescribed date nor had taken permission under Rule 14 of the
Madhya Pradesh Lok Nyas Adhiniyam, 1951 for selling the property.
6. Being aggrieved, the assessee filed an appeal before the ITAT,
Indore Bench on the following grounds:-
(i) Learned CIT erred in not considering the fact that the Trust was
registered on 26.09.1956 and only amendments were carried out on
30.09.1989 and therefore, the same was not a new registration.
(ii) Learned CIT also did not consider the fact that the appellant Trust
is a public Trust.
(iii) Learned CIT failed to appreciate that the Trustees have right to
make necessary amendments in the Trust deed within the frame work of
public policy and in the interest of Trust.
(iv) Learned CIT erred in not considering the fact that sale of property
was not detrimental to the interest of Trust but, it was in the interest of
Trust to have more income.
(v) Learned CIT erred in not considering the fact that the value
determined as per the guidelines is not real value of the property but it
was for the purpose of stamp duty and the stamp duty was paid by the
purchaser and not by the seller/assessee.
7. Ms. Veena Mandlik, learned counsel for the revenue, contended
that application for registration under Section 12(A)(a) was not filed
before the competent authority i.e. CIT but the same was filed before
ACIT(investigation), Ujjain. The Trustees and their relatives were
benefited by illegal profit which amounts to violation of Section 13(1)(c)
(ii). The ITAT also erred in coming to the conclusion that the registration
of the Trust as a condition precedent for claiming benefit under Sections
11, 12 r/w Section 13 is not mandatory for the purpose of availing the tax
benefit. The ITAT also failed to consider the fact that since the
respondent/assessee-Trust was registered as a public Trust on 20.11.2001,
therefore, there was no question of registration under Section 12(A)(a) of
the Act for the period 26.09.1956 to 20.11.2001. The learned ITAT also
erred in allowing the application without considering the fact that the
assesse/respondent could not disclose sufficient reasons to condone the
inordinate delay. Learned counsel submitted that in the light of the
substantial questions of law involved in the case, the order of the ITAT
deserves to be set aside and appeal needs to be allowed.
8. Learned counsel for the appellant has placed reliance on the
judgment of the Apex Court in the case of Commissioner of Income Tax
Vs. Palghat Shadi Mahal Trust (2002) 9 SCC 685 and contended that
the Trust attracts that provisions of Section 13(1)(b) and is not entitled to
exemption under Section 11. She also relied on the decision of the Apex
Court in the case of Commissioner of Income Tax Vs. Rattan Trust
(1997) 141 CTR SC304 and submitted that the Trust deed could not have
been amended.
9. Per contra, learned Senior Advocate Shri P.M. Choudhary with
Shri Anand Brabhalkar, Advocate for the respondent, opposed the prayer
and submitted that none of the substantial questions of law arises for
consideration since the findings are pure findings of fact. No challenge
has been made by the appellant to the findings in the appeal. The order in
appeal under Section 260(A) of the Act can only be interfered on the
ground of perversity and if the same is not supported by any evidence.
The appellant has not raised any of the grounds of perversity, therefore,
the appeal deserves to be dismissed.
10. Learned counsel for the respondent has placed reliance on the
judgment of the Division Bench of this Court in the case of Kantilal
Prabhudas Patel Vs. Deputy Commissioner of Income Tax and
another (2005) 277 ITR 504 (MP) in which the Division Bench has held
as under:-
"Any factual finding once recorded and consistently upheld by
the Appellate Tribunal is binding on the High Court while
hearing an appeal under Section 260A of the Act. It is only
when it is noticed that the finding is de hors the evidence or
against any provision of law or perverse to its extreme, that no
judicial man can ever reach such a conclusion, that a case for
interference in appeal under Section 260A of the Act is called
for. Such does not appear to be a case of that nature."
11. So far as, the contention of the learned counsel for the
appellant that the assessee/respondent Trust was not registered as a
public Trust is concerned, learned senior counsel relied on the
judgment of Division Bench of this Court in the case of
Commissioner of Income Tax (Exemption) Vs. Maharashi
World Peace Trust (2020) 315 CTR 469 (MP) in which the
Division Bench in Paragraph Nos. 6 and 7 has held as under:-
"6. As per the provisions of Section 12AA(1) of the Act
provides that Principal CIT or CIT, on receipt of application
for registration of the Trust or Institution made under Clause
a or Clause aa of Sub-Section 1 of Section 12A can call for
such documents or information as he thinks necessary in
order to satisfy himself about the objects and genuineness of
activities of the Trust or Institution and also make such
enquiries as he may deem necessary in this behalf and after
satisfying himself about the objects of the Trust or
Institution and the genuineness of its activities he may pass
an order in writing registering the Trust or Institution or if
he is not so satisfied, he may pass an order in writing
refusing to register the Trust or Institution. Provision of
Section 12A(a) of the Act refers to the "Trust or Institution".
There seems to be no requirement for a Trust to be
mandatorily registered as a Public Charitable Trust in the
State of India where it is located. The action of Ld.CIT-
Exemptions denying the registration merely for the reason
that the assessee Trust was not registered as a public
Charitable Trust cannot be held to be justified.
7. In the present case, the registration was applied for
by the respondent under S. 12AA(i)(b)(i) of the Act and the
provisions under S. 12AA(1) of the Act also refers to the
"Trust or institution" and there is no mandate under S.
12AA of the Act that the application seeking exemption is
required to be applied only by a registered Trust or
institution under the local laws i.e. M.P. Public Trust, 1951.
The learned Tribunal considering the privisions of laws i.e.
MP Public Trust Act, 1951. The learned Tribunal
considering the provisions of S. 12AA(1) of the Act has
specifically held that for registering the trust or institution
for the purposes of the said Act the Principal CIT or CIT is
required to satisfy itself about the objects of the applicant-
trust or institution and the genuineness of its activities.
Under the said provision there is no requirement for a trust
to be mandatorily registered as a public charitable trust
under the local Act. In the absence of any provision
requiring registration as a public charitable trust before
applying for registration under Section 12AA(1) of the Act,
the findings arrived at by the learned Tribunal cannot be
faulted and said to be illegal or perverse. "
12. Learned Senior counsel further contended that the ITAT was
right in holding that at the time of granting registration, the
Commissioner is not required to examine whether income derived by
Trust spend for charitable purposes or the Trust is earning profit.
Learned ITAT has rightly come to the conclusion that the
genuineness of the objects of assessee-Trust could not be doubted
and the same shall be seen at the time of assessment and not at the
time of grant of registration. For this contention, appellant's counsel
has placed reliance on the judgment of Division Bench in the case of
Commissioner of Income Tax Vs. Divine Shiksha Samiti (2020)
428 ITR 552 (MP). In veiw of the aforesaid, the appeal sans merit
and no substantial question of law is involved, therefore, the same
deserves to be dismissed.
13. In our opinion, learned Tribunal has examined the case from
all angles. The learned Tribunal has rightly come to the conclusion
that while considering the application for registration, learned CIT
was supposed to enquire 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 CIT was not justified in rejecting the
application for registration on the aforesaid basis. Thus, no
substantial question of law arises for consideration in this appeal.
The question of fact cannot be examined in the present appeal. We,
therefore, do not find any question of law much less substantial
question of law for entertaining this appeal, accordingly, the appeal
fails and is hereby dismissed. No order as to costs.
(S.A. DHARMADHIKARI) (PRAKASH CHANDRA GUPTA)
JUDGE JUDGE
VD/-
VARSHA DUBEY
2023.02.01
17:35:56 +05'30'
