Commissioner Of Income Tax, Jaipur-Iii, Jaipur v. M/S Shyam Mandir Committee Khatushyam Ji, Sikar, Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 224 / 2010 Commissioner of Income Tax, Jaipur-III, Jaipur ----Appellant Versus M/S Shyam Mandir Committee Khatushyam Ji, Sikar, Rajasthan ----Respondent Connected With D.B. Income Tax Appeal No. 273 / 2016 Commissioner of Income Tax (Exemptions) 3[rd] Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur ----Appellant Versus M/S Shree Shyam Mandir Committee, Khatushyam Ji, Distt. Sikar (Raj.) ----Respondent D.B. Income Tax Appeal No. 274 / 2016 Commissioner of Income Tax (Exemptions) 3[rd] Floor, Kailash Heights, Lal Kothi, Tonk Road, Jaipur ----Appellant Versus M/S Shree Shyam Mandir Committee, Khatushyam Ji, Distt. Sikar (Raj.) ..Respondent _____________________________________________________For Appellant(s) : Mr.Sameer JainFor Respondent(s) : Mr. Mahendra Gargiya _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 02/08/2017 1.Since in all these appeals, common questions of law andfacts are involved, they are decided by this common judgment. 2.By way of these appeals, the appellants have challenged thejudgment and order passed by the tribunal whereby the tribunalhas allowed the appeals of the assessee, reversing the view takenby the Commissioner of Income Tax Jaipur-III, Jaipur videjudgment and order dated 30.09.2009 whereby the registrationunder Section 12A was rejected. 3. This court while admitting the appeal has framed the followingsubstantial questions of law:- D.B. Income Tax Appeal No.224/2010 admitted on-13.12.2010: (i) Whether granting registration to a private trustu/s. 12A was legal and proper especially whenSections 2(15),11,12 & Section 13 specificallyrestricts use and application of voluntarilycontribution/income for the benefit of privateperson u/s.13(3)? (ii) Whether applications of Rajasthan Public TrustAct, 1959 can be applied to the private trustespecially when they are covered by the IndianTrust Act, 1882?” D.B. Income Tax Appeal No.273/2016 admitted on-17.01.2017: "(i) Whether on the facts and circumstances ofthe case and in law, the Hon'ble ITAT was justifiedin allowing Gujara Bhatta as application of incomeof the trust by following earlier order in spite ofthe fact that is as not fixed by the StateGovernment as per Section 65 of the RajasthanPublic Trust Act, 1959 r.w. Rule 38 of theRajasthan Public Trust Rules, 1962?" (iii) Whether the provisions of Rajasthan Public Trust Act are applicable to the Trust when the Trustis specifically governed by the Indian Trust Act1882?" D.B. Income Tax Appeal No.274/2016 admitted on -7.12.2016: “Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was justified inallowing Gujara Bhatta as application of income ofthe trust by following earlier order in spite of thefact that it was not fixed by the State Governmentas per Section 65 of the Rajasthan Public Trust Act,1959 r.w. rule 38 of the Rajasthan Public TrustRules, 1962.” 4.Counsel for the appellant has taken us to the definition of2(31)(vii), Section 2(24)(iia), 2(15) Section 12A, Section 12AA,Section 13(1)(a), and Section 13(3) of the Income Tax Act. He hasalso taken us to Section 17A of the Rajasthan Public Trust Actwhich reads as under:- 2. Utility of the Act.-Shri K.N. Shah in BombayPublic Trust Act 1950, eighty Edition, p.3 hasobserved- -7.12.2016: “Whether on the facts and circumstances of thecase and in law, the Hon’ble ITAT was justified inallowing Gujara Bhatta as application of income ofthe trust by following earlier order in spite of thefact that it was not fixed by the State Governmentas per Section 65 of the Rajasthan Public Trust Act,1959 r.w. rule 38 of the Rajasthan Public TrustRules, 1962.” 4.Counsel for the appellant has taken us to the definition of2(31)(vii), Section 2(24)(iia), 2(15) Section 12A, Section 12AA,Section 13(1)(a), and Section 13(3) of the Income Tax Act. He hasalso taken us to Section 17A of the Rajasthan Public Trust Actwhich reads as under:- 2. Utility of the Act.-Shri K.N. Shah in BombayPublic Trust Act 1950, eighty Edition, p.3 hasobserved- There are instances of how Mahants,Pujaris, Bhatjis and Acharyas who have lived onthe temple and its income for years andflourished fat o;n the earnings of the Holy shrinesand attempting to devour and appropriate thedeity and donations to themselves. Through theymay have for generations held out to and invitedinnumerable devotees for Darshan and hundredsof devotees may have openly come for Darshan,and worshipped the idol for years, and thoughdonations, offerings and emoluments may havebeen begged, asked for, offered and receiveduninterruptedly, when it comes to registration ofthe Temple as a Public Trust and accounting forits income, they would not stop of claimingexclusive rights of ownership not only over theincome but over idol, the deity of the temple too.They, the preservers of the deity and the spiritualheads, the supposed saviors of the souls of siners& the sanctity of the holy shrink would go to any length to perjure themselves, if they could notestablish their ownership over the endowmentand its property, and derive the material benefitof getting its income. Such instances are not few.The richer the endowment, the greater thetemptation to swallow the same. To such impiousPujaris, Managers and Mahants, nothing matters,consideration neither of this world nor the next, ifthey could only serve their selfish end. Suchinstances, justify the passing of and the utility ofthis Act. These days the Trusts and Temples haveassumed great importance. This is because theState has thought it advisable to introducelegislation for the governance for safeguardingthe interest of the beneficiaries and for avoidingthe cases of magnificence and to check mis-appropriation and criminal breach of trust. Asexpressed by the late Hon’ble Justice Chagle C.J.of Bombay, in his judgment that “The wholeattempt and the whole object is to see that theproperties settled on public and charitable trustsare properly managed and are properlyadministered, that the trustees keep properaccounts that the trustees render those accounts,answer questions put to them arising out ofthose accounts and every single provisioncontained in the Act is incorporated from thatpoint of view. Ratilal Pannachand Gandhi Vs.State of Bombay, 55 Bom. LR 86= AIT 1953Bom. 242= ILR 1953 Bom. 1187. The utilityof this Act is being realised by the members ofthe public and the Bombay High Court had madea survey of this Act in a case reported as C.C. vs.Municipality of Taloda, 65 Bom.LR 27. TheGujarat High Court also had made a survey ofthis Act in cases reported as Kuberbhai vs.Purshottamdas, (1961) 2 GLR 564; Lallubhai G.Parikh vs. Acharya Shri VrijbhushanlalBalkrishanlalji, (1967) 8 GLR 42. As the law stands, the trustees of thecharity, however small, has to perform onerousduties involving a certain amount of expenses,Gross abuses of public trusts and trust funds byunscrupulous trustees, no doubt demandstatutory control and regulation and the law hadits inspiration and jurisdiction. The whole objectof the Legislature, in passing the Act a highlylaudable, e.g. to see that public trusts wereproperly and efficiently administered." As the law stands, the trustees of thecharity, however small, has to perform onerousduties involving a certain amount of expenses,Gross abuses of public trusts and trust funds byunscrupulous trustees, no doubt demandstatutory control and regulation and the law hadits inspiration and jurisdiction. The whole objectof the Legislature, in passing the Act a highlylaudable, e.g. to see that public trusts wereproperly and efficiently administered." He also pointed out Section 2(xi) of Public Trust Act and contendedthat in view of the definition envisaged under the Act, every publictrust registered under the Rajasthan Public Trust Act is deemed tobe a society and the benefits which are granted under Section 12Aare not available to be granted. 5.However, he has taken us to the order of Commissioner ofIncome Tax which has declined the registration and contendedthat the view taken by the tribunal is required to be reversed,more particularly in view of the provisions of Section 13(1)(a) and13(3) of the Income Tax Act. 6.He has relied upon the decision of Madras High Court in thecase of Commissioner of Income Tax-Madras Vs. M JamaMohammad Sahib reported in (1941)9ITR375 (Mad) wherein thecourts has observed as under:- In Umar Bakhsh v. Commissioner of Income-tax,Punjab (1931) I.L.R. 12 Lah. 725 : 5 I.T.C. 402(F.B.), the Lahore High Court expressly held thatthe expression "religious or charitable purposes"in S.4 (3) (i) has to be construed with referenceto English law and not to the personal law of theassessee and this opinion was accepted by thePatna High Court in Humayun Rasa Chowdhury v.Commissioner of Income-tax, Bihar and Orissa10 I.T.C. 7. The learned Advocate for theassessee (muthavalli) has suggested that thedecision of the Judicial Committee in TheTrustees of Tribune Press, Lahore v. TheCommissioner of Income-tax, Punjab, Lahore(1939) 2 M.L.J. 444 : L.R. 66 I.A. 241 : I.L.R.(1939) Lah. 475 (P.C.), has negatived thisopinion, but we cannot read the judgment in thatsense. The passage which has just been quotedfrom the judgment of the Privy Council speaks ofthe test of general public utility. As this is the testso far as the Indian Income-tax Act is concernedit is not necessary to consider whether the trusthere would be deemed to be charitable in England. Even assuming that the Court may haveregard to Muslim ideas in deciding whether aMuslim trust fulfils the test of general publicutility, it cannot be said that that part of the trustdeed which relates to the setting aside of incomefor the descendants of the donor constitutes atrust for general public utility. The beneficiariesare to be members of the donor's own family.The utility is not of a public, but clearly of aprivate nature. For these reasons we wouldanswer the first question in the negative. The second question calls for no discussion. Theposition is that the muthavalli has in his handsincome belonging to a private trust. Income of aprivate trust is not exempt from taxation and themuthavalli is assessable in respect of it, becausehe holds it. It follows that the answer to thesecond question is in the affirmative.” 7.He therefore contended that the view taken by the tribunal is required to be reversed. 8.Mr. Jain has also taken us to the observations made by the tribunal in para 6 which reads as under:- The second question calls for no discussion. Theposition is that the muthavalli has in his handsincome belonging to a private trust. Income of aprivate trust is not exempt from taxation and themuthavalli is assessable in respect of it, becausehe holds it. It follows that the answer to thesecond question is in the affirmative.” 7.He therefore contended that the view taken by the tribunal is required to be reversed. 8.Mr. Jain has also taken us to the observations made by the tribunal in para 6 which reads as under:- 6. We have heard and considered the argumentsadvanced by the parties in view of orders of theld.CIT, material available on record and thedecision relied upon. The ld.CIT has raised twoissues. Firstly as to whether the assessee is aprivate trust since it is run by the representativeof three families and secondly as to whether it isfor their benefit since they are paid 15% of thetotal receipt as also marriage and other help. Wenote that there is no specific definition of publicor private trust in the Income Tax Act, 1961.Various decided cases provide guidelines in thisregard, according to which a trust would be apublic trust where the benefit enure to the publicat large. The control and management of trustproperty left in the hands of a body of individualbelonging to the settlers family is of noconsequence in determining whether the trust ispublic trust or not. In case of Ganeshram RamiDevi Charitable Trust Vs. CIT 71 ITR 696 (Cal.),the Hon’ble High Court considered the questionwhether the provision that management is left toprivate individuals and not tot he public would, in any way, affect the nature of the trust for thepurpose of the Income-tax Act. It is observedthat the phrase “charitable purpose” in theIncome-tax Act “includes relief of the poor,education, medical relief and the advancement ofany other object of general public utility”. It isfurther provided that “nothing contained inclause (i) or clause (ii) shall operate to exemptfrom the provisions of the Act that part of theincome from property held under a trust or otherlegal obligation for private religious purposeswhich does not ensure for the benefit of thepublic.” This definition does not deal with thematter of control and management of the fund.There is no reference of the same in it. Theimplication, therefor, is that the matter ofmanagement of the fund is not an essentialmatter for the purpose of defining “charitablepurposes” so far as the Income-tax Act isconcerned; it may be essential for other purposesas, for example, for the purpose of section 92 ofthe Code of Civil Procedure. What is eseential forthe Income-tax Act is whether “it enures to thebenefit to the public” or not, whoever maycontrol the fund. Therefore, even if the funds arecontrolled by a body of persons which is not apublic body in any sense, but if the fund “enuresto the benefit of the public”, it wold still becharitable purpose within the meaning of theIncome-tax Act. Therefore, it did not agree withthe contention that because the control of thefund is not left to the public, it must beconcluded that it is not a public charitable trust.The court held that it is not a condition essentialfor determining a “charitable” trust for thepurposed of the Indian Income-tax Act. All that isrequired is that the fund is spent or accumulatedfor religious and charitable purposes. TheJodhpur Bench of ITAT in case of Smt. MansukhiDevi Bihani Jan Hitkari Trust Vs. CIT 277 ITR140 (AT) (Jodh.) after discussing the facts of thecase observed that in the case before them, it isnot in dispute that application for registration hasbeen made in the prescribed form i.e. Form No.10A. It is also not the case of the Departmentthat the property held by the trust and incometherefrom had not been utilized for the purposesof charity/public utility. The only reason for notgranting registration was that there is a clause inthe trust deed that “in the event of a vacancyarising in the board of trustees for whateverreasons, the remaining trustees shall co-opt another major male or female person out of thefamily members of that person to fill up thevacancy”. Only on that basis, the learnedCommissioner of Income-tax considered that thetrust was a family affair/settlement. However, hehas not brought any material on record that byco-opting a person from the family of theprevious trustee, how the object of the trust hasbeen changed or by co-opting another familymember of the trustee on account of vacancy asto how the income was not utilized for the publiccharity. Thereafter, ITAT after considering theobject of the trust, provisions of section 12A andRule 17A concluded that Commissioner ofIncome-tax was not justified in refusingregistration to the assessee merely on the basisthat in the case of a vacancy in the board oftrustees, the remaining trustees are to co-optanother person from the very family of theoutgoing trustee as as such the trust appearsmore in the nature of a family affair/settlementthan a charitable trust. Accordingly it directed togrant registration under section 12A of theIncome-tax Act, 1961. These cases clearly laydown the proposition that control onmanagement of the fund is no criteria fordetermining whether the trust is a public orprivate trust. What is required to be seen is thatin enures to the benefit of the public or not whoever may control the fund. It is not in doubt thatactivities carried out by the assessee enures tothe benefit of the public and it is for this reasonthat it is registered as a public trust under theRajasthan Public Trust Act, 1959. The object ofthe trust are also for religious and charitablepurpose and is not restricted to any particularcast, colour, or creed. We, therefore, hold thatassessee is a public trust and not a private trust. 9.However, Mr. Gagria, counsel for the respondent has takenus to paragraph 10 of the order to the tribunal which reads asunder:- “10. We also note that at the time of grant ofregistration u/s 12AA the ld. CIT is to satisfyhimself about the genuineness of the activity of 9.However, Mr. Gagria, counsel for the respondent has takenus to paragraph 10 of the order to the tribunal which reads asunder:- “10. We also note that at the time of grant ofregistration u/s 12AA the ld. CIT is to satisfyhimself about the genuineness of the activity of the trust and about the object of the trust. Atthis stage he is not required to ponder into theprovisions of section 13. The applicability ofsection 13 is to be looked by the AO at the timeof assessment. The ld.CIT has not brought onrecord any positive evidence that the activitiesof the trust are not genuine or the funds of thetrust are not applied for its object. He onlyassumed that since the trusties are gettingbenefit by way of ‘gujara bhatta’ and otherfacilities perpetually, the activities of the trustare not genuine. This can not be a reason forrefusing the registration u/s 12AA. In case ofModern Defence Shishkan Sansthan Vs. CIT 108TTJ 732 (Jodh.) it was held that at the stage ofconsideration of the issue of registration undersection 12AA, it is not a sine qua non to examinethe aspect of the application of income. Whenthe Commissioner has not doubted the aims andobjects of the society, he cannot throw away theapplication of registration on this pretext. Incase of Dream Land Educational Trust Vs. CIT109 TTJ (Asr.) 850, it was held that for grant ofregistration under section 12AA, only relevantconsideration is satisfaction of Commissionerregarding objects of trust and genuineness of itsactivities; in absence of any dissatisfaction ofCommissioner with regard to either objects orgenuineness of activities of trust, if registrationis refused to trust, it would be violation ofprovisions of section 12AA. In case of Asstt. DITVs. Rajasthani Shiksha Samiti 23 SOT 124 (Hyd)it was held that when registration to a trust isgranted by the Commissioner u/s 12A, then it isfor the AO to examine every year whetherincome has been applied by assessee forcharitable purpose or not and if income is not soapply, it wold be duty of AO to tax such incomebut he cannot further held that trust is notestablished for charitable purpose. The Hon’bleKarnataka High Court in case of SanjeevammaHanumanthe Gowda Charitable Trust vs. DIT 285ITR 327, (Kar) has held that for the purpose ofregistration u/s 12A what the authorities have tosatisfy is the genuineness of the activities of thetrust or institution and how the income derivedfrom trust property is applied to charitable orreligious purpose and not the nature of theactivity by which the income is derived fromtrust property is applied for charitable andreligious purpose as discussed above. Hence, forthe detailed reasons stated supra, we direct ld. CIT to grant registration u/s 12A to the assesse.” 10.He has also relied upon the decision of this court in the caseof Commissioner of Income Tax Vs. Vijay Vargiya Vani CharitableTrust reported in (2014) 90 CCH 0209 RajHC wherein it has beenobserved as under:- “In our view, the object of Section 12AA is toexamine genuineness of the objects of the trust butnot the income of the trust for charitable or religiouspurpose.the Commissioner cannot sit in the chair ofAssessing Officer to look into amount spent oncharitable activities at the time of creation of theTrust. The stage for reviewing the application ofincome has not arrived when such trust or institutionfiles application for registration of the trust/society.” 11.He has also relied upon the judgment rendered by thePunjab and Haryana High Court in the case of Commissioner ofIncome Tax Vs. Surya Educational & Charitable Trust reported in(2013) 355 ITR (P&H) and the judgment rendered by theAllahabad High Court in the case of Commissioner of Income TaxVs. Red Rose School reported in (2007) 212 CTR 394 (All HC). Hehas also relied upon para 5.2 of the Circular No.14/2015(F.No.197/38/2015-ITA.I) dated 17.08.2005 which reads asunder:- 11.He has also relied upon the judgment rendered by thePunjab and Haryana High Court in the case of Commissioner ofIncome Tax Vs. Surya Educational & Charitable Trust reported in(2013) 355 ITR (P&H) and the judgment rendered by theAllahabad High Court in the case of Commissioner of Income TaxVs. Red Rose School reported in (2007) 212 CTR 394 (All HC). Hehas also relied upon para 5.2 of the Circular No.14/2015(F.No.197/38/2015-ITA.I) dated 17.08.2005 which reads asunder:- “There is no provision under the Act which callsfor denial of exemption merely on account ofappointment or removal of trustees. Althoughanswer to sucha situation would normallydepend on the factual implication of sucharrangement, the samej should generally not bea ground for denying exemption unless thenature of activities of the trust or institution getchanged or modified or no longer remain to exist‘solely for educational purpose and not forfor denial of exemption merely on account ofappointment or removal of trustees. Althoughanswer to sucha situation would normallydepend on the factual implication of sucharrangement, the samej should generally not bea ground for denying exemption unless thenature of activities of the trust or institution getchanged or modified or no longer remain to exist‘solely for educational purpose and not for purposes of profit’. Hence denial of exemptionwould not be justifiable only on the ground ofinduction of new trustees or removal of existingones.” 12.We have heard counsel for the parties. 13.Before proceeding with the matter, it will not be out of placeto mention here that in all the questions of law, the questionwhich consideration before us is whether taking into account, theobservations made in paragraph 10, the view taken by the tribunalis just and proper. At the time of registration, the authority isrequired to look whether it is registered under the state Act orunder any other Act. There is no distinction between private trustand public trust. The contention which has been raised by counselfor the appellant regarding the expenses, diversion or control bythe private people will come only when the assessment has takenplace. For the purpose of trust registered and the income used isfor the charitable purpose or not and whether income from publictrust if it is going for any private use will negative the very objectof the Trust Act which is the main intention of the legislation, isnot to be considered at this stage. 14.In that view of the matter, we see no reason forinterfere with the finding of the tribunal. Both the issues areanswered in favour of the assessee. 15.The appeals stand dismissed. (INDERJEET SINGH)J. (K.S.JHAVERI)J. Jyoti Item No.152, 154, 155