Commissioner Of Income Taxcoimbatore v. R.k.deivendra Nadar Trust4 & 4A, Periyasamy Roadeast R.s.puramcoimbatore 641 002

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MR. JUSTICE G.M.AKBAR ALI T.C.A. NO. 975 OF 2013 Commissioner of Income TaxCoimbatore... Appellant- Vs - R.K.Deivendra Nadar Trust4 & 4A, Periyasamy RoadEast R.S.PuramCoimbatore 641 002... Respondent Appeal u/s 260-A of the Income Tax Act filed against the order ofthe Income Tax Appellate Tribunal, Madras 'C' Bench, dated 11.7.13 inITA No.969/Mds/2012 against the order of the Commissioner of IncomeTax-I, Coimbatore dt. 30.03.2012 and made in F.No.127(266)/12A-RKDNT/CTI:I-CBE/11-12.For Appellant: Mr. T.R.SenthilkumarJUDGMENT(DELIVERED BY G.M.AKBAR ALI, J.) This tax appeal is preferred against the order of the Income TaxAppellate Tribunal, Madras 'C' Bench, dated 11.7.13 in ITANo.969/Mds/2012. 2. The respondent, R.K.Deivendra Nadar Trust, which was formed on3.8.11, filed an application for registration under Section 12A ofthe Income Tax Act stating that the Trust was formed to promoteeducation among the poor, especially economically backward people ingeneral and for the benefit of people in particular and for thepurpose of running schools, colleges, including professionalcolleges, etc. 3. The Commissioner of Income Tax processed the application underSection 12AA of the Act and found the Trust has not done anycharitable acts, rejected the application vide order dated 30.3.12.Aggrieved by the said order of the Commissioner of Income Tax, theTrust preferred an appeal before the Appellate Tribunal and relied onthe judgment reported in (DIT – Vs – Meenakshi Amma Endowment Trust(2011) 50 DTR (Kar.) 243. According to the Trust, the applicationwas filed within three months of the formation of the Trust and thecharitable activities cannot be assessed in the early stage; and theCommissioner has not considered the objects of the Trust. TheTribunal found that the objects of the Trust are charitable andplaced reliance on the decision in Meenakshi Amma Endowment Trust'shttps://hcservices.ecourts.gov.in/hcservices/ case (supra), allowed the appeal filed by the Trust for registrationunder Section 12A of the Act. Aggrieved against the same, theRevenue has preferred the present appeal. 4. Heard Mr.Senthilkumar, learned standing counsel appearing forthe appellant and perused the documents placed in the typed set ofdocuments and also the judgment relied on by the Tribunal. 5. Learned standing counsel for the appellant points outthat the Trust has not done any charitable activities and,therefore, the Commissioner, has rightly rejected the registrationas no independent activities of charitable nature were shown. Thelearned counsel submitted that the Trust was relying only upon thecharitable activities carried on by one Late R.K.Deivandra Nadar, inwhose name the Trust was started and, therefore, there is nothing onrecord to show that the objects of the Trust are for charitablepurpose. 6. A perusal of the order would show that the object of theTrust, as extracted by the Appellate Tribunal, is to promoteeducation among the poor, especially economically backward people andalso promote and run colleges, schools, professional colleges andalso to establish hospitals for the poor. It is admitted that oneDeivandra Nadar, a philanthropist was doing the charitable activitiesand only in order to continue such charitable activities, the Trusthas been created in his name and within a month of its formation,applied for registration under Section 12A of the Act, which providesthat the registration should be done within one year from theformation of the Trust. 6. A perusal of the order would show that the object of theTrust, as extracted by the Appellate Tribunal, is to promoteeducation among the poor, especially economically backward people andalso promote and run colleges, schools, professional colleges andalso to establish hospitals for the poor. It is admitted that oneDeivandra Nadar, a philanthropist was doing the charitable activitiesand only in order to continue such charitable activities, the Trusthas been created in his name and within a month of its formation,applied for registration under Section 12A of the Act, which providesthat the registration should be done within one year from theformation of the Trust. 7. It is also relevant to point out that in MeenakshiEndowments's case (supra), the Karnataka High Court has held that“when the trust itself was formed in January, 2008, with the moneyavailable with the trust, one cannot expect them to do activity ofcharity immediately and because of that situation the authoritycannot come to the conclusion that the trust was not intending to doany activity of charity.” We respectfully agree with the view takenby the Karnataka High Court, which is squarely applicable to therespondent/Trust in the present case. The Tribunal has rightlyfollowed the said judgment in arriving at its conclusion. 8. The apprehension of the Commissioner, whether the objects aregenuine and the intentions of the Trust are doubtful, cannot bedecided at the threshold. The answer to the same lies in Section12AA (3) of the Act, which is extracted hereunder :-“12 AA. .............. (3) Where a trust or an institution has been grantedregistration under clause (b) of sub-section (1) andsubsequently the Commissioner is satisfied that theactivities of such trust or institution are notgenuine or are not being carried out in accordancewith the objects of the trust or institution, as thecase may be, he shall pass an order in writinghttps://hcservices.ecourts.gov.in/hcservices/ cancelling the registration of such trust orinstitution: Provided that no order under this sub-section shallbe passed unless such trust or institution has beengiven a reasonable opportunity of being heard.]9. 'Charitable purpose' is defined under Section 2 (15) of theAct and the same is extracted hereinbelow for easy reference :-“2. ........ (15) “charitable purpose” includes relief of thepoor, education, medical relief, and the advancementof any other object of general public utility: Provided that the advancement of any other object ofgeneral public utility shall not be a charitablepurpose, if it involves the carrying on of anyactivity in the nature of trade, commerce orbusiness, or any activity of rendering any service inrelation to any trade, commerce or business, for acess or fee or any other consideration, irrespectiveof the nature of use or application, or retention, ofthe income from such activity.” 10. From a reading of the above provisions, it is clear that theauthority has got power to subsequently satisfy itself about theactivities of such trust or institutions as to whether it is genuineor not and whether the trust is being conducted in accordance withthe objects of the trust and the authority has got the power to passan order cancelling the registration of the trust or the institution.We find that the above provision enables the authority to monitor theactivities of the charitable trust and if it finds that itsactivities are not in the best interest of the trust and to subservethe interest of the trust, then it is open to the authority to cancelthe registration of the trust or the institution. 10. From a reading of the above provisions, it is clear that theauthority has got power to subsequently satisfy itself about theactivities of such trust or institutions as to whether it is genuineor not and whether the trust is being conducted in accordance withthe objects of the trust and the authority has got the power to passan order cancelling the registration of the trust or the institution.We find that the above provision enables the authority to monitor theactivities of the charitable trust and if it finds that itsactivities are not in the best interest of the trust and to subservethe interest of the trust, then it is open to the authority to cancelthe registration of the trust or the institution. 11. In the present case, we find no reason as to why theCommissioner had rejected the registration of the Trust when there isample power under law to rectify any error to cancel the registrationof the trust or institution if there is breach of the objects of thetrust in the discharge of its charitable objects as propounded in thetrust deed. The reasons given by the original authority, we find, toreject the registration, cannot be held against the respondent atthis stage and the Tribunal has rightly exercised its discretion insetting aside the said order. 12. It is also brought to the notice of this Court that in T.C.(A) Nos.975 and /14 and 729/13, similar view has been taken by thisCourt. 13. Accordingly, there is no question of law, much lesssubstantial question of law arising for considering in this appealand there being no merits, this appeal is dismissed. 14. However, before parting with the case, we hope that theDirector of Exemptions/Commissioner of Income Tax concerned willhttps://hcservices.ecourts.gov.in/hcservices/ endeavour to scrutinise the working of all the existing trusts andfind out whether the funds of the trust are utilised towards thecharitable objects propounded in the trust deed and not for thepersonal interest of any particular person or individual. Wefervently hope and trust, that considering the number of charitabletrusts that are being registered, the appropriate authority willscrupulously verify the individual charitable trust and take actionwhenever there is a breach of the objects of the trust and theauthority empowered shall take action against such charitable trustsif there is any violation of the objects of the Trust. Sd/-Asst. Registrar(J)/true copy/Sub Asst. Registrar.GLNNote to Office :-Copy of this order to be sent to1) Director of Exemptions, Income Tax Department, Chennai.2) The Chairman, Central Board of Direct Taxes, New Delhi.3) Commissioner of Income Tax,I Coimbatore.4.The Income Tax Appellate Tribunal,Madurai "C" Bench,+1cc to Mr.T.R.Senthil Kumar ,Advocate SR.No.34811GP(CO)ka 15/09 T.C. (A) NO. 975 OF 2013 05.08.2014