Director Of Income Tax (Exemptions) Chennai v. Vijayapuram Chatram Trust Mahalakshmi Mansion, I Floor

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.11.2018 CORAMTHE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE DR.JUSTICE ANITA SUMANTH Tax Case Appeal No.887 of 2009 Director of Income Tax (Exemptions)Chennai..... AppellantVs. Vijayapuram Chatram TrustMahalakshmi Mansion, I Floor,No.14, I Main Road, Gandhi Nagar, Adyar, Chennai – 20. .... Respondent Tax Case Appeal filed under Section 260A of the Income TaxAct, 1961 against the order of the Income Tax AppellateTribunal, Madras 'D' Bench, Chennai, dated 16.04.2009 made inITA No.455/Mds/2008, against the order of the Director of IncomeTax Exemption, Chennai dated 29/01/2008 in DIT(E)No.2(452)/02-03. For Appellant : Mr.Karthik RenganathanFor Respondent : Mr.R.Kumar J U D G M E N T (Delivered by DR.VINEET KOTHARI,J) The Revenue has filed this appeal raising the followingsubstantial questions of law arising from the order of theIncome Tax Appellate Tribunal dated 16.04.2009 allowing theappeal of the assessee - Vijayapuram Chatram Trust in ITA No.455(Mds)/2008: "(i) Whether on the facts and in thecircumstances of the case, the Tribunal was right inholding that cancellation of registration undersection 12AA cannot be done by the Director ofIncome Tax (Exemptions) as the word used in thesection is “Commissioner”? https://hcservices.ecourts.gov.in/hcservices/ (ii) Whether on the facts and in thecircumstances of the case, the Tribunal was right inholding that there is no power to cancel theregistration under section 12AA where immovableproperty was sold by the assessee trust withoutobtaining the approval of the Director of Income Tax(Exemptions) contrary to the undertaking given byit?” 2. Even though this Court by order dated 17.09.2009admitted only question of law (i) quoted above, we feel itnecessary to admit question (ii) also. Accordingly, question oflaw (ii) quoted above is also admitted. 3. The learned Tribunal held that the assessee/trust hadgiven an undertaking before the learned Commissioner, whogranted registration to the effect that the property of thetrust would not be alienated. However, in the course of time,on certain disputes arising the matters were taken before thecompetent Civil Court and under the orders of the Civil Court,some of the properties of the trust were required to be sold.Under the Will executed by Mr.V.T.Somasundaram on 20.04.1981,under which the said Trust was created, even though it wasstated that the building should be used for family trustactivities and the income of the property should be used tomanage the chatram and meals will be provided to Brahmins daily,the objects of the Trust were fulfilled by the sale of certainproperties with the leave of Civil Courts and hostel forstudents was constructed and such poor students were also givenfood. The learned Tribunal, therefore, found that in suchcircumstances, the alleged breach of aforesaid Undertaking givenby the assessee/trust before the learned Commissioner could notresult in refusal of the renewal of registration of the trustfor the purpose of availing exemption under the Income Tax Act,since the objects of the Trust could not be said to have beendefeated by the aforesaid activities. 4. The learned counsel for the Revenue has urged before usthat the sale of property of the Trust even though under theorders of the Civil Court will have no effect on thecontinuation of the registration under the provisions of IncomeTax Act and since the Undertaking given before the learnedCommissioner of Income Tax stood violated on the own showing ofthe assessee, the Tribunal has erred in allowing the appealfiled by the assessee and setting aside the order of theDirector of Income Tax (Exemptions), Chennai dated 29.01.2008. 5. Learned counsel for the respondent/assessee has howeversupported the order passed by the Income Tax Appellate Tribunal. 4. The learned counsel for the Revenue has urged before usthat the sale of property of the Trust even though under theorders of the Civil Court will have no effect on thecontinuation of the registration under the provisions of IncomeTax Act and since the Undertaking given before the learnedCommissioner of Income Tax stood violated on the own showing ofthe assessee, the Tribunal has erred in allowing the appealfiled by the assessee and setting aside the order of theDirector of Income Tax (Exemptions), Chennai dated 29.01.2008. 5. Learned counsel for the respondent/assessee has howeversupported the order passed by the Income Tax Appellate Tribunal. 6. Having heard the learned counsel, we are satisfied thatthe present appeal filed by the Revenue has no merit anddeserves to be dismissed. 7. The findings of the learned Tribunal recorded inparagraphs 10 and 11 of the order dated 16.04.2009 areessentially findings of fact and do not reflect any breach ofthe objects of the said Trust by the sale of certain propertiesof the Trust under the orders passed by the Civil Court and nomisuse of the funds by the trust for the activities which arenot covered by the trust deed or the Will under which the saidtrust was created has been established. The registration of thetrust under Section 12A of the Income Tax Act cannot be revokedor cancelled, unless specific findings are recorded, as thebasis of evidence by the authorities concerned that the objectsof the trust have been defeated or the funds of the trust havebeen diverted or misused for the purposes, other than theobjects covered by the trust deed. There is no such findingagainst the Trust before us on record. The sale of propertyunder the orders of the Civil Court was a due legal sanction forsuch sale of property and, therefore, the formal undertakinggiven before the Director of Income Tax (Exemptions) by theassessee/trust will not amount to defeating the objects of thetrust so as to result in the cancellation of registration. 8. In view of the aforesaid, question No.(ii) standsanswered against the Revenue and in favour of the assessee. 9. However, with regard to question No.(i) in respect ofjurisdiction of Director of Income Tax (Exemptions) to pass theimpugned order, we find that the relevant definition of the term“Commissioner” as defined under section 2(16) of the Act priorto substitution by Finance (No.2) Act 2014 with effect from01.06.2013 and even after that included the Director of IncomeTax within the definition of “Commissioner” and therefore tothat extent, it cannot be said that the Director of Income Tax(Exemptions) had no jurisdiction to pass the impugned orderdated 29.01.2008. 10. Accordingly this appeal is disposed of answeringquestion No.(i) in favour of the Revenue and against theassessee and question No.(ii) in favour of the assessee andagainst the Revenue. No costs.Sd/- Assistant Registrar //True copy// sl Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, Madras 'D' Bench, Chennai. 2. Director of Income Tax (Exemptions) Ayakar Bhawan, Annexe III Floor, 121, Mahatma Gandhi Road, Chennai. Ayakar Bhawan, Annexe III Floor, 121, Mahatma Gandhi Road, Chennai. +1cc to Mr.Karthik Ranganathan, Advocate SR.No.81865 +1cc to Mr.T.N.Seetharaman, Advocate SR.No.87230 SPD(CO) TCA No.887 of 2009 GMY(27/12/2018)