Public/Charitable Trust
Manish
(Querist) 05 September 2008
This query is : Resolved
Trust Deed of a Public and Charitable trust does not contain any clause to describe as to what will happen to the assets remaining at the time of its dissolution. Under this condition how could the same be disposed off. Could the same be distributed among the Trustees/settlor??
The Qn has been raised by the income-tax authorities, alleging that lack of such clause shows that the trust or its objectives (of public and charity) are ingenuine.
I understand that the assets of a public charitable Trust cannot be distributed among its trustees or settlors and the absence of such clause doesnot cast a shadow on the trusttees' intentions of charity.
But I need to establish the same in the interest of my client. If there is any establised norms/ provision/ case law operative in such circumstances?
PLEASE HELP BY GUIDING ME.
Guest
(Expert) 06 September 2008
It is mandatory clause in Karnataka, without which even the Sub Registrar will refuse to register.
In most the states, the Society Registration ACts provide for a transfer of assets of a society in case of dissolution to another society. In Karnataka we use the same section in the Trust Deed to state what happens when a dissolution takes.
You can amend the trust deed to include the dissolution clause. The department cannot hold the Trust as not genuine in the absence of that clause, it can only state that benefit of section 11 may be withdrawn if granted, but if you amend it they will recondsider it and give you the benefit.
They have to only consider the Object clauses of the Deed to know whether the objects for which the trust was formed are charitable or not and as per section 2(15) of the IT Act 1961.
Manish
(Querist) 09 September 2008
Thanks,
If such amendment may be done vide a General Body Resolution? or another deed is required to be registered?
Can you suggest some case-laws?
[Please also give a full text of: Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of Income-tax
(Exemptions) (2006) 285 ITR 327 (Karn.)]
Manish
(Querist) 09 September 2008
Thanks,
If such amendment may be done vide a General Body Resolution? or another deed is required to be registered?
Can you suggest some case-laws?
[Please also give a full text of: Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of Income-tax
(Exemptions) (2006) 285 ITR 327 (Karn.)]
Manish Singh
(Expert) 13 September 2008
Amendment can easily be done under the terms and conditions mentioned in the Trust deed.
If the deed is registered, then you will have to register the amendment also.
case :
iN THE ITAT BANGALORE
'A' BENCH
IT Appeal No. 1240 (Bang.) of 2002
Decided On: 02.08.2005
Appellants: Sanjeevamma Hanumanthe Gowda Charitable Trust
Vs.
Respondent: Director of Income-Tax (Exemptions)
Hon'ble Judges:
Gopal Chowdhury, J.M. and Deepak R. Shah, A.M.
Subject: Direct Taxation
Disposition:
Appeal dismissed
Head Note:
INCOME TAX ACT, 1961
• Charitable trust--Registration under Section 12AActivity of trust not in furtherance of object as shown in trust deed--Assessee trust, which was established under a trust deed with several objects such as conducting mass marriages, poor feeding, yoga classes, providing food and hostel accommodation, vocational training to handicapped persons, relief to poor sick destitutes and promoting physical, psychological and spiritual health, etc., applied for registration under Section 12A. DIT (exemption), on the basis of enquiry conducted and from the accounts filed, concluded that the trust was carrying on activity in a commercial way by letting out a marriage hall on hire and the trust was not wholly for charitable objects. He therefore, refused registration. Held: Assessee had not done anything in furtherance of objects as stated in trust deed.All the activities so far done were only towards construction of a choultry. As per findings of DIT (Exemptions), the choultry was let out on hire on commercial basis which activity was not for attainment of other objects. The mere spending of Rs. 2,000 on yoga classes and Rs. 5,000 on feeding poor people out of the total receipt of over Rs. 62 lakhs, do not establish that the assessee was pursuing wholly charitable activities. Therefore, assessee was not entitled to registration under Section 12A.
Income Tax Act, 1961 Section 12A
ORDER
Deepak R. Shah, A.M.
1. This appeal by assessee is directed against the order of learned Director of Income Tax (Exemptions); dated 24-6-2002 against order under Section 12AA(1)(b)(ii) of the Income Tax Act (hereinafter referred to as the Act).
2. The appellant-trust was established under a Trust Deed dated 1-3-1997. The objects stated in the said Trust Deed inter alia includes conducting mass marriages, poor feeding, yoga classes, providing food and hostel accommodation, vocational training to handicapped persons, relief to poor sick destitutes and promoting physical, psychological and spiritual health etc. The appellant-trust started constructing building during March, 2000 and the same was completed in 2001. The appellant-trust applied for registration under Section 12A of the Act on 29-11-2001. The learned Director of Income Tax (Exemptions), on the basis of enquiry conducted and from the accounts filed, concluded that the trust is carrying on activity in a commercial way by letting out a marriage hall on hire. The trust is not wholly for charitable objects. In paras 6 and 7 of his order, he concluded as under:-
"Meanwhile, the Income Tax Inspector of this office was sent to the trust office at the address mentioned in the application in Form No. 10A to report on the activities of the trust and whether they are in consonance with the activities report given by the assessee-trust. The ITI has reported that the above address is a palatial marriage chowltry situated on nearly 2 acres of lush landscaped gardens. The marriage half is a 3 storeyed posh building with marble floors and posh interiors. On enquiries, it was revealed that the charges of hiring the hall were Rs. 30,000 for 2 day marriages and for other functions Rs. 15,000 per day. As regards the claims of the assessee in writing and orally through the authorized representative regarding conduct of mass marriages, it was revealed during enquiries that on the inauguration of the marriage chowltry, mass marriage was performed and
