Andhra Pradesh H.C : The Tribunal is correct in law in directing the DIT(E) to grant registration to the assessee-trust under section 12AA

High Court Of Andhra Pradesh

DIT (Exemptions) vs. Ramoji Foundation

Section : 12A

Kalyan Jyoti Sengupta And Sanjay Kumar, JJ.

ITAT No. 583 Of 2013

December 18, 2013

JUDGMENT

Kalyan Jyoti Sengupta, J. – Pre-admission notice has been issued to the respondent and in response thereto Mr. S. Ravi, learned senior counsel appears on behalf of the respondent-assessee.

2. Now, the question is whether we admit this appeal or not. Mr. J.V. Prasad, learned senior standing counsel for income-tax appearing on behalf of the appellant insists that the appeal should be admitted on the following suggested questions of law :

“(1) Whether, on the facts and in the circumstances of the case and having regard to the decision of the hon’ble Supreme Court in CIT v. Kamla Town Trust [1996] 217 ITR 699 (SC), the Tribunal is correct in law in holding that amendment of the trust deed need not be made by approaching the appropriate civil court ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in directing the DIT(E) to grant registration to the assessee-trust under section 12AA of the Income-tax Act, 1961 ?”

3. We have heard the learned counsel for the parties and gone through the impugned judgment and order of the learned Tribunal.

4. Mr. J.V. Prasad says that the learned Tribunal was not correct in holding that without approaching the civil court, the rectified trust deed can be accepted.

5. Mr. S. Ravi has produced the trust deed before us and he pointed out the relevant clause thereof The trustees have been given power by the settler itself to rectify the trust deed, if necessary.

6. Mr. J.V. Prasad submits that without approaching the civil court, as it could be found from the aforesaid judgment of the hon’ble Supreme Court relied on by the learned Tribunal in the case of CIT v. Kamla Town Trust [1996] 217 ITR 699/84 Taxman 248 (SC), the trust deed could not be rectified and consequently the rectified portion of the trust deed cannot be said to be binding.

7. It is true that the learned Tribunal has not decided this matter in so many terms as indicated by Mr. J.V. Prasad. We have examined the trust deed and, vide clauses 18 and 19, the trustees have been given power to amend, alter, change or modify the provisions of the trust deed with a condition mentioned therein. We set out clauses 18 and 19 of the trust deed as under :

“18. Subject to the prior approval of the Director of Income-tax (Exemptions), any amendment, alteration, changes or modifications to the provisions of the trust deed may be carried out in such a way that they shall not alter the basic character and charitable objects of the trust.

19. The trustees subject to clause 18 supra, shall have power by two-thirds majority decision to add or alter of the objects for which this trust is constituted provided that such additional or altered object is of charitable nature falling within the definition thereof under the relevant provisions of the Income-tax Act, 1961. The trustees shall have power at any time by two-thirds majority decision to add or alter any of the other presents of this deed which shall thereafter be treated as forming part of this deed.”

8. We are of the view that when the power had been given to the trustees by the settler, it can be amended without approaching the civil court provided all the conditions laid down by the settler are fulfilled. The approach of the civil court is required where there is no such power. No law has been produced before us that the trustees without approaching the civil court in spite of the specific power being given by the settler cannot change the trust deed. According to us, when the power has been given to the trustees by the settler, no further power basically from the civil court is required. This is the exact mindset of the hon’ble Supreme Court in the aforesaid judgment. We have got the corresponding judgment of the hon’ble Supreme Court in Kamla Town Trust (supra) At page 629 in paragraph 16 of the judgment, the hon’ble Supreme Court observed as follows (page 716 of 217 ITR) :

“The aforesaid decision of the Rajasthan High Court also takes a view which is almost parallel to the view taken by the Delhi High Court though the binding nature of the rectification order of the civil court on the Income-tax Officer is not highlighted as no such occasion arose for Rajasthan High Court to pronounce on the same on the facts of that case. However, the fact remains that after due rectification of the original trust deed either by the settlor himself by executing a supplementary deed or by getting it rectified through competent civil court under the relevant provisions of the Specific Relief Act, the trustees would be bound to carry out the amended and rectified objects of the trust and if they fail to do so they would be guilty of breach of trust for which even proper proceedings can be initiated against them under section 92 of the Code of Civil Procedure.”

9. Thus, in the aforesaid decision of the hon’ble Supreme Court, nowhere it is stated that, in spite of having power to amend the trust deed, the trustees have to approach the civil court and get it rectified and such rectified trust deed is a binding instrument. Therefore, we hold that the learned Tribunal has correctly dealt with the matter in this case and the rectified trust deed can be relied on by the Revenue authorities for the purpose of registration.

10. Accordingly, the appeal is dismissed. No order as to costs.

[Citation : 364 ITR 85]