- (1.) This order will dispose of an appeal filed under Section 260A of the Income-tax Act, 1961 (in short "the Act") against the order dated 10.6.2011 passed by the Income Tax Appellate Tribunal, Delhi Bench 'A', New Delhi (hereinafter referred to as "the Tribunal") in ITA No. 6088/ Del/2010. The revenue has claimed the following substantial questions of law:- (i) Whether the Hon'ble ITAT is justified in law in holding that the CIT erred in refusing to register the assessee u/s. 12A of the Income-tax Act. (ii) Whether the Hon'ble ITAT is justified in directing to grant registration when the Trust is an autocratic/private discretionary/family Trust as there is no provision for independent internal check on the discretionary functioning of the Trust as the control over the affairs of the Trust is in the hands of six Board of trustees, three of which belongs to Katyal family, who hold the key positions in the Trust? (iii) Whether the Hon'ble ITAT is justified in directing to grant registration when the Trust has made huge investment in the form of FDR with banks with a view to earn interest without serving public in absence of any charitable activities performed as per section 2(15) of the Income-tax Act, 1961? (iv) Whether the Hon'ble ITAT is justified in directing to grant registration when the Trust has failed to furnish any documentary evidence regarding identity and capacity to make initial investment in the Trust by the trustees? (v) Whether the Hon'ble ITAT is justified in directing to grant registration when the six settlers cum trustees have autocratic and discretionary power to remove any Trustee other than the settler one without giving any notice or reasons whatsoever?
(2.) Record of the appeal shows that the respondent-Trust had moved an application under Section 12A(1)(aa) of the Act in form No. 10A on 18.7.2010 accompanied by copy of the Trust deed dated 23.6.2010 and form No. 10B. The said application was rejected by the Commissioner of Income-tax, Rohtak (hereinafter referred to as "the CIT, Rohtak") vide order dated 26.11.2010. The conclusion arrived at by the CIT, Rohtak was that the Trust is susceptible to use for purposes other than charitable ones and Sh. Prikshit Katyal (son), his mother Smt. Sangeeta Katyal & his brother Sh. Gaurav Katyal were trustees in the previous Trust deed. The same had been rejected on 5.5.2010 though in the supplementary deed Mrs. Shruti Bhagat, Mrs. Darshana Dhinghra and Mr. Sanjay Bhagat were added as new trustees. The Trust was having FDR of Rs. 2,18,30,042/- and had huge bank balance and thus it was clear that main motive of the Trust was to earn interest income. Reliance was also placed upon the judgment of Kerala High Court in Self Employers Service Society v. CIT, 2001 247 ITR 18 . It was accordingly held that no activity had been carried out in relation to the aims and objects of the Trust during the financial year 2008-09. The terms and conditions enshrined in the Trust deed whereby the trustees had the power to convert the Trust property, acquire immovable property, sell, charge, rent out or otherwise alienate the assets including immovable property for personal/non-charitable purposes. The trustees had autocratic and discretionary powers to remove without any notice/reason a trustee except founder trustees and there was a provision for subsidised low rate of interest and the Trust had not disclosed regarding initial investment in the Trust by the trustees.
(3.) Feeling aggrieved, the respondent-Trust preferred an appeal before the Tribunal which vide impugned order dated 10.6.2011 allowed the appeal of the respondent-Trust and set aside the order of the CIT, Rohtak after taking into consideration the provisions of Section 12AA of the Act and the objects of the Trust. The Tribunal noticed that the properties were in the name of the Trust and not in the name of the trustees by referring to the conveyance deeds. It was noticed that the power of the Board of the trustees to remove the trustees except the founder trustees was also such, if the work of any trustee was not satisfactory or against public policy and interest of the Trust. The Tribunal held that the power to convert the Trust property was to be gone into at the time of assessment and was general power for facilitating the proper functioning of the Trust. The evidence regarding the identity and capacity of the trustees to make initial investment was also noticed and documents were referred to namely APB 148 to 153 which were copies of PAN cards of the trustees and also ABP 130 to 147 which were the confirmations of the investment made. The judgment of Self Employers Service Society's case was distinguished on the ground that, in that case the society was set up only for the purpose of generating Income for its members. The judgment in DIT v. Garden City Educational Trust, 2011 330 ITR 480 was referred to in support.;