K.S.JHAVERI,J. - (1.) By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby Tribunal has allowed the appeal of the assessee.
(2.) This Court while admitting the appeal on 07.12.2016 framed following substantial question of law : "1. Whether on the facts and circumstances of the case the Hon'ble ITAT was justified in applying the Proviso of Section 12A(2), inserted w.e.f. 01.10.2014, with retrospective effect in spite of the facts that the proviso has no indication of being applied for the earlier years retrospectively."
(3.) In the case of assessee itself this court has already taken view in D.B. Income Tax Appeal No. 224/2010 dated 02.08.2017, wherein it has been observed as under:- "1. Since in all these appeals, common questions of law and facts are involved, they are decided by this common judgment. 2. By way of these appeals, the appellants have challenged the judgment and order passed by the tribunal whereby the tribunal has allowed the appeals of the assessee, reversing the view taken by the Commissioner of Income Tax Jaipur-III, Jaipur vide judgment and order dated 30.09.2009 whereby the registration under Section 12A was rejected. 3. This court while admitting the appeal has framed the following substantial questions of law:- D.B. Income Tax Appeal No. 224/2010 admitted on 13.12.2010:- (i) Whether granting registration to a private trust under section 12A was legal and proper especially when Sections 2(15),11,12 and Section 13 specifically restricts use and application of voluntarily contribution/income for the benefit of private person under section 13(3) ? (ii) Whether applications of Rajasthan Public Trust Act, 1959 can be applied to the private trust especially when they are covered by the Indian Trust Act, 1882 ?" D.B. Income Tax Appeal No. 273/2016 admitted on 17.01.2017:- "(i) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in allowing Gujara Bhatta as application of income of the trust by following earlier order in spite of the fact that is as not fixed by the State Government as per Section 65 of the Rajasthan Public Trust Act, 1959 r.w. Rule 38 of the Rajasthan Public Trust Rules, 1962 ?" (iii) Whether the provisions of Rajasthan Public Trust Act are applicable to the Trust when the Trust is specifically governed by the Indian Trust Act 1882 ?" D.B. Income Tax Appeal No. 274/2016 admitted on 7.12.2016:- "Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT was justified in allowing Gujara Bhatta as application of income of the trust by following earlier order in spite of the fact that it was not fixed by the State Government as per Section 65 of the Rajasthan Public Trust Act, 1959 r.w. rule 38 of the Rajasthan Public Trust Rules, 1962." 4. Counsel for the appellant has taken us to the definition of 2(31)(vii), Section 2(24)(iia), 2(15) Section 12A, Section 12AA, Section 13(1)(a), and section 13(3) of the Income Tax Act. He has also taken us to Section 17A of the Rajasthan Public Trust Act which reads as under:- 2. Utility of the Act.-Shri K.N. Shah in Bombay Public Trust Act 1950, eighty Edition, p.3 has observed- There are instances of how Mahants, Pujaris, Bhatjis and Acharyas who have lived on the temple and its income for years and flourished fat o;n the earnings of the Holy shrines and attempting to devour and appropriate the deity and donations to themselves. Through they may have for generations held out to and invited innumerable devotees for Darshan and hundreds of devotees may have openly come for Darshan, and worshipped the idol for years, and though donations, offerings and emoluments may have been begged, asked for, offered and received uninterruptedly, when it comes to registration of the Temple as a Public Trust and accounting for its income, they would not stop of claiming exclusive rights of ownership not only over the income but over idol, the deity of the temple too. They, the preservers of the deity and the spiritual heads, the supposed saviors of the souls of siners and the sanctity of the holy shrink would go to any length to perjure themselves, if they could not establish their ownership over the endowment and its property, and derive the material benefit of getting its income. Such instances are not few. The richer the endowment, the greater the temptation to swallow the same. To such impious Pujaris, Managers and Mahants, nothing matters, consideration neither of this world nor the next, if they could only serve their selfish end. Such instances, justify the passing of and the utility of this Act. These days the Trusts and Temples have assumed great importance. This is because the State has thought it advisable to introduce legislation for the governance for safeguarding the interest of the beneficiaries and for avoiding the cases of magnificence and to check mis-appropriation and criminal breach of trust. As expressed by the late Hon'ble Justice Chagle C.J. of Bombay, in his judgment that "The whole attempt and the whole object is to see that the properties settled on public and charitable trusts are properly managed and are properly administered, that the trustees keep proper accounts that the trustees render those accounts, answer questions put to them arising out of those accounts and every single provision contained in the Act is incorporated from that point of view. Ratilal Pannachand Gandhi v. State of Bombay, 55 Bom. LR 86 : AIT 1953 Bom. 242 : ILR 1953 Bom. 1187. The utility of this Act is being realised by the members of the public and the Bombay High Court had made a survey of this Act in a case reported as C.C. v. Municipality of Taloda, 65 Bom. LR 27. The Gujarat High Court also had made a survey of this Act in cases reported as Kuberbhai v. Purshottamdas, (1961) 2 GLR 564 ; Lallubhai G. Parikh v. Acharya Shri Vrijbhushanlal Balkrishanlalji, (1967) 8 GLR 42. As the law stands, the trustees of the charity, however small, has to perform onerous duties involving a certain amount of expenses, Gross abuses of public trusts and trust funds by unscrupulous trustees, no doubt demand statutory control and regulation and the law had its inspiration and jurisdiction. The whole object of the Legislature, in passing the Act a highly laudable, e.g. to see that public trusts were properly and efficiently administered." He also pointed out Section 2(xi) of Public Trust Act and contended that in view of the definition envisaged under the Act, every public trust registered under the Rajasthan Public Trust Act is deemed to be a society and the benefits which are granted under Section 12A are not available to be granted. 5. However, he has taken us to the order of Commissioner of Income Tax which has declined the registration and contended that the view taken by the tribunal is required to be reversed, more particularly in view of the provisions of section 13(1)(a) and 13(3) of the Income Tax Act. 6. He has relied upon the decision of Madras High Court in the case of Commissioner of Income Tax-Madras v. M. Jama Mohammad Sahib reported in (1941) 9 ITR 375 (Mad) wherein the courts has observed as under:- In Umar Bakhsh v. Commissioner of Income tax, Punjab (1931) I.L.R. 12 Lah. 725 : 5 I.T.C. 402 (F.B.) , the Lahore High Court expressly held that the expression "religious or charitable purposes" in Section 4 (3) (i) has to be construed with reference to English law and not to the personal law of the assessee and this opinion was accepted by the Patna High Court in Humayun Rasa Chowdhury v. Commissioner of Income-tax, Bihar and Orissa 10 I.T.C. 7. The learned Advocate for the assessee (muthavalli) has suggested that the decision of the Judicial Committee in The Trustees of Tribune Press, Lahore v. The Commissioner of Income-tax, Punjab, Lahore (1939) 2 M.L.J. 444 : L.R. 66 I.A. 241 : I.L.R. (1939) Lah. 475 (P.C.) , has negatived this opinion, but we cannot read the judgment in that sense. The passage which has just been quoted from the judgment of the Privy Council speaks of the test of general public utility. As this is the test so far as the Indian Income-tax Act is concerned it is not necessary to consider whether the trust here would be deemed to be charitable in England. Even assuming that the Court may have regard to Muslim ideas in deciding whether a Muslim trust fulfils the test of general public utility, it cannot be said that that part of the trust deed which relates to the setting aside of income for the descendants of the donor constitutes a trust for general public utility. The beneficiaries are to be members of the donor's own family. The utility is not of a public, but clearly of a private nature. For these reasons we would answer the first question in the negative. The second question calls for no discussion. The position is that the muthavalli has in his hands income belonging to a private trust. Income of a private trust is not exempt from taxation and the muthavalli is assessable in respect of it, because he holds it. It follows that the answer to the second question is in the affirmative." 7. He therefore contended that the view taken by the tribunal is required to be reversed. 8. Mr. Jain has also taken us to the observations made by the tribunal in para 6 which reads as under:- 6. We have heard and considered the arguments advanced by the parties in view of orders of the ld. CIT, material available on record and the decision relied upon. The ld. CIT has raised two issues. Firstly as to whether the assessee is a private trust since it is run by the representative of three families and secondly as to whether it is for their benefit since they are paid 15% of the total receipt as also marriage and other help. We note that there is no specific definition of public or private trust in the Income Tax Act, 1961. Various decided cases provide guidelines in this regard, according to which a trust would be a public trust where the benefit endure to the public at large. The control and management of trust property left in the hands of a body of individual belonging to the settlers family is of no consequence in determining whether the trust is public trust or not. In case of Ganeshram Rami Devi Charitable Trust v. Commissioner of Income Tax 71 ITR 696 (Cal.) , the Hon'ble High Court considered the question whether the provision that management is left to private individuals and not tot he public would, in any way, affect the nature of the trust for the purpose of the Income-tax Act. It is observed that the phrase "charitable purpose" in the Income-tax Act "includes relief of the poor, education, medical relief and the advancement of any other object of general public utility". It is further provided that "nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of the Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure for the benefit of the public." This definition does not deal with the matter of control and management of the fund. There is no reference of the same in it. The implication, therefor, is that the matter of management of the fund is not an essential matter for the purpose of defining "charitable purposes" so far as the Income-tax Act is concerned; it may be essential for other purposes as, for example, for the purpose of section 92 of the Code of Civil Procedure. What is essential for the Income-tax Act is whether "it endures to the benefit to the public" or not, whoever may control the fund. Therefore, even if the funds are controlled by a body of persons which is not a public body in any sense, but if the fund "endures to the benefit of the public", it wold still be charitable purpose within the meaning of the Income-tax Act. Therefore, it did not agree with the contention that because the control of the fund is not left to the public, it must be concluded that it is not a public charitable trust. The court held that it is not a condition essential for determining a "charitable" trust for the purposed of the Indian Income-tax Act. All that is required is that the fund is spent or accumulated for religious and charitable purposes. The Jodhpur Bench of ITAT in case of Smt. Mansukhi Devi Bihani Jan Hitkari Trust v. Commissioner of Income Tax 277 ITR 140 (AT) (Jodh.) after discussing the facts of the case observed that in the case before them, it is not in dispute that application for registration has been made in the prescribed form i.e. Form No. 10A. It is also not the case of the Department that the property held by the trust and income therefrom had not been utilized for the purposes of charity/public utility. The only reason for not granting registration was that there is a clause in the trust deed that "in the event of a vacancy arising in the board of trustees for whatever reasons, the remaining trustees shall co-opt another major male or female person out of the family members of that person to fill up the vacancy". Only on that basis, the learned Commissioner of Income-tax considered that the trust was a family affair/settlement. However, he has not brought any material on record that by co-opting a person from the family of the previous trustee, how the object of the trust has been changed or by co-opting another family member of the trustee on account of vacancy as to how the income was not utilized for the public charity. Thereafter, ITAT after considering the object of the trust, provisions of section 12A and Rule 17A concluded that Commissioner of Income-tax was not justified in refusing registration to the assessee merely on the basis that in the case of a vacancy in the board of trustees, the remaining trustees are to co-opt another person from the very family of the outgoing trustee as as such the trust appears more in the nature of a family affair/settlement than a charitable trust. Accordingly it directed to grant registration under section 12A of the Income-tax Act, 1961. These cases clearly lay down the proposition that control on management of the fund is no criteria for determining whether the trust is a public or private trust. What is required to be seen is that in endures to the benefit of the public or not who ever may control the fund. It is not in doubt that activities carried out by the assessee enures to the benefit of the public and it is for this reason that it is registered as a public trust under the Rajasthan Public Trust Act, 1959. The object of the trust are also for religious and charitable purpose and is not restricted to any particular cast, colour, or creed. We, therefore, hold that assessee is a public trust and not a private trust. 9. However, Mr. Gagria, counsel for the respondent has taken us to paragraph 10 of the order to the tribunal which reads as under:- "10. We also note that at the time of grant of registration under section 12AA the ld. CIT is to satisfy himself about the genuineness of the activity of the trust and about the object of the trust. At this stage he is not required to ponder into the provisions of section 13. The applicability of section 13 is to be looked by the AO at the time of assessment. The ld. CIT has not brought on record any positive evidence that the activities of the trust are not genuine or the funds of the trust are not applied for its object. He only assumed that since the trusties are getting benefit by way of 'gujara bhatta' and other facilities perpetually, the activities of the trust are not genuine. This can not be a reason for refusing the registration under section 12AA. In case of Modern Defence Shishkan Sansthan v. Commissioner of Income Tax 108 TTJ 732 (Jodh.) it was held that at the stage of consideration of the issue of registration under section 12AA, it is not a sine qua non to examine the aspect of the application of income. When the Commissioner has not doubted the aims and objects of the society, he cannot throw away the application of registration on this pretext. In case of Dream Land Educational Trust v. Commissioner of Income Tax 109 TTJ (Asr.) 850 , it was held that for grant of registration under section 12AA, only relevant consideration is satisfaction of Commissioner regarding objects of trust and genuineness of its activities; in absence of any dissatisfaction of Commissioner with regard to either objects or genuineness of activities of trust, if registration is refused to trust, it would be violation of provisions of section 12AA. In case of Asstt. DIT v. Rajasthani Shiksha Samiti 23 SOT 124 (Hyd) it was held that when registration to a trust is granted by the Commissioner under section 12A, then it is for the AO to examine every year whether income has been applied by assessee for charitable purpose or not and if income is not so apply, it wold be duty of AO to tax such income but he cannot further held that trust is not established for charitable purpose. The Hon'ble Karnataka High Court in case of Sanjeevamma Hanumanthe Gowda Charitable Trust v. DIT 285 ITR 327, (Kar) has held that for the purpose of registration under section 12A what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from trust property is applied to charitable or religious purpose and not the nature of the activity by which the income is derived from trust property is applied for charitable and religious purpose as discussed above. Hence, for the detailed reasons stated supra, we direct ld. CIT to grant registration under section 12A to the assesse." 10. He has also relied upon the decision of this court in the case of Commissioner of Income Tax v. Vijay Vargiya Vani Charitable Trust reported in (2014) 90 CCH 0209 Raj HC wherein it has been observed as under:- "In our view, the object of Section 12AA is to examine genuineness of the objects of the trust but not the income of the trust for charitable or religious purpose the Commissioner cannot sit in the chair of Assessing Officer to look into amount spent on charitable activities at the time of creation of the Trust. The stage for reviewing the application of income has not arrived when such trust or institution files application for registration of the trust/society." 11. He has also relied upon the judgment rendered by the Punjab and Haryana High Court in the case of Commissioner of Income Tax v. Surya Educational and Charitable Trust reported in (2013) 355 ITR (P and H) 280 and the judgment rendered by the Allahabad High Court in the case of Commissioner of Income Tax v. Red Rose School reported in (2007) 212 CTR 394 (All HC). He has also relied upon para 5.2 of the Circular No. 14/2015 (F.No. 197/38/2015-ITA.I) dated 17.08.2005 which reads as under:- "There is no provision under the Act which calls for denial of exemption merely on account of appointment or removal of trustees. Although answer to such a situation would normally depend on the factual implication of such arrangement, the same should generally not be a ground for denying exemption unless the nature of activities of the trust or institution get changed or modified or no longer remain to exist 'solely for educational purpose and not for purposes of profit'. Hence denial of exemption would not be justifiable only on the ground of induction of new trustees or removal of existing ones." 12. We have heard counsel for the parties. 13. Before proceeding with the matter, it will not be out of place to mention here that in all the questions of law, the question which consideration before us is whether taking into account, the observations made in paragraph 10, the view taken by the tribunal is just and proper. At the time of registration, the authority is required to look whether it is registered under the state Act or under any other Act. There is no distinction between private trust and public trust. The contention which has been raised by counsel for the appellant regarding the expenses, diversion or control by the private people will come only when the assessment has taken place. For the purpose of trust registered and the income used is for the charitable purpose or not and whether income from public trust if it is going for any private use will negative the very object of the Trust Act which is the main intention of the legislation, is not to be considered at this stage. 14. In that view of the matter, we see no reason for interfere with the finding of the tribunal. Both the issues are answered in favour of the assessee. 15. The appeals stand dismissed.";