CIT Vs. A.S. KUPPARAJU BROTHERS CHARITABLE FOUNDATION TRUST

JUDGEMENT

(1.) THIS is a revenue's appeal challenging the order passed by the Tribunal holding that the trust in question is genuine and the prominent object of the assessee trust i.e., education, falls within the definition of charitable purpose in terms of Section 2(15) of the Act and therefore, the assessee trust needs to be registered in terms of Section 12A of the Income Tax Act, 1961.

(2.) THE facts in brief as under:- An extent of 26 acres 27 guntas of land in Sy. No. 6 of Hebbal and Sy. No. 99 and 100 of Cholanayakanahalli of Bangalore North was purchased under a registered sale deed dated 19.08.1961 by one Smt. K. Savithramma, Sri. A.S. Chinnaswamy Raju and Sri. A. Kuppaswamy for a valuable consideration. All of them got the aforesaid land converted for residential purposes by an order of the Government of Karnataka dated 20th August, 1969. Sri, Kuppaswamy settled his 1/3rd undivided interest in the said land to his sons by a registered deed. The remaining extent of land exclusively belongs to the other two co-owners. The remaining two owners viz., K. Savithramma and A.S. Chinnaswamy Raju declared that the extent of 17 acres 37 guntas which exclusively belonged to them as the property of the trust for the purpose of establishing an educational institution as set out in the said trust deed. The said document was executed on 21st December, 1984 and duly registered. Prior to the creation of the trust, as the provisions of the Urban Land Ceiling Act, 1976 was attracted to extent of land, they applied to the Government and got an exemption on the ground that they are utilising the said land for charitable purposes by creating trust. The Government granted exemption by its order dated 02.09.1980 under Section 20 of the Urban Land Ceiling Act and also accorded transfer of the land in favour of the trust. It is not in dispute that on the ground that the said trust property is utilised for charitable purpose and the income therefrom is not liable to income tax, the trust did not file annual returns with the authorities. A search under Section 132 of the Income Tax Act was conducted in the case of authors/trustees and their connected group. It is then for the first time, the trust filed its return of income for the assessment year 1998-99 on 09.10.1998 along with a note. It also filed certain belated returns for the earlier assessment year 1996-97. They also filed a bunch of unaudited statements of affairs, income and expenditure accounts and statement of receipts and payments. It was their specific case that the trust has been running Vidyalaya Institute of Prakruti Chikitsa, Institute of Yogic Sciences and was also indulging in the sale of boulders. The trust is allened to have received substantial donations to the tune of about Rs.1.5 crores in cash from un-identified persons and the said amount was advanced to M/s. Jyothi Construction Company, a firm in which the authors, trustees and their relatives were interested as partners. A sum of Rs.20 lakhs has been advanced to the Managing Trustee allegedly for the purpose of acquiring a land to set up a Vrudhashram. Further particulars were not furnished. The trustees also constructed a huge shed and it was let out to M/s. Core Designs Private Ltd., a private limited company in which the trustees and their relatives are interested as Directors and the shareholders. The said company was subjected to pay a rent of Rs.1,80,000/- per year which was not paid and the same was being shown as receivable from year to year in the accounts of the trust. The trust filed an application on 31.10.2002 claiming registration under section 12A of the Act with effect from 01.04.1999 and also filed an application for condonation of delay in filing the application for registration. The Commissioner on receipt of the said applications called upon the trust to produce the documents to substantiate their claim. From the documents, which are produced, it was noticed that the declaration of the trust was amended by a registered rectification deed dated 05.01.2001, where it is recited that there was an error in describing the entire 17 acres 37 guntas as the trust property and what was intended to be given was only 5 acres 37 guntas only. Consequently, through the rectification deed, it was sought that the property of 5 acres 37 guntas alone be treated as the trust property and the balance of 12 acres be treated as the property of the authors. The materials produced by them also showed that after the Urban Land Ceiling Act was repeated, an attempt was made to treat this property as a family property and a settlement was arrived at by partitioning the property treating it as a joint family property. There was also an agreement entered into to sell 4/15th of the land of 15 acres to M/s. Winfield Enterprises for a consideration of about Rs.20 crores. They applied for and obtained No Objection Certificate from the Income Tax Authorities. The 15 acres of land was also treated as real estate property. The said property was offered as a security to banks to raise funds for the purpose of setting up of A.S.K. Atria Park Company. Taking note of all these material on record, the Commissioner was of the view that the real object in creating the trust was to save the valuable property from the provisions of the Urban Land Ceiling Act with a view to enjoy either all or most of it for their own personal benefit and not for the benefit of the community at large. He was of the view that the main purpose of the creation of the trust is to save and protect the property of the authors from various enactments such as Urban Land Ceiling Act, Wealth Tax Act, Income Tax Act etc. Thus the apparent objects stated in the trust deed viz., education etc., though laudable on paper, they are not the real object for the creation and maintenance of the trust. Even assuming that incidentally some school was run, it was apparently a mere facade to get various benefits under the Income Tax, Wealth tax and Urban Land Ceiling Act. The way they have dealt with the property shows that even if it had been declared due to certain circumstances as a trust land, it was only being used for the benefit of the family. Therefore, the Commissioner was not satisfied that the trust exists genuinely for the purpose of the objects mentioned in the deed. The real activities are different from those stated in the deed and are not genuine. It was constituted primarily to serve the ulterior purpose of hoodwinking and by passing the provisions of the Urban Land Ceiling Act and to save taxes for the authors under the Income Tax and Wealth Tax Acts. Accordingly, the application came to be rejected. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. The Tribunal on a careful consideration of the entire material on record, on reappreciation of the same, after considering the rival contentions and also the law governing the same came to the conclusion that in the over all view of the activities of the assessee trust, as evidenced by the trust deed and also various other documents filed before them are genuine and the prominent object of the assessee trust i.e., education falls within the definition of charitable purpose in terms of Section 2(15) of the Act, as the assessee has shown by establishing an engineering college and running a school which is not disputed by the revenue. Once having been satisfied about the genuineness of the activities of the trust and its objects, it was of the view that the assessee trust needs to be registered in terms of Section 12A of the Act and therefore, they set aside the order of the Commissioner and allowed the appeal. Aggrieved by the said order passed by the Tribunal, the revenue is in appeal.

(3.) PER contra, the learned Counsel appearing for the assessee supported the impugned order.