Sections 12A and 12AA(3)– Charitable purpose – Registration of trust – Cancellation of registration – Grounds for – Difference between objects of trust and management of trust – No change in objects of trust – Amendment in respect of appointment of chief trustee and manner of managing the trust – Not ground for cancelling registration of trust

12. CIT(Exemption) vs. Sadguru
Narendra Maharaj Sansthan; 407 ITR 12 (Bom):

Date of order: 28^th
February, 2018

Sections 12A and 12AA(3)– Charitable purpose – Registration of
trust – Cancellation of registration – Grounds for – Difference between objects
of trust and management of trust – No change in objects of trust – Amendment in
respect of appointment of chief trustee and manner of managing the trust – Not
ground for cancelling registration of trust

The assessee-trust amended its
trust deed. The Commissioner recorded that the amendment to the trust deed
devised a system by which the chief trustee would alone define his heir for the
post of the chief trustee and “adhishtata” and that the heir could not
take part in the management of the trust during the lifetime of the chief
trustee. The Commissioner exercised his power u/s. 12AA(3) of the Income tax
Act, 1961 (hereinafter for the sake of brevity referred to as the
“Act”) and cancelled the registration of the assessee on the ground
that the amendment violated the provisions of section 13(1)(c).

The Tribunal held that the
Commissioner had not appreciated the difference between the objects of the
trust and the powers/management of the trust; the amendment of the trust deed
dealt with the powers of the management of the trust rather than the objects of
the trust. The Tribunal set aside the order of the Commissioner cancelling the
registration of the trust. 

On appeal by the Revenue, the
Bombay High Court upheld the decision of the Tribunal and held as under:

“i)    The
cancellation of registration u/s. 12AA(3) is only in two contingencies, one the
activities of the trust not being genuine or the activities of the trust not
being carried out in accordance with its objects.

ii)    Cancellation
of the registration of the assessee-trust was not justified. The cancellation
was not on above two grounds. Section 13 applied while applying section 11. It
was in the domain of the Assessing Officer during the assessment proceedings
and not a basis for cancellation of registration.

iii)    Besides, the amendment of the trust deed not being in the spirit
of charitable trust, could not be the basis of cancellation u/s. 12AA(3). The
term “spirit of a charitable trust” was not defined in the Act nor elaborated
in the order of the Commissioner. The amendment made in the trust deed did not
suggest any change or addition to the objects of the trust. It was only in
respect of the appointment of the chief trustee and the manner of managing the
trust. The Tribunal rightly held that the Commissioner had focused on change in
the future management of the trust rather than the objects of the trust to
cancel the registration. The appeal is dismissed.”