M/S. St. Dominic'S Convent English ... vs Assessee

1 ITA No.518/Coch/2014

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN

Before Shri N.R.S. Ganesan (JM) and Shri Chandra Poojari (AM)

I.T.A No. 518/Coch/2014 (Assessment year 2014-15)

M/s St. Dominic's Convent English vs CIT, Thrissur Medium School, Mukundapuram Taluk Vellani, Thrissur 680 701 PAN : AAJTS1502L (Appellant) (Respondent)

Appellant by : Shri N.R. Neelakantan Respondent by : Shri M Anil Kumar, CIT

Date of hearing : 10-02-2015 Date of pronouncement : 06-03-2015

ORDER

Per N.R.S. Ganesan (JM)

The assessee filed the present appeal challenging the correctness

of the order of the Administrative Commissioner dated 30-09-2014

rejecting the application for registration u/s 12AA of the Act.

2. Shri N.R. Neelakantan, the ld.representative for the assessee

submitted that the assessee trust has established and is running a school

affiliated to Central Board of Secondary Education. The assessee filed

application for registration before the Commissioner of Income-tax. 2 ITA No.518/Coch/2014

According to the ld.representative, The Administrative Commissioner

rejected the application of the assessee on two grounds - (1) the applicant

can transfer the asset to even a religious trust and that (ii) the lease deed

does not specify how the addition / alteration made by the assessee be

treated at the time of expiry of lease deed. According to the

ld.representative, u/s 12AA, the Commissioner of Income-tax can examine

only the object and activity of the trust and the lease deed and other things

cannot be examined at the time of grant of registration. Moreover, at the

time of dissolution of the trust, the asset of the trust can be transferred to

any similarly placed trust with similar object. Therefore, according to the

ld.representative, these two grounds raised by the Commissioner for

rejecting the application is not justified.

3. On the contrary, Shri M Anil Kumar, the ld.DR submitted that the

assessee trust is only conducting school in English medium. Other than

school, no charitable activity was carried on. At the end of the period, the

funds of the trust can be transferred to even a religious trust. According to

the ld.DR, the funds can be transferred only to trust which has similar

objects. Moreover, the lease deed does not disclose the ownership of the

investment made by the trust in the leasehold land after expiry of the

period. Therefore, according to the ld.DR, the Commissioner of Income-

tax has rightly rejected the claim of the assessee. The ld.DR placed 3 ITA No.518/Coch/2014

reliance on the judgment of the Kerala High Court in Dawn Educational

Charitable Trust vs CIT 300 of 2013dated 12-02-2014, copy of which is

filed by the ld.DR. The ld.DR has also placed reliance on the decision of

this Tribunal in M/s Travancore Education Society in ITA

No.134/Coch/2014 order dated 27-06-2014.

4. We have considered the rival submissions on either side and also

perused the material available on record. Admittedly, the asssessee has

established and is administering a school which is affiliated to CBSE.

Education itself is a charitable activity. Therefore, the assessee, in

pursuance of its object has established a school, which itself, is charitable

activity. The question arises for consideration is whether the assessee is

entitled for registration u/s 12AA of the Act? A bare reading of the trust

deed shows that the trust was established by a registered deed executed

by Rev.Sr.Tessy Kachappilly OP, the Superior General of the

Congregation of the Dominican Sisters of the Holy Trinity. Clause 24 of

the trust deed shows that in case of dissolution, if the Council feels to wind

up the trust, then the proposal has to been sent to the General Council of

the Congregation of the Dominican Sisters of the Holy Trinity for its

decision and action shall be taken according to its direction. It appears

that Congregation of the Dominican Sisters of the Holy Trinity is also a

registered trust u/s 12AA of the Act. Therefore, prima facie it appears that 4 ITA No.518/Coch/2014

the assessee has to run its affairs on the basis of the direction that may be

issued by Congregation of the Dominican Sisters of the Holy Trinity. A

trust being an artificial person has to carry out its obligation through its

trustees. The decision for running the administration has to be taken by

the trustees itself. However, in this case it appears that the ultimate

decision has to be approved by Congregation of the Dominican Sisters of

the Holy Trinity which is separate and independent trust. Therefore, there

is a confusion whether the present assessee is independent trust by itself

or it acts only as per the directions and management of the mother trust,

viz. Congregation of the Dominican Sisters of the Holy Trinity. This aspect

was not examined by the Commissioner of Income-tax. Moreover, at the

time of winding up the assets of the trust shall be transferred to a similarly

placed trust with similar objects. Clause 24 of the trust deed clearly says

that what is remaining after satisfying the liability of the trust shall be

transferred to any trust with similar or nearly similar aims and objectives of

the trust duly registered under the then prevailing laws and which function

under the control of the Congregation of the Dominican Sisters of the Holy

Trinity. This Tribunal is of the considered opinion that in view of this

clause, we have to examine whether the trust is an independent trust by

itself or it has to function on the terms dictated by Congregation of the

Dominican Sisters of the Holy Trinity. If the assessee trust is not

independent one and it has to function as per the terms dictated by 5 ITA No.518/Coch/2014

Congregation of the Dominican Sisters of the Holy Trinity then whether

such a trust can be considered to be a charitable trust within the meaning

of section 2(15) r.ws.s. 12AA of the Act? Since these matters have not

been considered by the Commissioner of Income-tax and the assessee

also has not explained the situation and circumstances under which it is

functioning. Therefore, this Tribunal is of the considered opinion that the

Commissioner has to consider this issue afresh. Accordingly, the order of

the Commissioner is set aside and the remitted to his file. The

Commissioner shall re-examine the issue and thereafter decide the same

in accordance with law after considering all the issues and providing

opportunity of hearing to the assessee.

5. In the result, appeal of the assessee is allowed for statistical

purpose.

Order pronounced in the open court on this 06th March, 2015.

Sd/- sd/- (Chandra Poojari) (N.R.S. Ganesan) ACCOUNTANT MEMBER JUDICIAL MEMBER th Cochin, Dt : 06 March, 2015 pk/- copy to:

1. M/s St. Dominic's Convent English Medium School, Mukundapuram Taluk, Vellani, Thrissur 680 701

2. The CIT, Thrissur

3. The DR (True copy) By order

Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench