Trust Registration can’t be rejected for authorisation to administer trust to 2 Trustees: Madras High Court [Read Judgment]

The Madras High Court ruled that the trust registration cannot be rejected for authorization to administer trust to 2 trustees.

The respondent, M/s.Angels Educational Trust is a Trust which came into being pursuant to a Deed of Trust registered as a Document on the file of the Sub Registrar, Mohanur. The Trust was founded by four Trustees with a corpus of Rs.501/- established for educational purposes and known as 'Angles Educational Trust'. The principle object of the Trust was to run educational or other institutions to provide, establish, maintain, run, develop and improve or assist in the establishment, maintenance, running, developing, and improving education; to institute and award scholarships to poor and deserving students and to assist them in any manner of their study, research or apprenticeship. There were other objects of the Trust, which were incidental and ancillary to the main object, viz., education. The first and second Trustees or their successors in office of the Board of Trustees were given full power and authority to administer the Trust, its properties and affairs and to do all acts, deeds, and things which were calculated to fulfil the objects of the Trust for which it was established.

The issue raised in this case was whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in setting aside the order of the Commissioner of Income Tax under Section 12 AA of the Income Tax Act and directing him to grant registration to the assessee Trust without appreciating the various issues raised in the order of the Commissioner of Income Tax pointing out the defects in the trust deed and also the systematic earning of a substantial surplus of income out of the gross receipts.

The division bench of Justice T.S. Sivagnanam and Justice Sathi Kumar Sukumara Kurup ruled that the assessee's institution was rightly regarded as an institution carrying on educational activity and in the absence of any material available with the appellant, the Tribunal was right in itself observing that there was nothing on record to show that the Teachers Training College has been established solely for making a profit.

“Excess of income over expenditure by itself is not a reason to hold that the assessee-Trust is not engaged in charitable activities. Furthermore, there was no finding that the Trustees had applied the monies of the Trust for their personal benefit or for any other purpose other than education. The infrastructure facilities, which were provided by the assessee-Trust were also rightly taken note of by the Tribunal,” the court said.

The court held that if in any particular assessment year if there was an error in the manner in which the funds of the Trust were administered, it would be open to the Assessing Officer to examine the case and decide as to whether the assessee-Trust was entitled to the benefit of Section 11 of the Act for a particular assessment year or not. The assessee-Trust was entitled to registration under Section 12AA of the Act.

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Commissioner of Income Tax vs M/s.Angels Educational Trust , 2021 TAXSCAN (HC) 571 , Mr.J.Narayanaswamy , Mr.R.Sivaraman