JUDGMENT
1. By this writ petition, the petitioners are challenging the order of the Commissioner of Income-tax, Meerut, dated March 17, 2006 (annexure 14 to this writ petition), purporting to have been passed under Section 154 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). By that order the Commissioner has cancelled the last two renewal orders dated January 2, 2002 and June 4, 2004, issued under Section 80G of the Income-tax Act, 1961, and has directed petitioner No. 1 (the assessee-trust) not to use the said renewals while accepting donations from the public and to clarify in writing that donations given to the said trust are not entitled to deduction under Section 80G.
2. The facts leading to the impugned order are that one Smt. Rajwati Bhatnagar (hereinafter referred to as the "settlor" of the trust), executed an unregistered trust deed dated March 15, 1991. A copy of the trust deed is enclosed as annexure 1 to this writ petition. By that document, a sum of Rs. 1,101 (rupees one thousand one hundred one only) was contributed and converted by the "settlor" into a public charitable trust described to be wholly for charitable purpose in India under the name and style of "Subharati Krishan Kumar Bhatnagar Charitable Trust". The objects mentioned in that trust deed are quoted below : "Objects:
(i) To promote and work for public welfare in all its dimensions, phase and aspects, in particular, to promote physical, mental, eternal, moral and ethical development of human beings, to propagate and circulate ideas by public lectures, demonstrations, publications, research, or in other manner whatsoever.
(ii) To establish, run, maintain and grant aids to hospitals, nursing homes, clinics, sanatoriums, maternity homes, dispensaries and other institutions of medical relief for general public.
(iii) To help the poor patients with blood, artificial limbs, other aids, medicines, food, nutrition and resettlement.
(iv) To establish, run, maintain or grant aid to the schools, colleges, pathshalas, hostels and other similar institutions imparting or facilitating education to boys and girls and also to provide facilities for the development and advancement of education and knowledge.
(v) To help poor or promising students in their studies by providing books, uniforms, meals, lodging and other necessaries or facilities and to provide stipends, scholarships, grants and aids for further studies.
(vi) To establish, arrange and maintain rest houses, public houses, poor houses, water huts or other public utilities for the benefit of the society.
(vii) To grant relief to the poor and distressed persons during and after natural calamities like famine, earthquakes, floods, draughts, etc.
(viii) To help indigent, poor and helpless families, individuals and persons.
(ix) To start community, recreational, health, devotional and other centres of general public utility and also to arrange and manage medical camps for any kind of diseases, for the benefit of the public.
(x) To assist in or to provide and create job or employment opportunities for the poor, handicapped and females.
(xi) To formulate plans, schemes and programme for rural development and execute the same for the welfare of the rural community.
(xii) To formulate and carry out schemes and programmes for the benefit of the society especially for the benefit of the poor and weaker sections of the society and to take up other public charitable objects.
3. With the aforesaid objects, this trust deed was got registered under Section 12A of the Income-tax Act, vide registration certificate dated November 15, 1991. After obtaining the registration as above, the assessee applied for issue of a certificate for exemption under Section 80G of the Act, which was granted to the assessee for the first time on August 25, 1994, for the period April 1, 1993 to March 31, 1997. The exemption was renewed on December 24, 1997, for the period April 1, 1997 to March 31, 2000; it was renewed again on December 20, 2000, for the period April 1, 2000 to March 31, 2001; it was renewed again on January 2, 2002, for the period April 1, 2001 to March 31, 2004, and the last renewal is dated June 4, 2004 for the period April 1, 2004 to March 31, 2007. These last two renewals dated January 2, 2002 and June 4, 2004, have been cancelled by the impugned order dated March 17, 2006.
4. The record indicates that after obtaining the first exemption under Section 80G vide certificate dated August 25, 1994. the "settlor" executed another trust deed dated August 17, 1995, a copy of which has been filed as anenxure 5 to this writ petition. By this second trust deed, which does not refer at all to the earlier trust created vide trust deed dated March 15, 1991, a new independent trust under the same name with a similar account of Rs. 1,101 was created. In this second trust, two new objects were included, which were not there in the objects of the earlier trust. These new objects are:
1. To establish, run ... medical, dental and nursing colleges ....
2. To open, run schools and hospitals and other institutions in villages and to provide the villages with basic needs and services.
5. It may be mentioned here that strong and vehement arguments have been advanced in an attempt to establish that the second trust deed of 1995 is merely a slight modification of the original trust of 1991. To meet the objections of this Court that after creating a trust the "settlor" is divested of the ownership of the corpus of the trust, which vests in the trustees and, therefore, the "settlor" loses the right of dealing with the trust property in any manner unless perhaps the trust deed itself permits such act on the part of the "settlor", reliance has been placed upon the decision of the Rajasthan High Court in the case of Laxminarain Lath Trust v. CIT . That decision says as follows:
... In the present case, the settlor was alive and he had indicated what his intention was in creating the trust by executing the supplementary deed. In our opinion, it was permissible for the settlor to clarify his intention in creating the trust under the original settlement deed by executing the supplementary deed and it cannot be said that the supplementary deed dated May 21, 1958, executed by the settlor must be ignored.
6. The said decision of the Rajasthan High Court is said to have been approved or referred to with approval or at least referred to without disapproval by the Supreme Court in the case of CIT v. Kamla Town Trust .
7. In our opinion, the said decision of the Rajasthan High Court does not apply at all in the present case because here the second trust deed of 1995 does not even refer to the first trust or the first trust deed of 1991 and, therefore, it cannot be said that the second document of 1995 is any kind of clarification of the first document of 1991. The fact that the name of the second trust is identical to the first trust or that the amount initially settled in the two trusts is equal does not make any difference whatsoever.
8. The only inference possible from the trust deed of 1995 is that a second trust of an equal amount of money, i.e., Rs. 1,101 was created by the "settlor" of the first trust into a second trust unlinked with the first trust except by similarity of name.
9. Coming back to the facts, it is not disputed that the second trust of 1995 was never registered under Section 12A of the Income-tax Act and no exemption was granted under Section 80G in respect of the second trust.
10. This second trust started running a medical college where huge donations running into crores of rupees were obtained by the trust. The Commissioner of Income-tax has written a very detailed and well reasoned order pointing out the undue advantage taken by similarity of names of the two trusts by misrepresenting that the exemption under Section 80G granted to the first trust was available for donations to the second trust.
11. We have heard learned Counsel for the petitioner at length and we are of the opinion that on the facts and circumstances detailed in the impugned order of the Commissioner of Income-tax and briefly summarised above by us, this is not a fit case for interfering with the Commissioner's order in our discretionary jurisdiction under Article 226 of the Constitution of India. The discretionary jurisdiction should not be utilised to perpetuate illegality, error or fraud.
12. An attempt was made from the petitioner's side to show with reference to Section 2(15) of the Income-tax Act that education can also be for "charitable purpose". We do not propose to enter into this question as the relevant facts as to whether the kind of education and the terms on which it is being imparted and the use to which the proceeds from such imparting of education are to be put by the trust need to be examined which according to us should be left to the authorities entitled to deal with facts and to arrive at conclusions of fact.
13. We, therefore, direct that if the petitioner applies under Section 12A for registration of the second trust created by the 1995 trust deed, the concerned authority will take a reasoned decision granting or refusing such registration within one month of the date on which such application is made along with a certified copy of this order.
14. We, further direct that if registration under Section 12A is granted to the 1995 trust, it will be open to that second trust to apply for exemption under Section 80G and, if such exemption is sought along with a certified copy of this order and after completing necessary formalities, the concerned authority will consider by a reasoned order within two months of the date when the petitioner has applied after completing the formalities whether to grant or refuse the exemption.
15. Learned Counsel for the petitioner has submitted relying upon Explanation 2 to Section 80G(5C) that the impugned cancellation order of the Commissioner should not affect the past donations, which may have been advanced to the trust relying upon renewals of exemption which have been cancelled by the impugned order.
16. This question does not arise at present in this case. It may be considered in the appropriate proceedings as and when this question arises and we decline to go into this issue.
17. It has also been urged from the petitioner's side that Section 154 of the Income-tax Act, under which the Commissioner of Income-tax has passed the impugned order does not authorise the passing of such cancellation orders. Reliance has been placed in support of this contention upon a decision of the Supreme Court in the case of T.S. Balaram, ITO v. Volkart Brothers . It is not necessary to go into this question in view of the finding recorded by the Commissioner of Income-tax in the impugned order with which we have already agreed because, as already stated above, the petitioner is before us in a discretionary jurisdiction, which we would not like to utilise for perpetuating the wrong.
18. The writ petition is thus disposed of with the aforesaid directions.