$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% DECIDED ON: 04.03.2014
+ ITA 1359/2009
DIRECTOR OF INCOME TAX ..... Appellant
Through: Mr. Rohit Madan with
Mr. P. Roychoudhry and Mr. Akash Vajpai,
Advocates.
versus
THE GURU HARKISHAN MEDICAL TRUST
..... Respondent
Through: Ms. Rashmi Chopra, Advocate for
Committee.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)
1. This appeal under Section 260A of the Income Tax Act, 1961
("the Act"), is preferred by the revenue, against an order dated
20.11.2008 of the Income Tax Appellate Tribunal ("ITAT")
whereby the DIT (Exemption) was directed to grant registration
to the assessee under Section 12A of the Act. The ITAT held
that Section 24 (iv) of the Delhi Sikh Gurudwara Act, 1971
empowered the Delhi Sikh Gurudwara Management Committee
("the Committee") to constitute a trust for effecting one of its
aims and objectives, i.e. provision of medical treatment.
ITA 1359/2009 Page 1
2. The brief facts are that the Committee is constituted under the
Act; it had constructed a hospital at Gurudara Bala Saheb.
During the hospital's construction, the Committee's President
proposed, by a letter dated 4th May, 2006, that the hospital be
managed by an independent trust settled by the Committee,
whose trustees would be decided upon by the Committee itself.
The proposal was accepted, and accordingly, the Guru
Harkishen Medical Trust, the respondent herein ("the Trust"),
was created. A trust deed dated 3rd May, 2007, was drawn up,
by which the Committee was described as the settler. The Deed
also stated that the Committee was running a number of
charitable institutions, and that it was interested in establishing
a specialty hospital to provide medical services at affordable
rates. The Deed further stated that the trust is being established
to run and operate the hospital either by itself or in collaboration
with other organizations with experience and expertise in this
field. The deed also indicates that to fulfil these objectives, a
sum of Rs. 1 lakh had been settled to the trustees. The trust deed
further states that:
"to effectuate the said desire, the Settlor has made over
the said specialty hospital buildings being constructed at
Gurudwara Bala Sahib, New Delhi, to hold the same
together with all other properties that may be acquired
out of the same or otherwise and may hereinafter in
pursuance of the said desire and for carrying out such
desire into effect the Settlor doth hereby grant, transfer
and assign upto the trustees only the rights to manage
ITA 1359/2009 Page 2
said specialty hospital building along with all other
movables, such as plant, machinery, equipments, etc. and
to have and to hold the said specialty hospital unto the
trustees but upon and subject to the trust's powers and
provisions hereinafter declared and expressed of and
concerning the same."
3. Clause 8 states that the aims and objects of the trust are to do
welfare activities for the benefit of public at large, and more
specifically for economically poorer sections of the society,
physically challenged persons, persons suffering from any type
of physical or mental ailments, old age persons, economically
poor students or children in particular, without any profit
motive. Further, Clause 35 declares that none of the trust fund
or property or its income shall be applied for any other purpose
which is not consistent with the aims and objects of the Trust
and the provisions of the deed shall be construed accordingly.
The Trust, after its constitution, entered into a collaboration
agreement with Manipal Health Systems Pvt. Ltd., in terms of
which the hospital was to be run by the latter, with a certain part
of the revenue paid to the Trust.
4. The Trust filed an application in Form 10A, dated 7th July,
2007, seeking registration under Section 12A of the Act, which
exempted income earned by the trust. The DIT (Exemption)
rejected the application, on the ground that the Delhi Sikh
Gurudwara Act, 1971, especially Section 24, concerning the
powers of the Committee, did not empower the Committee to
create a trust. A show-cause notice was earlier issued to the
ITA 1359/2009 Page 3
appellant on this issue, and two replies dated 28th and 29th
January, 2008 were filed and disposed off by the DIT
(Exemption). Since the creation of the trust itself was contrary
to law, registration under Section 12A was denied. Section 24
reads as follows:
"24. Powers and functions of the Committee. Subject to
the provisions of this Act and the rules made thereunder,
the control, direction and general superintendence over
all the Gurdwaras and Gurdwara property in Delhi shall
vest in the Committee, and it shall be the duty of the
Committee-
(i) to arrange for the proper performance of the religious
rites and ceremonies in the Gurdwaras,
(ii) to provide facilities for worship by the devotees at the
Gurdwaras,
(iii) to ensure safe custody of its funds, movable and
immovable properties, deposits, offerings in cash or kind,
(iv) to do all such things as may be incidental and
conducive to the efficient management of the affairs of
Gurdwaras, educational and other institutions under the
Committee and their properties or to the convenience of
devotees,
(v) to provide suitable accommodation and facilities for
pilgrims,
(vi) to maintain free langars,
(vii) to manage the historic and other Gurdwaras,
educational and other institutions and their properties in
such a way as to make them inspiring centres of the Sikh
tradition, culture and religion,
(viii) to ensure maintenance of order, discipline and
proper hygienic conditions in Gurdwaras, educational
and other institutions under its management,
(ix) to open free dispensaries,
(x) to spread education, especially the knowledge of
Punjabi, in Gurmukhi script,
ITA 1359/2009 Page 4
(xi) to establish educational institutions, research centres
and libraries.
(xii) to render financial assistance to religious and
educational institutions, societies and needy persons,
(xiii) to give stipends to needy and deserving students,
(xiv) to render help in the case of the uplift of the Sikh
community and propagation of Sikh religion,
(xv) to perform such other functions and to do such
religious or charitable acts, as may be prescribed by
regulations for carrying out the purposes of this Act.
5. The Trust carried the matter in appeal to the Income Tax
Appellate Tribunal, which reversed the decision, and held that
the Committee did have such powers under sub-clause (iv) of
Section 24. The Revenue impugns this decision of the ITAT in
the present proceedings, arguing that the powers outlined in
Section 24 are specific and exhaustive, such that the creation of
a trust and transfer of property are not contemplated to lie
within the powers of the Committee, which as a creation of
statute cannot exceed the permissible limits.
6. Learned counsel for the Revenue has drawn the attention of the
Court to CS 252/2012 in the Patiala House Court, by which this
very issue concerning the legality of the Trust was agitated
and decided by a Civil Judge, holding that the establishment of
the trust was illegal and contrary to law. There is no dispute
today that if the creation of the Trust is held to be illegal, no
exemption can be granted under Section 12A. The dispute
between the parties before the ITAT concerned the question of
its legality vis-à-vis the powers of the Committee under Section
ITA 1359/2009 Page 5
24. Given this development, i.e. the issue concerning the
legality of the Trust having been deciding in a civil proceeding
instituted for that purpose, and a judgment in rem having been
delivered, this Court is of the opinion that the matter, as regards
the present proceedings, stands decided, subject to any further
appellate interference with the decision of the Civil Judge.
There is no mandate to question or re-appreciate the decision of
the Civil Judge in the present proceedings under the limited
domain of the appeal under the Income Tax Act, 1961.
7. Furthermore, even on an independent consideration of the facts
in this case, it is evident that the Committee is a creation of the
statute; its functions in the nature of obligations, or duties, are
outlined in Section 24 of the Act. The reliance placed by ITAT
on Section 24 (iv) of the Act, in this court's opinion, is
misplaced. That empowers the Committee to do all incidental
acts and things necessary to carry out the duties of the
Committee itself under section 24 (ix) one of the duties of such
committee is to establish and manage "free clinics"; Section 24
(xi) enables the maintenance of "research centres". Neither
Section 24 nor Section 40 (which empowers the Committee to
frame regulations) enables the Committee to efface their duties
and create other entities for carrying out their functions. Even
more importantly, such creations cannot do what Committees
are not permitted to perform, i.e utilize Committees' properties
or monies through the device of trusts and societies, to engage
in indirect commercial activity, - which the trust was authorized
ITA 1359/2009 Page 6
and created to indulge in the present case. As a consequence,
the ITAT clearly fell into error in holding that the Act permitted
the Committee to enter into the agreement which enabled it to
set up a joint venture for a hospital, on revenue sharing basis.
Clearly such trust was ultra vires the Committee's powers and
beyond its statutory mandate.
8. Accordingly, for the above reasons, this appeal has to succeed.
The order of the ITAT is hereby set aside, and the denial of
exemption under Section 12A by the DIT (Exemptions) is
restored. There shall be no order as to costs.
S. RAVINDRA BHAT, J
R.V.EASWAR, J
MARCH 04, 2014
ITA 1359/2009 Page 7
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