IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “D” NEW DELHI

BEFORE SHRI G.D. AGRAWAL, PRESIDENT

&
SHRI AMIT SHUKLA, JUDICIAL MEMBER

I.T.A. No.6291/DEL/2015

Global Academy of Emergency vs. CIT(Exemption),

Medicine, New Delhi.
401, Prabhat Kiran, 17
Rajendra Place, New Delhi.
TAN/PAN: AABTG9513D
(Appellant) (Respondent)

Appellant by: Shri Rajeev Bansal, CA

Respondent by: Shri Vijay Verma, CIT-DR
Date of hearing: 14 06 2018
Date of pronouncement: 14 09 2018

ORDER

PER AMIT SHUKLA, J.M.:

The aforesaid appeal has been filed by the assessee

against the impugned order dated 28.02.2015 passed by Ld.
CIT (Exemption), New Delhi u/s.12AA. In the grounds of
appeal, the assessee has raised the following grounds:-

“1. That the learned Commissioner of Income Tax (Exemptions) New

Delhi has erred both on facts and in law while rejecting application for
grant of registration u/s 12AA and exemption u/s 80G of the Income
Tax Act to the Trust.

2. That proper and meaningful opportunity was not provided to the

trust while framing order of rejection of application for grant of
registration to the trust u/s 12AA of the Act. Thus, the order framed is
unjustified illegal and void.”
 I.T.A. No.6291/DEL/2015 2

2. The applicant-assessee is a Trust which was formed vide

Trust deed dated 8th March 2013, by a Settler, Shri Satish
Kumar in favour of five trustees. The main objects of the
Trust as given in the deed are as under: -

Main objects of the Trust are:

In furtherance, but not in limitation, of the foregoing charitable and
educational purposes, the Trust shall:

(1) be dedicated to promoting and improving emergency medicine and

care on a global basis through advocacy, training, and education of
physicians and allied health care personnel internationally;
(2) alone or in cooperation with other foundations, institutions,
associations and other organizations, conduct any and all activities
and do any and all acts and things which may be necessary, useful,
suitable or proper in connection with or for the furtherance,
accomplishment or attainment of such charitable and educational
purposes as are lawful for a Trust formed under the Indian laws;
(3) to solicit, collect, accept, hold, invest, reinvest and administer
any gifts, grants, bequests, devises, benefits of trusts and property of
any sort, without limitation as to value or amount, for such Charitable
Purposes, and make grants and contributions of income and principal
as the Board of Trustees may from time to time determine, to
international, national and community-based foundations,
institutions, associations and other organizations organized for the
same or similar purposes;
(4) to borrow money or contract debts and mortgage, pledge,
convey, assign in trust or otherwise encumber or dispose of, the
property or other assets of the Trust;
(5) to purchase, lease or otherwise acquire, to own, hold, use,
operate, manage, improve, repair, maintain, control, to sell, assign,
transfer, convey, exchange, lease or otherwise dispose of, to mortgage
or otherwise encumber, real property, whether improved or
 I.T.A. No.6291/DEL/2015 3

unimproved, or structures, buildings, or other improvements thereon,

and to construct, improve, alter or remove structures, buildings or
other improvements upon real property.
(6) To construct and run schools, colleges, and educational
institutions for the benefit of the public at large.
(7) To provide grants, scholarships, fellowships and other forms of
financial assistance to the needy and deserving students for pursuing
education, vocational training, skill development etc.
(8) To grant financial assistance to any educational institution for
granting scholarships, prizes, medals, awards for excellence in
studies, sports and scientific research, distribution of books and note
books for poor and or deserving students.
(9) To provide necessary facilities or to contribute to educational
and scientific research development In any place as the trust finds
deemed fit.
(10) To carry out any activities with the intention of service but not of
any profit making.
(11) To print, publish, purchase, sell, circulate, distribute or exhibit
either free or for a price - books, periodicals, journals, booklets,
bulletins, calendars, message-cards, other literature, films,
documentaries, records, paintings and photographs which will assist
or promote the objects of the Trust.
(12) To purchase, sell or otherwise distribute materials and
services in the furtherance of the objectives of the Trust.
(13) To arrange and organize lectures, debates, discussions, study
tours, conferences, or radio-talks for the advancement of the objects of
the Trust.
(14) To organize and run residential educational program.
(15) To establish Training Centres and allied educational
institutions.
(16) Raise funds through donations and contributions to support all
the above activities, and setting up appropriate management
 I.T.A. No.6291/DEL/2015 4

structure, including subsidiary units as necessary.

(17) Create assets and transport facilities to accommodate any of
the above activities.

3. The Trust was stated to be established for the benefit of

humanity at large and class of people mentioned above
without discrimination of caste, religion, creed or sex. Looking
to its objects which was charitable in nature, trust has
applied for registration u/s.12AA before the ld. CIT(E) vide
application dated 26.03.2015 and also application for
exemption u/s.80G.

4. Ld. CIT (E) on the perusal of the Trust deed noted that
there were five initial trustees, and all were Non-Resident
Indian, i.e., who have taken the citizenship of the foreign
country. According to ld. CIT (E) in terms of Explanation-1 to
Section 60 and Section 73 of the “The Indian Trust Act” a
non-resident cannot be a trustee of an Indian resident trust
unless he is domiciled in India. Based on this reasoning, he
has rejected the assessee’s application for grant of registration
u/s.12AA and application for exemption u/s.80G. The
relevant observation of the ld. CIT(E) reads as under:

“3. In this connection, it is pertinent to mention that Explanation

1 to 60 of the Indian Trusts Act provides, inter alia, that a person
domiciled abroad or an alien enemy, i.e. a person not
domiciled/resident in India or a person belonging to a state which is
at war with India, are not proper persons to be trustees and they are
not permitted to be trustees of Indian resident trusts. Indian Courts
have held that a non- resident cannot be a trustee of an Indian
 I.T.A. No.6291/DEL/2015 5

resident trust unless he is domiciled in India. The rationale behind

this is that the trustee at all times must be within the reach of Indian
courts in order to ensure the enforcement of the terms of the trust.
However, if an Indian trust does not have a resident trustee, then a
court application would have to be made in order to invalidate the
trust.

3.1. Section 73 of the Indian Trusts Act provides that where a person
appointed as a trustee is absent for a continuous period of six
months, leaves India for a continuous period of six months, or leaves
India for the purpose of residing abroad, a new trustee may be
appointed in his place by a person nominated in the trust document
for that purpose, if any and in the absence of such person, by the
settler of the trust, if alive and competent to contract or the
surviving/continuing trustee , if any, or the retiring trustee himself
with the consent of the court. Also under the Indian exchange control
regime, it is not possible for a trust holding immovable property to
have a non-resident trustee.

4. It is mentioned that satisfaction of the Commissioner of

Income Tax regarding genuineness of the activities of the
organisation seeking registration u/s.12AA is one of the essential
conditions for grant of registration u/s 12AA. Both these
requirements are cumulative and not alternative. In view of the
discussion in the preceding paras and the fact that the five applicant
trustees are foreign citizens/national, and non-residents, I am
unable to satisfy myself about the structure of the applicant trust
which is a condition precedent for grant of registration so that it can
be held to be for charitable purpose.”

4.1 Thus, the entire premise for rejecting the assessee’s

application was that the applicant-assessee cannot be held to
be a valid Trust under the Indian Trust Act, 1882.
 I.T.A. No.6291/DEL/2015 6

5. Before us, ld. counsel for the assessee submitted that

the constitution of the trustees was substituted before filing of
‘Form-10A’ seeking registration u/s.12A, wherein one, Mr.
Milakh Raj Arora who was ordinary resident of India was
residing in Ludhiana, Punjab on permanent basis and has
replaced by one of the non-Indian trustees. The list of the
trustees was also enclosed along with copy of ‘Form 10A’ filed
before the ld. CIT (E) duly signed by Mr. Milakh Raj Arora.
Thus, he submitted that Explanation-1 to Section 60 of the
Indian Trust Act does not apply in the present case, as one of
the trustees is ordinary resident and Indian citizen. He
further submitted that Section 12AA requires that ld. CIT(E)
has to satisfy himself about the objects which should be in
the nature of ‘charitable purposes’ and also about the
genuineness of the activities of the Trust. There is no adverse
finding or opinion of the ld. CIT(E) on the objects, therefore,
registration cannot be cancelled. In support, he strongly relied
upon the decision of ITAT Jaipur Bench in the case of Sidha
Sthan Shri Kapleshwar Mahadev Sanyas Ashram Trust
vs. CIT(E), ITA Nos.655 & 656/JP/2017 dated 28th
September 2007, (2018) 162 DTR (JP) (Trib) 202. He
further submitted that all the other trustees otherwise were
basically from Indian origin and their parents were staying in
India and due to their professional activities they were settled
abroad. Thus, trustees who are well reputed and famed
doctors are doing genuine work for imparting education in
modern medicine and medical science and educating the
 I.T.A. No.6291/DEL/2015 7

doctors in global standards in medical fields and medicine. He

also pointed out that Pondicherry Government has given
grant to the assessee Trust looking to its noble cause. Thus,
not only it is a valid Trust but also its objects were charitable
and hence registration u/s.12A should be granted.

6. On the other hand, learned CIT-DR relied upon the order

of the ld. CIT(E) and submitted that all the trustees were
NRIs; and in terms of Sections 60 and 73 of the ‘Indian Trust
Act, 1882’, they cannot be held to be as proper
persons/trustees for the purpose of Indian Trust Act. He
further submitted that out of the 4 trustees three of them are
citizens of America which is evident from passports appearing
in the paper book and other is Australian. Thus, there is no
question of grant of registration u/s.12A.

7. We have heard the rival submissions and also perused

the relevant findings given in the impugned orders as well as
material referred to before us. The sole reason for denying the
registration u/s.12AA by the ld. CIT (E) is that the trustees
are the non-resident and therefore, under the provisions of
‘Indian Trust Act, 1882’ they cannot be held to be a valid
trustee; and when the trust and its structure itself is not
proper, therefore, the condition precedent for grant of
registration is not fulfilled.

8. We will first examine the relevant provisions of the

‘Indian Trust Act, 1882’. First of all, Section 10 of the Indian
 I.T.A. No.6291/DEL/2015 8

Trust Act provides for who can be the trustees. The relevant
section reads as under: -

“10. Every person capable of holding property may be a trustee;

but, where the trust involves the exercise of discretion, he cannot
execute it unless he is competent to contract.
No one is bound to accept a trust.
A trust is accepted by any words or acts of the trustee indicating
with reasonable certainty such acceptance.
Instead of accepting a trust, the intended trustee may within a
reasonable period, disclaim it, and such disclaimer shall prevent
the trust property from vesting in him.
A disclaimer by one or two more co-trustees vests the trust-property
in the other or others and makes him or them sole trustee or
trustees from the date of the creation of the trust.

Illustrations
(a) A bequeaths certain property to B and C, his executors, as
trustees for D.B. and C Prove A’s will. This is in itself an
acceptance of the trust, and B and C hold the property in trust
for D.
(b) A transfers certain property to B in trust to sell it and to pay out
of the proceeds A’s debts. B accepts the trust and sells the
property. So far as regards B, a trust of the proceeds is created
for A’s creditors.
(c) A bequeaths a lakh of rupees to B upon certain trusts and
appoints him his executors. B serves the lakh from the general
assets and appropriates it to the specific purpose. This is an
acceptance of the trust.”

8.1 The aforesaid section clearly provides that every

person capable of holding property may be a trustee, but
where trust involves the exercise of discretion, he (trustee)
 I.T.A. No.6291/DEL/2015 9

cannot execute it unless he is competent to contract. Thus, a

person who may be trustee must be capable of holding a
property of which the Trust is declared and must be
competent to deal with the property as required by the Trust
or as directed by the beneficiaries. The Ld. CIT (E) in his order
has also mentioned that under the Indian exchange control
regime, it is not possible for a trust holding immovable
property to have a non-resident trustee. However, he is not
specified under which Indian control regime there is such a
bar. On the contrary, provision of Section 6(5) of FEMA 1999,
a person resident outside India can hold, own, transfer or
invest in Indian currency, security or any immovable property
situated in India, if such currency, security or property was
acquired, held or owned by such person when he was resident
in India or inherited from a person who was resident in India.
Thus, there is no specific bar under Section 10 of the Trust
Act for an appointment of NRI as trustee of an Indian Trust.

8.2 However, certain restriction of appointment of NRI as

trustee has been given in the Act, for example Section 73
which provides as under: -

73. Whenever any person appointed a trustee disclaims, or any

trustee, either original or substituted, dies, or is for a continuous
period of six months, absent from India or leaves India for the
purpose of residing abroad, or is declared an insolvent, or desires
to be discharged from the trust, or refuses or becomes, in the
opinion of a principal Civil Court of original jurisdiction, unfit or
personally incapable to act in the trust, or accepts an inconsistent
trust, a new trustee may be appointed in his place by—
 I.T.A. No.6291/DEL/2015 10

(a) the person nominated for that purpose by the instrument of trust
(if any), or
(b) if there be no such person, or no such person able and willing to
act, the author of the trust if he be alive and competent to contract,
or the surviving or continuing trustees or trustee for the time being,
or legal representative of the last surviving and continuing trustee,
or (with the consent of the Court) the retiring trustees, if they all
retire simultaneously, or (with the like consent) the last retiring
trustee.
Every such appointment shall be by writing under the hand of the
person making it.
On an appointment of a new trustee, the number of trustees may be
increased.
The Official Trustee may, with his consent and by the order of the
Court, be appointed under this section, in any case in which only
one trustee is to be appointed and such trustee is to be the sole
trustee.
The provisions of this section relative to a trustee who is dead
include the case of a person nominated trustee in a will, but dying
before the testator, and those relative to a continuing trustee
include a refusing or retiring trustee if willing to act in the execution
of the power.”

Section 73 thus, deals with the appointment of a new trustee

on death, or is absent from India for the period of more than 6
months or domiciled outside India, etc. This section merely
provides that a new trustee may be unfit to be appointed in
case the said person is domiciled abroad for a period of six
months continuously; or leaves India for the purpose of
residing abroad, etc. In such a case, it is considered that
there is a personal incapacity to act in a Trust by such
 I.T.A. No.6291/DEL/2015 11

person. This inter-alia means that he is considered to be unfit

for the office of the trustee and the said section presume that
vacancy has occurred and the provision authorizes the
appointment of a new trustee in his/her place. This provision
also does not forbid the appointment of NRI, albeit acts as an
impediment to their appointment. Section 73 per se cannot
invalidate a Trust, but rather provides bar for appointment of
non-resident as a trustee.

8.3 Similarly, Section 60 r.w.s. Explanation-1 of the Indian

Trust Act reads as under: -

“60. The beneficiary has a right (subject to the provisions of the

instrument of trust) that the trust property shall be properly
protected and held and administered by proper persons and by a
proper number of such persons.
Explanation I—The following are not proper persons within the
meaning of this section:—
A person domiciled abroad; an alien enemy; a person having an
interest inconsistent with that of the beneficiary; a person in
insolvent circumstances; and, unless the personal law of the
beneficiary allows otherwise, a married woman and a minor.”

The aforesaid section provides that beneficiary has a

right to proper trustees. This section is based on a principle
that the trust whose property depends for its continuance
upon the faith and integrity of the trustee should be allowed
for all practical means to secure himself against the
occurrence of any act of misconduct. The first of the right of a
beneficiary securing himself against the occurrence of any act
 I.T.A. No.6291/DEL/2015 12

of misconduct is his right to have the custody and

administration of the estate confided to the care of proper
persons. The ‘proper persons’ have been defined whereby a
person domicile abroad, etc. have been held to be not a
proper person. This section provides for removal of the trustee
by the beneficiary of the trust if he is not a proper person as
given in Explanation-I. However, this section again does not in
any way impose restriction on the author as he may very well
appoint a person who is considered not proper under this Act.
Beneficiary may first choose to have not a ‘proper person’ as
long as the condition precedent in Section 10 is not violated.
This section only provides a right of the beneficiary to have
proper trustees, but it does not impinge upon the validity of
the Trust and nowhere the Indian Trust Act provides that if
the trustee is not a ‘proper person’, then the entire Trust can
be declared as invalid.

9. In our humble opinion, provisions of Section 60 and

73 of the ‘Indian Trust Act, 1882’ as relied upon by the ld.
CIT(E) to hold that assessee Trust is not a valid Trust, and
therefore, cannot be granted registration u/s.12AA cannot be
held to be a valid reason. As pointed out by the learned
counsel before the ld. CIT (E) in the application filed in ‘Form
10A’, assessee-applicant Trust has already given the list of
the trustees and one of the trustee was citizen of India and
domiciled in India, and therefore, it cannot be held that
simply because other four trustees were non-resident and the
 I.T.A. No.6291/DEL/2015 13

assessee trust is not a valid trust. We accordingly, hold that

assessee is a valid trust under the Indian Trust Act, 1882.

10. Now coming to the ‘objects’ as given in the ‘Trust

Deed’, prima facie, it appears that all the objects are
ostensibly for the charitable purposes. However, the ld. CIT(E)
has not examined the objects and the genuineness of the
activities of the assessee trust which is required to be
examined while considering the registration u/s 12AA, and
therefore, in all fitness of mater, we deem it proper that this
matter of registration should be restored back to the file of the
ld. CIT(E) who shall examine the ‘objects’ of the Trust as well
as genuineness of its activities; and if the assessee trust’s
‘objects’ are charitable and is actually carrying out charitable
activities for the benefit of public at large, then registration
u/s.12AA should be granted. Consequently, the application
for exemption u/s.80G should also be examined in that light.
With this direction, appeal of the assessee is treated as
allowed for statistical purpose.

11. In the result, the appeal of the assessee is allowed for

statistical purposes.

Order pronounced in the open Court on 14th September, 2018.

Sd/- Sd/-
[G.D. AGRAWAL] [AMIT SHUKLA]
PRESIDENT JUDICIAL MEMBER

DATED: 14th September, 2018

PKK: