1. Presentation on Trust Deeds
A project by Flying Kiwis

2. Agenda Introduction Governance of Trusts in India
Legislations applicable to Trust/ Trust deed
Registration procedures
Stamp duty implications
Other Concepts relating to Trust Deed
Frequently observed problems
Significant case laws
Draft Trust Deed

3. Introduction
Instrument by which a Trust is declared is called a Trust Deed
Aims, objects and mode of management are enshrined in a Trust Deed
Executed on a Non judicial stamp paper
It is a legally enforceable document
The Deed should be signed by the settlor(s) and the trustee(s)

4. Although preferable, a written Trust Deed is not a compulsion
Governance of a Trust
Trusts
Public Trusts
Private Trusts
Objectives = charitable or non charitable, religious or otherwise, etc.
Trust Deed
Although preferable, a written Trust Deed is not a compulsion

5. Is a Formal Trust Deed necessary ?
Radha Soami Satsung vs CIT
No formal document is necessary
However, for practical purposes, written document required when :
Trust created by Will
Private trust where immovable property exceeds Rs. 100/-

6. Benefits of a written Trust Deed
Prima facie evidence of existence of a trust
Facilitates devolution of trust property to the trust
Clearly specifies the objectives and duration
Registration of conveyance of immovable property in name of the Trust
Essential from point of view of claiming benefits under Income tax Act
Helps to control, regulate and manage the working and operations of the trust
Prescribes course of action during any other eventuality, like dissolution of the trust
Objectives = charitable or non charitable, religious or otherwise, etc.

7. Legislations applicable to Trust/ Trust Deed
Bombay Public Trust Act, 1950
Trusts in India
Indian Trust Act, 1982
Income Tax Act 1961
Objectives = charitable or non charitable, religious or otherwise, etc.
Foreign Contribution Regulation Act, 1976

8. Legislations applicable to Trust Deeds (contd)
Indian Trust Act, 1982
Formation of Trust under section 7 of the Act
Individuals, Body of individuals, a limited company or an HUF can also form a trust under this Act.
Private Trust are governed by Indian Trust Act, 1982

9. Legislations applicable to Trust Deeds (contd)
Bombay Public Trust Act, 1950
Public Trusts in the state of Maharashtra are governed by this Act.
Charity Commissioner has been given the powers of supervision, regulation and control of public trusts.

10. Legislations applicable to Trust Deeds (contd)
The definition of public trust includes a “Society” registered under Societies Registration Act therefore the society also gets the registration under Bombay Public Trust Act.
Charity Commissioner is the guardian of the trusts

11. Legislations applicable to Trust Deeds (contd)
Income Tax Act, 1961
A trust can claim exemptions under section 11 of this Act
Registration is also required for issuing tax deductible receipts to donors
Drafting of Objects of the Trust Deed is crucial to claim tax benefits

12. Registration Procedure under various legislations
Indian Trust Act, 1982
No specific registration process
Trust can be formed by any person competent to contract.
Objectives = charitable or non charitable, religious or otherwise, etc.

13. Registration Procedure under various legislations
Bombay Public Trust Act, 1950
Trustee to apply for registration to the Charity Commissioner of the region.
Application to be made in Form – Schedule II under rule 6 duly notarized along with court fee stamp of Rs. 2/-
Application is to be signed by the trustee or his agent
Certified copy of Trust Deed must be attached with the application
Memorandum in prescribed form relating to immovable properties to be submitted under the Indian Registration Act, 1908
Objectives = charitable or non charitable, religious or otherwise, etc.

14. Registration Procedure under various legislations
Income Tax Act, 1961
Registration u/s 12AA is required for Public trust to claim tax benefits and incentives
Application to be made to the Commissioner of Income Tax in the prescribed Form 10A in duplicate
List of names , addresses and PAN of trustees
Copy of Registration Certificate under BPT Act or Societies Registration Act
Objectives = charitable or non charitable, religious or otherwise, etc.

15. Registration Procedure under various legislations
Time limit for grant or refusal of registration is 6 months
On refusal Right of Appeal u/s 253(1)(c) of this Act is available within 60 days
No order received within prescribed time then application is deemed to have been accepted
Objectives = charitable or non charitable, religious or otherwise, etc.
No registration for Private Trusts required under Income Tax Act

16. Registration Procedure under various legislations
Foreign Contribution (Regulation) Act, 1976
Registration is required to receive foreign contributions.
Non-registration requires the trust to obtain prior permission from Central Government to receive such contribution.
Objectives = charitable or non charitable, religious or otherwise, etc.
Registration is preferable for receiving foreign contributions

17. Stamp Duty Implications
Trust deeds creating a trust otherwise than by way of will is chargeable to Stamp Duty
Under Indian Stamp Act, 1899 or as per State Stamp Act
Schedule I, Article 64 of the Indian Stamp Act, 1899
Schedule I, Article 61 of the Bombay Stamp Act, for state of Maharashtra
Objectives = charitable or non charitable, religious or otherwise, etc.
No stamp duty implications when Trust created by a Will

18. Stamp Duty Implications
Is there Disposition of Property
YES NO
Religious or Charitable purpose
Other Purpose
Objectives = charitable or non charitable, religious or otherwise, etc.
2% of Market value of property or amount settled
Rate applicable for executing a conveyance (Article 25)
1% of amount settled or market value subject to maximum of Rs. 200

19. Other Concepts relating to Trust Deed
Extinguishment of Trust
Revocation of Trust
Sale of Trust Property

20. Extinguishment of Trust
Trust is extinguished when :
Purpose of Trust is completed
Purpose of Trust becomes unlawful
Destruction of trust property
When trust is revocable and is expressly revoked
On extinguishment of trust the Trust Deed becomes redundant

21. Revocation of Trust The trust is revoked in the following situations:
All beneficiaries competent to contract consent for
Express power of revocation of author when exercised
Trust is for payment of debts of author of trust but has not been communicated to the creditors

22. Sale of Trust Property
Any sale or transfer of immovable property to be approved by Charity Commissioner (Section 36 of Bombay Public Trust Act)
If assets sold on revocation of a Public Trust the money goes to the Revenue Department

23. Amendment of Trust Deed
Amendment can be made by executing a rectification or supplementary deed
Amendment can be done if the terms and conditions are mentioned in the original deed
Case Law: Sakthi Charities
Separate deed to be executed and registered for amendment

24. Common Problems
Disputes may arise as to the very existence of the trust due to non execution and registration of the trust deed.
Controversy may be created in respect of devolution of trust property to the trust.
Wherein the objectives and duration are not clearly specified it may lead to unnecessary litigation and problems in the management of the trust.
Incorrect drafting of the objectives of the trust may lead to denial of tax incentives and benefits.(Sivakasi Case)
Inefficient drafting may lead to uncertainties in the course of action to be followed during unforeseen contingencies.

25. Baba Charan Dass Udhasi v Mahant Basant Das Babaji Chela Baba Laxmandas Udasi Sadhu, AIR 2000 SC 2610
it was held that the mode of managing a religious or charitable institution should be ascertained from the document or instrument by which it had been established.

26. Case Laws
Sakthi Charities vs. CIT (1984) [1984] 149 ITR 624/[1990] 182 ITR 483 (Mad.)
Founder or Court cannot delete objects originally spelt out
Original objects cannot be deleted even by the founder of trust, even though it is possible to add some other charitable objects without detriment to original objects.
CIT v. Sivakasi Hindu Nadars Uravinmurai [1996] 217 ITR 118/86 Taxman 290 (Mad.)
Dominant object should be charitable, and not profit-making.

27. Format
Here is a draft of the Trust Deed

28. References The main sources for the information are: www.karmyog.org

29. Thank You