The Charitable and Religious Trust

The basic purpose behind formation of trust in India is largely to manage the religious as well as personal property and also to offer charitable services especially to economically deprived sections of the society. Its legal framework in India identifies some specific activities including providing food, education, medical relief, and other such facilities to the people largely living in slum area or deprived life. In addition to this, it also works towards the preservation of monuments and environment, and the advancement of any other work of general public utility" exclusively with charitable purposes. The financial activities of a trust are exempted from the payment of tax. Besides, the person who donates his/her share or income to trust also get the benefit of tax exemption. Hence, to regulate such trusts and their activities, the charitable and religious trust act passed in 1920.

What does Charitable and Religious Trust Act Define?

To effectively govern and oversee charitable and religious institutions, the Charitable and Religious Trusts Act was enacted in 1920. The Act's main purpose was to collect data about the charity and religious organisations established for the public benefit and to make it easier for the trustees to request court orders for matters relating to those organisations.

Furthermore, a "trust" is a duty attached to property ownership that results from faith placed in the owner and accepted by him, or one he declares and accepts on behalf of another, or of another and the owner, as stated in Section 3 of the Indian Trusts Act. The "author of the trust" is the individual who expresses or asserts the confidence. The term "trustee" refers to the individual who accepts the confidence. The term "beneficiary" refers to the individual for whose benefit the confidence is accepted.

Overview

The Charitable and Religious Trusts Act, which was passed in 1920 to effectively govern and oversee charitable and religious institutions. The Act's main goals were to collect data on the charitable and religious organizations established for the public's benefit and to make it easier for the trustees to request court orders for matters relating to those organizations. The Act also proposes to provide specific clauses to cover the costs of the legal actions taken against the trustees.

To get an order regarding any of the following subjects, individuals affiliated with religious or benevolent organizations established for the benefit of the public must file a petition in the court −

• The trustee will receive order from the court to provide the relevant paperwork, which will include information on the trust's nature, purpose, terms of value, administration, subject matter, and income.

• For a period longer than three years, the direction must also relate to the audit and scrutiny of the accounts.

The relationship between the petitioner and the trust, as well as the specifics of the audit for which he is asking for guidance, must be included. The petition must be signed by the petitioner and be in writing. In accordance with the Civil Procedure Code, the petitioner must confirm the petition. When a petition is brought before the court, the judge must hear testimony and make the necessary inquiries to determine whether the trust falls under the current Act's jurisdiction and whether the petitioner is related to the trust. The trustee and other people associated with the trust will receive a copy of the notice with the date of the hearing if the court is satisfied with the problems and declares a date for the hearing. The court will carry out the proceedings, listen to the petitioner and the trustee, and make any necessary inquiries that it deems to be crucial. The trustee will also have a chance to submit a written statement through the Criminal Procedure Code, as required by the court.

When the trustee files a lawsuit to claim that the trust does not exist and that the Act does not apply to the trust that the petition is filed against, the court must order a stay of the proceedings. The Court must provide the necessary orders or dismiss the petition when the proper steps have been taken. The Court lacks the authority to resolve any title disputes between the petitioner and anyone else who asserts a title that is unfavourable to the trust. The failure to abide by the court's orders is regarded as a breach of trust, for which a lawsuit must be filed in line with the Civil Procedure Code.

According to the Act, the trustee is allowed to file a petition to ask the Court for advice or instruction on how to manage and oversee the trust effectively. However, if the court determines that the case is not appropriate for summary disposition, the court is not required to offer counsel. Only under the conditions specified by the Act may a court petition be filed.

Public Trust and Charitable Trust

Trusts for public charities are exempted from paying income taxes. The Income Tax Act's Sections 11, 12, and 13 discuss tax exemptions granted to public charitable trusts. Section 80G applies to the benefits provided to contributors to public charity trusts.

• The Income Tax Act's Section 11 outlines the conditions for public charitable trusts' exemption from income tax.

• A voluntary contribution received by a trust established exclusively for charity or religious purposes or by an organisation created exclusively for such purposes is referenced in Section 12 as a contribution of trust income.

• The Income Tax Act's Section 13 addresses the forfeiture of a public charitable trust's income tax exemption.

The Courts' authority to determine the expenses of certain lawsuits brought against trustees of charitable and religious trusts.

The court presiding over any case brought under section 14 of the Religious Endowments Act of 1863 (20 of 1863) or section 92 of the Code of Civil Procedure of 1908 (5 of 1908) may, on the plaintiff's request, after hearing from the defendant and conducting any necessary inquiries, if the court determines that such an order is necessary and in the public interest, direct the defendant to either provide security for any costs the plaintiff has incurred or will likely incur in starting and maintaining the lawsuit, or to deposit from any funds in his possession as trustee of the trust that the lawsuit relates, the amount that the court determines to be sufficient to cover such costs in full or in part.

Petition Costs (As per this Act)

Under the aforementioned provisions of this Act, the Court shall have the discretion to determine the costs, charges, and expenses related to any petition and all related proceedings. The Court may order that all or a portion of any such costs, charges, and expenses be covered by the property or income of the trust that is the subject of the petition, or to be paid in any other manner and by any person that it deems appropriate.

As long as the individual (other than the petitioner) has not received notice of the petition and had a reasonable opportunity to be heard on it, no such order may be granted against them.

Conclusion

The Charitable and Religious Trust Act was legislated in 1920 with the purpose to regulate the formation of trusts and their related activities. The Act defines and guides all provisions related to charitable and religious trusts and also defines the procedure in case any dispute arises during the course of action.

Frequently Asked Questions

Q. What do you understand by Charitable trust?

The trust established with the purpose to offer charitable service socio−economically deprived people without any charge or self−interest kept under the category of charitable trust. All the financial transactions of such trust are tax exempted, means no need to pay tax.

Q. Who runs a charitable trust?

As per the agreement, charitable trust is run by a few people known as trustees. There are other members that support trustees in performing their duties.

Q. What are the main objectives of the charitable and religious trust act?

The two main objectives of the Act were to make it simpler for the trustees to get court orders for matters relating to such organisations and to gather information on the charity and religious organisations formed for the benefit of the public. The Act also suggests adding specific provisions to pay for the trustees' legal defence expenses.