Trust registration

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Bhavin Kanabar (Querist)
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28 June 2011

I want to know about full proccedure about trust registration till the income tax exemption certificate.

Bhavin Kanabar

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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28 June 2011 TRUSTS FORMATION
Requisites of a trust –
Four essential conditions are necessary to bring into being a valid trust (Section 6).
They are:-
1. Clear intention of the author/settler to create a trust.
2. Purpose of the Trust must be clearly specified.
3. The Trust property must be indicated.
4. Beneficiaries of the Trust.
X bequeaths certain property to Y, requesting him to distribute it among such members of Z’s family as Y should think most deserving. This does not create a trust, for the beneficiaries are not indicated with reasonable certainty.
X bequeaths certain property to Y, desiring him to divide the bulk of it among Z’s children. This does not create a trust, for the trust-property is not indicated with sufficient certainty.
Subject of trust.-
The subject-matter of a trust must be property transferable to the beneficiary. A property which cannot be transferred to the beneficiary cannot be given in a trust. It must not be merely beneficial interest under a subsisting trust. (Section 8)
In the case of J.K. Trust vs. CIT (1957) 32 ITR 535 (S.C.), the Supreme Court had held that the word " property" under the Trusts Act is of the widest import and a business undertaking will undoubtedly be a property so that a running business can be made a subject matter of trust. This view has been followed in the case of in CIT vs. P. Krishna Warriar (1964) 53 ITR 176 (SC).
Trust of immovable property:-
A trust can be created by deed, will or even word of mouth. However, trust of immovable property can be created only by non-testamentary instrument signed by author of trust and is registered, or by will of the author. [Section 5]
Trust of movable property: -
A trust of movable property can be created by the ways mentioned as in the case of trust of immovable property or by transferring the ownership of the property to the trustee. (Section 5)
Lawful purpose: -
According to Section 4, a trust can be created for any lawful purpose. Every trust of which the purpose is unlawful is void. A trust is said to be lawful if its purpose is not:-
(a) forbidden by law, or
(b) is of such a nature that, if permitted, it would defeat the provisions of any law,
(c) is fraudulent, or
(d) involves or implies injury to the person or property of another, or
(e) the Court regards it as immoral or opposed to public policy.
Where a trust is created for two purposes, of which one is lawful and the other unlawful and the two purposes cannot be separated, the whole trust is void. For example: - X bequeaths property to Y in trust to employ it in carrying on a smuggling business, and out of the profits thereof to support X's children. The trust is void.
Acceptance of trust: -
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. (Section 10)
Disclaimer of trust: -
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 of two or 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 (Section 10). For Example: - X transfers certain property to Y in trust to sell it and to pay out of the proceeds X's debts. Y accepts the trust and sells the property. So far as regards Y, a trust of the proceeds is created for X's creditors.

FOR MORE INFO:-
http://www.karmayog.org/startanngo/startanngo_10607.htm

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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