Tribunal directs registration under Section 12AA, emphasizes compliance with Sections 11 & 12

The Tribunal directed the DIT to grant registration under Section 12AA, emphasizing compliance with Sections 11 and 12 during assessment. Both appeals were allowed, with the second appeal being deemed academic due to the decision in the first appeal. The DIT's refusal was based on extraneous considerations, and the inclusion of foreign nationals as trustees was deemed permissible as long as activities and benefits remained within India. The order was pronounced on 10th August 2016.

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Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act.
2. Assessment of the genuineness of the trust’s activities and objects.
3. Trust’s activities outside India.
4. Clauses in the Trust Deed regarding irrevocability and dissolution.
5. Number of trustees and clarity in the Trust Deed.
6. Inclusion of foreign nationals as trustees.

Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The assessee filed applications for registration under Section 12AA, which were rejected by the Director of Income Tax (Exemptions) on 29-11-2012 and 28-08-2014. The primary issue in both appeals is the rejection of registration under Section 12AA.

2. Assessment of the Genuineness of the Trust’s Activities and Objects:
The DIT did not object to the objects of the trust but questioned the genuineness of its activities. The Tribunal noted that Section 12AA requires the DIT to call for documents or information to satisfy himself about the genuineness of the activities and objects of the trust. Since there was no adverse comment about the charitable nature of the trust's objects, the Tribunal presumed no objection from the DIT on this matter.

3. Trust’s Activities Outside India:
The DIT raised concerns about the trust intending to carry out activities outside India. The Tribunal referenced the Hon'ble Delhi High Court's decision in M.K. Nambyar Saarc Law Charitable Trust Vs. Union of India [269 ITR 556], which clarified that the application of income outside India is not a valid ground for refusing registration. The Tribunal also cited the Co-ordinate Bench decision in Manhatten Foundation Vs. CIT (Exemptions), which supported the view that registration cannot be denied solely because the trust's activities might extend outside India.

4. Clauses in the Trust Deed Regarding Irrevocability and Dissolution:
The DIT found an anomaly in the Trust Deed, noting that it was stated to be irrevocable under Clause-7, while Clause-37 allowed trustees to dissolve the trust. The Tribunal clarified that irrevocability applies to the creator of the trust, while trustees can dissolve the trust if they cannot administer it as per its objects. These clauses operate independently and should not be grounds for rejecting registration.

5. Number of Trustees and Clarity in the Trust Deed:
The DIT pointed out inconsistencies regarding the number of trustees, with Clause-14 specifying a minimum of two and a maximum of 12 trustees, while Clause-15 allowed for up to 18 trustees. The Tribunal found no confusion, stating that the power to increase the number of trustees is clear and does not affect the trust's genuineness.

6. Inclusion of Foreign Nationals as Trustees:
The DIT objected to the inclusion of ex-officio members of the German Consulate as trustees, suggesting it compromised the trust's independence. The Tribunal found no legal restriction against foreign nationals being trustees, provided the trust's activities and benefits are within India.

Conclusion:
The Tribunal concluded that the DIT had taken extraneous considerations into account in refusing registration. The Tribunal directed the DIT to grant registration under Section 12AA, emphasizing that the Assessing Officer could examine compliance with Sections 11 and 12 during assessment. Both appeals by the assessee were allowed, with the second appeal considered academic in nature due to the decision in the first appeal.

Order Pronounced:
The order was pronounced in court on 10th August 2016.

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