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of <h1>Order set aside rejecting registration under s.12AB due to object clause conflict; directed grant and 80G approval</h1> ITAT set aside the CIT(E) order rejecting registration under s.12AB, finding the rejection was based solely on an object clause suggesting activities ... Rejection of registration application u/s 12AB - Existence of any object clause for carrying out any activity outside India - HELD THAT:- As per Dedhia Music Foundation [2025 (4) TMI 592 - ITAT MUMBAI] we find that in the impugned order as well the CIT(E) rejected the application for registration u/s 12AB on similar object clause in existence in the application. The case law is squarely applicable to the facts of the case as here also the ld.CIT( E) has rejected the application for registration solely on account of intended activity outside the country. He failed to take note of the various clauses of the deed the applicant has repeatedly in several parts therein has categorically repeated its entire activity as also the beneficiaries situated within the boundaries of the country only. We set aside the order passed by the ld.CIT(E) and direct him to allow registration to the applicant Trust. As we have already set aside the order u/s 12AB of the Act and directed the CIT to allow the registration, consequently, the rejection of the application u/s 80G is also set aside with a direction to the CIT to allow the same. Appeals by the assessee are allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether registration under section 12AB can be rejected merely because the trust deed contains object clauses permitting application of funds or activities outside India. 2. Whether the power under section 12AB (and by parity section 12AA) to register or cancel registration permits rejection or cancellation on the basis of geographical ambit of objects when no actual application of income outside India has occurred. 3. Whether section 11(1)/11(1)(c) (relating to exemption of income applied in India or outside India) can be invoked as a ground to refuse registration under section 12AB. 4. Whether existence of general/ancillary clauses in the trust deed, without concrete evidence of expenditure or activities outside India, justifies denial of registration or 80G recognition for failure of genuineness of activities. 5. Whether additional evidence tendered by the applicant should be admitted and the matter remitted for fresh consideration with opportunity of hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Rejection of registration under section 12AB solely because object clauses permit activities outside India Legal framework: Section 12AB prescribes procedure for registration (including calling for documents, satisfying about genuineness of objects/activities and granting or rejecting registration). Section 11(1) limits exemption to income applied for charitable purposes in India; section 11(1)(c) contemplates exemption for certain applications outside India subject to Board direction. Precedent Treatment: The Tribunal follows the ratio of judicial authority holding that application of income outside India is not a relevant criterion for denying registration under section 12A/12AA, and that officer must confine to examining objects and genuineness of activities (decision applied to 12AB by analogy). Interpretation and reasoning: The tribunal analysed text of sections 12AA and 12AB and observed that neither section conditions registration upon geographic limits of objects. Section 11 is a computation/exemption provision, not a compliance precondition for registration. Registration is concerned with objects and genuineness; exemption (section 11) is applied at assessment. The Explanation to section 12AB(4) enumerates specified violations that justify cancellation; application of income outside India is not among them unless it amounts to one of the defined violations (e.g., income applied other than for stated objects, non-genuine activity, non-compliance with other law etc.). Hence mere inclusion of power to act outside India in object clauses does not amount to a specified violation or a ground for refusal of registration under section 12AB. Ratio vs. Obiter: Ratio - registration under section 12AB cannot be refused solely on account of object clauses permitting application of income outside India; section 11's geographical restriction pertains to exemption computation, not to registration eligibility. Obiter - observations on scope of certain subsidiary clauses and illustrations drawn from object language. Conclusions: The authority erred in rejecting registration merely because some object clauses permitted activities outside India; such clauses (especially ancillary/incidental ones) do not ipso facto disqualify registration and, if income is actually applied outside India, exemption consequences arise under section 11(1)(c) and not as a bar to registration. Issue 2 - Applicability of earlier precedents/ratio under section 12AA to section 12AB Legal framework: Section 12AB replaced/updated procedure formerly under section 12AA. Registration/cancellation powers and the requirement of satisfaction about objects and genuineness remain central. Precedent Treatment: The tribunal treated earlier decisions under section 12AA (and High Court authority) as applicable by parity to section 12AB because provisions dealing with registration/cancellation and the tests to be applied are substantially similar and the Explanation to section 12AB(4) does not include geographical limitation as a specified violation. Interpretation and reasoning: Comparing texts of 12AA and 12AB, the tribunal found congruence in the officer's duty to satisfy himself about genuineness and objects. The definition of 'specified violation' under section 12AB(4) is exhaustive and does not include mere power to act outside India. Therefore the ratio from 12AA jurisprudence is transferable to 12AB cases. Ratio vs. Obiter: Ratio - precedents under section 12AA which hold that application of income outside India is not a ground to deny registration apply to section 12AB as well. Conclusions: The tribunal applied the existing precedent to hold that the earlier ratio governs decision-making under section 12AB. Issue 3 - Whether section 11(1)/11(1)(c) can be invoked to deny registration Legal framework: Section 11 deals with exemption of income derived from property held for charitable purposes when applied to such purposes in India; clause (c) deals with certain applications outside India subject to Board direction. Precedent Treatment: Followed precedent holding section 11 is for computing exemption, not for determining registration. The officer's satisfaction under registration provisions is distinct from assessment under section 11. Interpretation and reasoning: The tribunal emphasized that section 11 is a computation provision and does not constitute 'any other law' whose non-compliance would attract clause (f) of section 12AB(4) (which relates to compliance with laws material to achieving objects). Section 11 does not render application of income outside India illegal; it only restricts exemption. Thus invoking section 11 to refuse registration conflates registration eligibility with exemption limits. Ratio vs. Obiter: Ratio - section 11/11(1)(c) cannot be used as a ground to refuse registration under section 12AB; its relevance arises at assessment for computing exempt income. Conclusions: The CIT(E)'s reliance on section 11 to deny registration was misplaced. Issue 4 - Sufficiency of general/ancillary clauses and absence of past overseas expenditure as a basis to deny genuineness/registration Legal framework: Registration requires satisfaction about genuineness of activities; section 12AB(1)(b) permits making inquiries and calling for documents; natural justice requires opportunity to explain/document activities. Precedent Treatment: The tribunal admitted additional evidence and required that deficiencies, if any, be specified and remedied before adverse action; followed principle that decisions must be based on material and not conjecture. Interpretation and reasoning: Where the trust deed repeatedly and explicitly confines operations and beneficiaries to India, incidental clauses referring to collaboration, travel or engagement with persons outside India do not demonstrate intent to apply income abroad. Absence of actual foreign expenditure weighs against presuming future violation. Further, the CIT(E)'s observations regarding insufficiency of expenses were general and lacked particularised deficiencies; natural justice required permitting tender of additional evidence and remand for fresh consideration. Ratio vs. Obiter: Ratio - denial of registration on hypothetical or speculative apprehension of future foreign application of income is not justified; when officer alleges insufficiency of supporting evidence, he must identify specific deficiencies and afford an opportunity to remedy; additional evidence may be admitted and case remitted. Obiter - comments on interpretation of various object clauses in the instant deed. Conclusions: The authority's second ground (insufficient activities/expenses) was inadequately reasoned; additional evidence should be admitted and application reconsidered after providing reasonable opportunity of hearing. Issue 5 - Consequential treatment of 80G recognition where 12AB registration was rejected Legal framework: Recognition under section 80G is contingent on registration and satisfaction about objects/genuineness; refusal of registration was the primary basis for rejecting 80G recognition. Precedent Treatment: Following corrective order on registration, the tribunal set aside 80G rejection and remitted it for fresh disposal in light of the directions on 12AB. Interpretation and reasoning: Since registry decision under 12AB was vitiated, the attendant refusal of 80G which rested on that decision could not stand; both matters should be re-examined afresh with opportunity to be heard and admissible additional evidence. Ratio vs. Obiter: Ratio - where registration order is quashed and remitted for fresh consideration, consequent 80G recognition denial premised solely on the defective registration order must also be set aside and reconsidered. Conclusions: The 80G rejection is set aside and remitted for fresh consideration after grant/processing of registration in accordance with law and principles of natural justice. Overall Disposition The tribunal concluded that rejection of registration under section 12AB on the sole ground that object clauses permit activities outside India is legally unsustainable; earlier ratios under section 12AA are applicable by parity to section 12AB; section 11 is not a freestanding compliance ground for registration; additional evidence should be admitted and both registration under section 12AB and recognition under section 80G remitted for fresh consideration with reasonable opportunity of hearing.
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