TaxTMI 
TaxTMI 
2025 (4) TMI 592
X X X X Extracts X X X X
X X X X Extracts X X X X
.... understand the legal recourse available to it and to file appeal after consulting the tax counsel. It has resulted in a marginal delay of 32 days in filing these appeals. Accordingly, it is stated that the delay is not intentional and accordingly prayed that the delay may kindly be condoned. 2.1. We heard the Ld.DR on this preliminary issue. Having regard to the submissions made in the affidavit, we are of the view that there was a reasonable cause for the assessee in filing both the appeals belatedly. Accordingly, we condone the delay in filing these appeals and admitted them for hearing. 3. The facts relating to the case are stated in brief. The assessee is a non-profit organization, incorporated u/s. 8 of the Companies Act, 2013 on 08-12-2023. The main objects of the assessee read as under: "Promote Indian heritage art such as Indian Classical music, Organize regular concerts and performances by renowned and emerging Indian classical musicians, Establish or support training school or institute to teach Indian classical music to students of all ages and skill levels, to Indian classical musicians to cover the costs of performance, travel, and recording, Organize f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see's submission is not sufficient and necessary compliance as per the provisions of section 12AB of the Income tax Act, 1961 is concerned. The words in the object: "Promote Indian heritage art such as Indian Classical music, Organize regular concerts and performances by renowned and emerging Indian classical musicians, Establish or support training school or institute to teach Indian classical music to students of all ages and skill levels to Indian classical musicians to cover the costs of performance, travel and recording, Organize festivals and conferences that bring together Indian Classical musicians and scholars from around the world." means the assessee intends to utilise the funds outside India while bringing musicians and scholars from outside India to participate in conferences and festivals organized by the assessee. Such objects leave room for any potential future endeavour may be undertaken by the assessee trust which would require expenditure outside India. Further, the assessee has not presented/submitted any documentary evidence/proof of passing the resolution regarding amendment in trust deed nor has it provided any proof that it has initiated the process for amen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich such income is applied to such purposes in India...". For the sake of convenience, section 11(1) is extracted below:- "11. Income from property held for charitable or religious purposes. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;" A careful perusal of the above said provisions would show that the entire income of a charitable trust or institution is not exempt automatically, as in the cases covered by sec.10 of the Act. The exemption of income is restricted "to the extent to which such income is applied to charitable purposes in India." Hence, if any portion of income is applied either for non-charitable purposes or applied o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion for a period of five years; or (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution." As per the scheme of the Act, the charitable trusts or institutions are initially given provisional registration for three years. Then they have to apply for permanent registration within the time prescribed in the Act. 5.2. In the instant case, clause (b) is applicable. As per the provisions of that section, the Ld CIT(E) has to satisfy himself with the following:- (a) Objects of the trust or institution (b) Genuineness of its Activities (c) Compliance of requirements under any other law as mentioned in clause (B) of clause (i) of Sec. 12AB(1)(b). In the instant case, the ld CIT(E) has cited two reasons for rejec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to be indulging in charitable activities. And for holding so he has referred to the provisions of section 11(1)(c) of the Act. 8. The primary argument of the assessee against the order of the Ld.CIT(E) is that for the purposes of granting registration only the conditions mentioned in section 12AA need to be fulfilled and the provisions of section 11(1)(c) are not relevant for the said purpose, being applicable only while determining the income entitled to exemption u/s 11 of the Act. That in any case carrying out charitable activities outside India was not the sole or main object but only incidental/ancillary object of the applicant assessee. 9. What is therefore to be decided is whether the law provides for any such geographical limitation in carrying out charitable activities for the purposes of recognising an entity as charitable and eligible for registration as such u/s 12A of the Act. We have gone through the provisions of the Act relating to charitable entities, relevant for adjudicating the issue before us, i.e section 11, 12, 12A,12AA & 2(15) of the Act. While section 2(15) defines charitable purposes, section 11 exempts incomes, derived from properties he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution." 10. As per section 12AA of the Act, the Commissioner, while considering the application of the trust/societies, has to satisfy himself regarding the genuineness of the obje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not in accordance with law. More particularly when, admittedly, this was not the sole and main object of the applicant assessee, but only its ancillary and incidental object. It is not the case therefore that there is to be no application of income within India at all as per the objects. In fact the main object of the applicant assessee involves carrying out charitable activities in India. In this factual situation, denying registration u/s 12AA of the Act, for the reason that its incidental object entailed application of income outside India, we find, would result in the assessee being denied exemption to income applied in India, which it would otherwise be entitled to under law. 14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities carried out in India will qualify as charitable for grant of registration, is only for the purpose of determining the income which qualifies for exemption u/s 11 of the Act. The said section comes into operation only once registration is granted u/s 12A of the Act and therefore cannot be relevant for the purpose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent, of the income from such property; . .. (b)****** (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India ; Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hes of the Tribunal in the case of National Informatics Centre Services Inc. (supra) ([2017] 88 taxmann.com 878 (Delhi)) 17. In view of the above, the order passed by the Ld. CIT(E) denying registration u/s 12A of the Act is set aside and the Ld.CIT(E) is directed to grant registration as applied for by the assessee. 18. In the result, the appeal of the assessee is allowed." 6. We may examine whether the ratio of above said decision would also apply to the applications processed by Ld CIT(E) under new provisions of sec.12AB of the Act. Under the provisions of sec.11 to 13 of the Act, which are applicable to charitable trusts or institution, two authorities are involved, viz., (a) the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or 12AB as the case may be. (b) the assessing officer is the authority who assesses the total income of the charitable trust or institution for every assessment year. 7. We shall examine the provisions of sec.12AB of the Act. The authority to grant registration u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have been prescribed for the process of registration ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant." (B) SECTION12AB 12AB. [Procedure for fresh registration.] [Ins. by the Act No. 38 of 2020, w.e.f. 1-4-2021.] (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,- (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or instit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall- (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nation, then the Ld CIT(E) shall not get power to cancel the registration. 12. In the present case, according to Ld CIT(E), the objects clause enables the assessee to apply its income outside India. According to Ld CIT(E), the same is not permitted under the Act and hence the registration provisionally granted to the assessee may be cancelled. We shall now examine as to whether the existence of objects for carrying out activities outside India or actual application of income outside India in accordance with its objects, would fall under any of the categories of "specified violations" listed out in the Explanation to sec. 12AB(4) of the Act or not. (i) Clause (a) would be attracted only if any income derived from the property held for charitable purpose is applied other than for the objects of the charitable trust or institution. Hence, so long as any income is applied for the objects of the charitable trust or institution, the clause (a) would not get attracted. Thus, if the objects clause of a charitable Trust or Institution permits carrying on objects outside India and if any income is applied for such objects, then it cannot be considered as application of income "fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t is pertinent to note that the verification by Ld CIT(E) should be restricted to compliance of those laws as are material for the purpose of achieving its objects. 12.1. It may be noticed that clauses (a),(c),(d) and (e) would be attracted only when there is application of income as mentioned in those clauses. Hence "actual application of income" is the condition to be satisfied for attracting the above said four clauses. 13. In our view, the provisions of sec.11(1) would not fall under the category of "any other law", since it is only a computation provision. The provisions of sec.11(1) do not require the charitable trust or institution to comply with any requirements, which are essential to achieve the objects of the trust. Further provisions of sec.11(1) do not state that the application of income derived from property held under trust for activities carried outside India results in violation of any law. Sec.11 only states that the exemption under that section is restricted to income applied for charitable purposes in India, i.e., it does not permit exemption of income applied outside India. Hence income, if any, applied for objects outside India cannot be construed to be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rehension entertained by him. 17. The second reasoning given by the assessee is that the expenses incurred by the assessee do not prove the activities carried on by it. In this regard, the Ld A.R submitted that the assessee has filed required documents before Ld CIT(E). He further submitted that the assessee has also furnished additional evidences relating to the activities carried on by the assessee. Accordingly, he prayed that these additional evidences may be admitted and the assessee may be provided with an opportunity to present all the details before Ld CIT(E) to prove the activities carried on by it. 17.1. We find merit in the prayer of the assessee. We notice that the observations made by Ld CIT(E) with regard to activities is general in nature, i.e., the Ld CIT(E) did not state the deficiencies noticed by him in the documents furnished by the assessee. Further, the assessee has furnished additional evidences in order to satisfy Ld CIT(E) with regard to the genuineness of activities. Accordingly, in the interest of natural justice, we admit the additional evidences furnished by the assessee. 18. Accordingly, we set aside the impugned order passed by Ld CIT(E) rejec....