TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 84
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.... ITA No.1165/MUM/2025 (A.Y. 2025 -26) 1. Under the facts and in law, the learned CIT(E) - Income Tax Department (hereinafter referred to as 'CIT(E)'), erred in passing an order u/s 12AB by rejecting the application of registration made by filing Form 10AB. 1.1 Under the facts and in law, the learned CIT(E) erred in questioning the objects of the trust and genuineness of activities of the trust solely on the basis of misinterpreting certain clauses mentioned in the Trust Deed which intends that the appellant can apply funds outside India. 1.2 Under the facts and in circumstances, the Learned CIT(E) failed to consider the fact that the appellant has mentioned in the trust deed vide page No. 3 that the areas of operation of the trust would be within the boundaries of India. 1.3 Under the facts and in law, the learned CIT(E) has erred in rejecting the application for registration of Trust on the presumption that the funds may be utilized outside India due to the general objects mentioned in the Trust Deed. This presumption is misplaced as it is contrary to the established legal principle that decisions must be based on actual conduct and not ....
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....reasonable opportunity to the appellant to justify about the object of the appellant and genuineness of the activities of the appellant. 3. The assessee Trust('Applicant') filed an application in Form 10AB u/s 12A(1)(ac)(iii) seeking registration under section 12AB of the Act. According to the order passed by the ld.CIT(E), the relevant procedural mandate is governed by the provisions of Rule 17A of the IT Rules, which is titled "Application for registration of charitable or religious trusts, etc." The sub rule (2) of Rule 17A mandates that the application in Form 10AB is to be accompanied by certain specific documents mentioned in Rule 11AA(2), it was noted by him from various clauses of the trust deed/MOA, being the objects of trust deed/MOA, the applicant intended to apply fund outside India. He observed that these objects were in violation of section 11 of the Act. In response to the query made in this regard, the applicant stated as under: "Trust deed dated 24.05.2023 which contains various clauses from 1 to 27 & total pages are 40. Trust deed has stated before providing the main objects and incidental objects as Boundaries, Limits and area of Operation which is re....
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....lling fellowships in any branch of Science or art or learning assisting students to study abroad either by payment of a lumpsum or by payment of periodical sums or "Trust shall establish, maintain and control institutions in India and elsewhere for the above object...." Or "To conduct and/or arrange foreign tours of the deserving candidates "clearly conveyed that it intended to utilise the funds outside India. Such objects left room for any potential future endeavour may be undertaken by the assessee trust which would require expenditure outside India. According to him, the applicant trust ought to have amended the clauses of the objects mentioned above which are in violation of the Act as discussed above, however, the applicant has not considered it. The assessee had 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 amendment in trust deed/MOA before the competent authority. It is further stated that Registration under section 12AB is to be granted in terms of the provisions of section 12AB(1)(b) of the Act after being satisfied about the objects of ....
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....ion outside India in future endeavours although we find that the applicant has categorically stated in the deed that all its activities as also the beneficiaries would be confined to the boundaries of the country only. Relevant parts provide that "Trust deed dated 24.05.2023 which contains various clauses from 1 to 27 & total pages are 40. Trust deed has stated before providing the main objects and incidental objects as Boundaries, Limits and area of Operation which is reproduced herewith. Clause No 3 on page no 6 of 40 of Trust deed dated 24.5 2023 which is reproduced herewith: "Area of Operation State that The Trust Shall Operate within the Boundaries of India" So the settlor and Trustees have already agreed and decided that trust operation will be WITHIN BOUNDERIES OF INDIA. Hence It clearly says and means that • All activities or benefits will be within India, • End user or beneficiaries will be within India, • Any help or benefits will be for persons or human being staying in India • Any medical camp help, any education help to students/education institute or Relief of poverty for persons or institu....
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....ed in section 11(1)(c), subject to being approved by the Board. 12. As is evident from the above, in the scheme of the Act, incomes applied outside India for charitable purposes are not completely and categorically ruled out from being eligible for grant exemption. 13. The Ld. Pr. CIT's order, in the present case, therefore denying registration to the applicant assessee merely for the reason that its objects included application of income outside India, we hold, is 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. Furth....
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.... of this admission that the activities will be extended outside India as per the objects laid down, it was held that the registration cannot be granted under section 12A of the Act and the approval of exemption under section 80G also cannot be granted. Section 11 of the Act refers to income from property held for charitable or religious purposes. The relevant provisions are reproduced hereunder: "11. (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; . .. (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 we....
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....page 32 which is based on irrelevant criteria is quashed and set aside with a direction to consider the application strictly in accordance with law. It is made that even application under section 80G is required to be considered afresh. It is directed that the application shall be disposed of within a period of four weeks by the Commissioner. 16. The aforesaid decision of the Hon'ble Delhi High Court has been followed by the Coordinate Benches 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 CI....
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....the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and] (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-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 w....
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....f sec.12AB(4) reads as under:- "(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,-- (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; 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....
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.... the registration granted u/s 12AB of the Act. The expression „specified violation‟ is defined in the Explanation. It can be noticed that the said definition is not an "inclusive definition", since it starts the expression "For the purposes of this sub-section, the following shall mean "specified violation"". Hence, it is an exhaustive definition. Consequently, if there is any violation other than those stated in the Explanation, 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 ....
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....f the Act, which reads as under:- "(B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects". The Ld CIT(E) has to ensure that the charitable trust or institution has complied with the requirement of „any other law for the time being in force‟, as are material for the purpose of achieving its objects. Here, it 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....
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....l musicians and scholars from around the world, i.e., it talks about mobilizing the Indian classical musicians and scholars, wherever they are located. It nowhere states that the income of the charitable trust or institution shall be applied outside India. Even if it is applied outside India, then the assessee, subject to sec. 11(c) of the Act, would not get exemption of the income so applied u/s 11 of the Act. Hence the Ld CIT(E) was not justified in rejecting the application of the on apprehension 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 ob....
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.... that as per the Trust deed one of the object clauses categorically stated "To provide support and other such developmental services to other organisations in India and outside India in the social sector" which clearly showed its intentions to carry on activities outside the country which is not the case here. Moreover, the applicant therein was amenable to modifying the Trust deed on the issue of activities outside the country for which the tribunal accorded liberty in this regard. 8.2 Respectfully following the above decision, we set aside the order passed by the ld.CIT(E) and direct him to allow registration to the applicant Trust. As a result, the grounds raised by the assessee are allowed. 9. ITA No.1164/MUM/2025 (A.Y. 2025 -26) 1. Under the facts and in law, the learned CIT(E) - Income Tax Department (hereinafter referred to as 'CIT(E)'), erred in denying the recognition of the trust under section 80G on the grounds of rejecting the application for registration u/s 12AB,as per the order issued u/s 12AB dated 23.12.2024. 1.1 Under the facts and in law, the learned CIT(E) erred in questioning the objects of the trust and genuineness of activities o....