GRAMEEN PRAGATI FOUNDATION ,MUMBAI vs. COMMISSIONER OF INCOME TAX (EXEMPTION), MUMBAI

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ITA 4840/MUM/2025Status: DisposedITAT Mumbai27 October 20259 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the delay in filing Form 10AB was on account of bonafide reasons, specifically the serious illness and cancer treatment of a trustee, Mrs. Neeta Neralla, and therefore, the delay ought to have been condoned. The Tribunal also noted that the assessee was already registered under the old regime, and the delay in filing the application for regular registration deserved to be condoned. Regarding the issue of applying funds 'Outside India', the Tribunal referred to the decision in Dedhia Music Foundation (supra) and held that the mere mention of 'Outside India' in the objects clause does not constitute a "specified violation" under section 12AB(4) that would warrant rejection or cancellation of registration. The Tribunal found that the objects clause, as interpreted by the CIT(E), was not justified, and even if funds were applied outside India, exemption under section 11 would not be available for such application, but this does not lead to rejection of registration. The Tribunal admitted additional evidence furnished by the assessee concerning its activities. Consequently, the impugned order of the CIT(E) rejecting the application for registration under section 12AB and recognition under section 80G was set aside, and the matters were restored to the CIT(E) for fresh consideration.

What were the facts?

The assessee, Grameen Pragati Foundation, filed an appeal against the order of the Commissioner of Income-tax (Exemptions), Mumbai (CIT(E)), dated 25.06.2025, which rejected its application for registration under section 12A of the Income Tax Act, 1961. The assessee was initially granted registration under section 12A on 17.09.2020. Following the introduction of a new regime, it applied afresh and received provisional registration on 02.10.2021, valid till AY 2024-25. The assessee failed to apply for regular registration by the due date of 30.09.2024, filing Form 10AB approximately two months late due to the serious illness of a managing trustee. The CIT(E) rejected the application on grounds of delay and alleged violation of section 11 due to the objects mentioning application of funds 'Outside India'.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the CIT(E) erred in rejecting the application for registration under section 12AB on the grounds that the appellant had not satisfied the conditions prescribed for approval, failed to make the application in Form 10AB within the prescribed time, and its objects violated section 11 of the Act. Assessee's contentions: - The delay in filing Form 10AB was a venial and technical breach, and condonation should have been granted due to the genuine medical reasons of a trustee (Mrs. Neeta Neralla, suffering from cancer). - No funds were applied outside India, and the mere mention of 'Outside India' in the objects clause of the Trust deed is not a ground for rejection, relying on the decision in Dedhia Music Foundation vs. CIT (Exemption). Revenue's contentions: - As per applicable provisions, the application for registration had to be filed within 6 months of provisional registration, and the CIT(E) rightly rejected the belated application as there was no reasonable cause for the delay of over two years.

Which sections of the Income-tax Act were involved?

Section 12A,Section 12AB,Section 11,Section 12A(1)(ac)(iii),Section 11(1),Section 11(c),Section 12AB(4),Section 80G

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Before: SHRI PAWAN SINGH & SMT.RENU JAUHRI

For Appellant: Shri Rajiv Khandelwal, CA
For Respondent: Shri Swapnil Choudhary- Sr. AR
Hearing: 30.09.2025Pronounced: 27.10.2025

This appeal by the assessee is preferred against the order of the CIT(Exemptions), Mumbai dated 25.06.2025 vide which the CIT(E) rejected the application for grant of registration u/s. 12A of the Act.

2.

The grounds of appeal are as followed: “The following grounds of appeal are independent of, and without prejudice to, one another:

P a g e | 2 ITA NO. 4840/mum/2025.

1.

The Commissioner of Income-tax (Exemptions), Mumbai (hereinafter referred to as the CIT(E)) erred in rejecting the application for registration under section 12AB on the following grounds: (a) that the appellants have not satisfied the conditions prescribed for approval under the said section. (b) that the appellants failed to make the said application in Form no 10AB within the time prescribed under section 12A(1)(ac)(iii) of the Act. (c) that the objects of the appellant-trust violate the provisions of section 11 of the Act. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(E) ought not to have rejected the application for registration inasmuch as he has not correctly appreciated the facts of the case in its entirety and hence, the action of the CIT(E) needs to be reversed. The appellants further, contend that on the facts and in the circumstances of the case and in law, the CIT(E) ought not to have rejected the application on the ground of delay inasmuch as delay in furnishing of Form no 10AB is merely a venial and technical breach of law and the same ought not to be a reason to reject the application of the appellants and hence, the action of the CIT(E) needs to be reversed. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(E) ought not to have rejected the application for registration inasmuch as the appellants have not applied any funds outside India in violation of the provisions of section 11 of the Act and hence, the action of the CIT(E) needs to be reversed. The appellants crave leave to add to, alter or amend the aforestated ground of appeal.”

3.

Brief fact of the case are that the assessee trust had originally applied for registration u/s. 12A on 04.10.2019 in Form 10A and was granted registration vide order dated 17.09.2020. Subsequently, on introduction of the new regime by the Finance Act, 2020, the assessee applied afresh for registration in prescribed form. However, inadvertently, it selected subclause (vi) instead of (i) under clause (ac) of section 12A(1) while submitting the online application, and therefore, provisional registration was granted to the assessee vide Form 10AC issued on 02.10.2021. This registration was valid till A.Y. 2024-25.

P a g e | 3 ITA NO. 4840/mum/2025.

The assessee could not apply for regular registration on or before 30.09.2024 due to serious illness of one of the managing trustees, Mrs. Neeta Neralla because of which the application in Form 10AB was filed after a delay of 2 months.

3.2 Ld. CIT(E) rejected the assessee’s application on two grounds: i. Delay in filing of Form 10AB of more than 2 years as the application was required to be filed within 6 months of obtaining provisional registration as the assessee was already carrying out charitable activities at the time of obtaining provisional registration and no reasonable cause could be established for the delay. ii. The activities of the assessee were in violation of section 11 of the Act as it intended to apply the funds ‘Outside India’, as mentioned in the Objects of the assessee.

3.3 Against the order of rejection dated 25.06.2025 issued by CIT(E) in Form 10AD, the assessee has filed an appeal before the Tribunal.

4.

Before us ld. AR has submitted that Mrs. Neeta Dewang Neralla, trustee and w/o Mr. Dewang Neralla, the main trustee, was suffering from cancer and undergoing treatment for the same during 2023-24. Under these circumstances, the application was filed belatedly and condonation of delay ought to have been allowed by ld. CIT(E) considering the genuine medical reason explained by the assessee.

P a g e | 4 ITA NO. 4840/mum/2025.

Ld. AR has also placed on record, the medical papers evidencing the diagnosis and treatment of Mrs. Neeta Dewang Neralla.

4.2 Further, with regard to the alleged violation of conditions of section 11, ld. AR has argued that no funds were applied ‘Outside India’ by the assessee. Mere mention of the phrase ‘Outside India’ in different clauses of the MOA Trust deed is not a ground for rejection of registration.

For this proposition, ld. AR has placed reliance on various decisions of the co-ordinate benches. Specifically in the case of Dedhia Music Foundation vs. CIT (Exemption) in and 744/MUM/2025 this issue has been exhaustively discussed and decided in favour of the assessee by the co-ordinate bench.

5.

On the other hand, ld. DR placed reliance on the order of Ld. CIT(E) and pointed out that as per the applicable provisions, application for registration had to be filed within 6 months of provisional registration as the activities of the assessee had already commenced. Accordingly, ld. CIT(E) rightly rejected the belated application as there was no reasonable cause for the delay of more than two years.

6.

We have heard the rival submissions and perused the material placed on record. On the issue of delay, the ld. AR has placed on record, requisite documentary evidence showing that the trustee Mrs. Neeta Neralla w/o the main trustee Mr. Dewang Neralla was going through cancer treatment during the relevant period. Accordingly, we are of the view that the delay was on account of bonafide reasons and ought to have been condoned.

P a g e | 5 ITA NO. 4840/mum/2025.

As regards the due date of filing of application and consequent calculation of period of delay involved, it is noted that the assessee was already registered under the old regime. As such there was no requirement for it to obtain provisional registration and regular registration should have been granted by the Revenue on the application filed in 2021. Seen in backdrop of these facts, we are of the view that the delay in filing of application deserves to be condoned.

6.2 As regards the second issue of intended application of funds ‘Outside India’, we note that this issue has been decided in favour of the assessee by the co-ordinate benches in several cases, following the decision in Dedhia Music Foundation (supra). The relevant portion of this decision is reproduced below:

11. It can be noticed from the provisions of sec. 12AB(4) of the Act, the registration already granted either provisionally or permanently may be cancelled by Ld CIT(E), if he is satisfied that one or more specified violations have taken place. If he is not satisfied so, he may refuse to cancel 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 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 P a g e | 6 ITA NO. 4840/mum/2025.

such objects, then it cannot be considered asapplication of income "for objects other than the objects of the charitable trust or institution" falling within the meaning of clause (o). Consequently, the clause (d) would not be attracted. (ii)Clause (b) would be attracted only if any business or profession is carried on and there is violation as mentioned therein. This clause will not be attracted for application of income for permitted objects outside India. iii) Clause (c) would be attracted when income of trust held for private religious purposes is applied for those purposes, which does not ensure for the benefit of public. The assessee herein is not a trust held for private religious purposes and hence this clause will not apply to the assessee herein. (iv) Clause (d) would be attracted when income of the trust is applied for particular religious will also not apply to the assessee herein. (v) Clause (e) would be attracted when any activity being carried out by the trust or institution- (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered.

This clause would be attracted when the activities of the charitable trust or institution is not genuine or in violation of any of the conditions subject to which the registration u/s 12AB was granted. In the instant case, the Ld CIT(E) has stated the activities claimed to have been carried on is not supported by the expenses incurred. According to Ld A.R, the above said observations are against the facts available on record. Hence the above said observations of Ld CIT(E) is dealt with separately infra.

(vi) Clause (f) would be attracted when there is failure to comply with the requirements of "any other law" Under this clause "any other law" would mean any law other than Income tax Act. This meaning can be understood from the Sub-clause (B) of clause (1) of sec. 12AB(1)(b) of 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.

P a g e | 7 ITA NO. 4840/mum/2025.

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 violation of 'any other law' falling within the meaning of clause (f) of Explanation to sec. 12AB(4) of the Act.

14.

The foregoing discussions would show that the application of income of a charitable trust or institution outside India for carrying out its objects will not fall under any of the categories of "specified violation" as mentioned in the Explanation to sec. 12AB(4) of the Act. Hence, the decision rendered by Hon'ble Delhi High Court in the case of M.K. NambyarSaarf Law Charitable Trust v. Union of India (2004] 140 Taxman 616/269 ITR 556 (Delhi) will apply to the provisions of sec. 12AB of the Act also, since the provisions of sec.12AB also do not refer to the activities carried in India or outside India.

15.

In view of the foregoing discussions, it can be concluded that existence of any object for carrying out any activity outside India will not enable the Ld CIT(E) to deny registration u/s 12AB of the Act. As observedearlier, such kind of application of income outside India (unless it is permitted by the CBDT) will exempted u/s 11 of the Act.

16.

Hence, the first reasoning given by Ld CIT(E) is liable to be quashed. On merits of the case, we are una to agree with the interpretation given by the Ld CIT(E) to the objects clause of the assessee, which reads 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 festivals and conferences that bring together Indian classical musicians and scholars from around the world."

A careful perusal of the above cited object clause talks about the organizing festivals and conferences that bring together Indian Classical musicians and scholars from around the world, i.e., it talks about mobilizing the Indian

P a g e | 8 ITA NO. 4840/mum/2025. 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 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) rejecting the application filed by the assessee seeking permanent registration u/s 12AB of the Act and restore all the issues to his file with the direction to process the application of the assessee again afresh in the light of discussions made supra.

19.

We shall not adjudicate the appeal filed by the assessee challenging the order passed by Ld CIT(E) rejecting the application filed by the assessee seeking recognition u/s 80G of the Act.

20.

We notice that the Ld CIT(E) has rejected the application on the reasoning that the he has denied registration to the assessee u/s 12AB of the Act. In the preceding paragraphs, we have cancelled the order passed by Ld CIT(E) and restored all the issues relating to the registration sought by the assessee u/s 12AB of the Act. Following the said order passed by us in the preceding paragraphs, we set aside the order passed by Ld CIT(E) rejecting the recognition u/s 80G of the Act and restore all the issues to his for examining the application afresh in the light of discussions made supra.”

7.

In view of above facts and circumstances, we are of the considered opinion that mere mention of the phrase ‘Outside India’ in different

P a g e | 9 ITA NO. 4840/mum/2025. clause of MOA does not lead to violation of any condition making the assessee liable for rejection of registration u/s. 12AB/80G of the Act.

Accordingly, we restore the matter to ld. CIT(E) to consider the assessee’s application for registration afresh and grant the same provided other requisite conditions are fulfilled.

8.

In the result, assessee’s appeal is allowed.

Order Pronounced in Open Court on 27.10.2025

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