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Facts
The assessee applied for registration under Section 12AB and approval under Section 80G, which were rejected by the CIT(E). The rejection was based on the CIT(E)'s opinion that one of the trust's object clauses, allowing it to apply/receive funds outside India, violated the provisions of Section 11 of the Income Tax Act.
Held
The Tribunal held that the object clause was not objectionable for rejecting Section 12AB registration, especially since it only allowed arrangements conducive to the trust's objects. Relying on a Delhi High Court precedent, the Tribunal directed the CIT(E) to grant registration under Section 12AB and reconsider the application for Section 80G approval afresh, noting that the objectionable clause had since been amended by the Trust.
Key Issues
Whether a trust's object clause enabling it to apply/receive funds outside India is a valid ground for rejecting its applications for registration under Section 12AB and approval under Section 80G of the Income Tax Act.
Sections Cited
11, 12A, 12AB, 80G, 12A(1)(ac)(iii), 11(1)(a), 11(1)(a)(c), 12AA
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
O R D E R PER NARENDRA KUMAR BILLAIYA, AM: & 4508/Mum/2025 are two separate appeals preferred against two separate orders of ld. CIT(E), Mumbai [hereinafter ld. CIT(E)], dated 28/06/2025, by which the ld. CIT(E) has rejected the application for grant of registration u/s 12A of the Act and approval u/s 80G of the Act.
Briefly stated the facts of the case are that the assessee filed an application in form 10AB u/s 12A(1)(ac)(iii) of the Act seeking registration u/s 12AB of the Act. The application was accompanied with necessary documents as per the relevant provisions of the Act and on verification of the application in form 10AB filed by the assessee, the ld. CIT(E), observed that point no. 3(b)(iii) of the objects are in violation of provisions of Section 11 of the Act as the trust intends to I.T.A. No. 1560/Mum/2025 2 apply/receive funds outside India. The ld. CIT(E) was of the opinion that the application seeking registration u/s 12AB of the Act is in violation of the relevant provisions of the Act and rejected the same. Since the application seeking registration u/s 12AB of the Act was rejected, the ld. CIT(E) further rejected the approval u/s 80G of the Act.
Having heard the rival contentions, we have carefully perused the orders of the ld. CIT(E). We are of the considered view that the object clause simply provides that "to enter into any arrangements with any Government(s), local or international authorities whether Central, State, municipal, local or any other person, that may seem conducive to the objects of the Company.” cannot be considered as objectionable to reject the application for registration u/s 12AB of the Act. On similar set of facts, the Hon’ble Delhi high Court in the case of M.K. Nambyar Saarf Law Charitable Trust vs. Union of India [2004] 269 ITR 556 (Delhi), has held as under:- “3. So far as the benefit of section 11(1)(a) is concerned, it can be extended only to the extent to which such income is applied to such purposes in India. However, if the income is applied to the purposes outside India, then clause (c) will be applicable and if the permission is granted by the Board either by general or special order then, benefit can be extended. Section 12AA prescribes the procedure for registration. Reading the section, it becomes clear that after the application is made, the officer has to call for documents or information from the Trust to satisfy himself about the genuineness of the activities of the Trust. He can make further enquiry as he may deem necessary. It is only after satisfying himself about the objects of the Trust and the genuineness of its activities that he has to pass an order in writing registering the Trust or institution. And if he is not satisfied, he can reject the same. This section does not refer to the activities in India or outside India. It refers to application of income for charitable or religious purposes in India as also with direction or order of the Board for application of income as aforesaid outside India. Reading the order dated 24-2-2004, it is very clear that there is non-application of mind. It was necessary for the Commissioner to examine the purpose for satisfying himself that the activities are genuine. It was open for him to make necessary enquiries in this behalf and to pass an order as per the procedure laid down under section 12AA of the said Act. So far as income which is applied outside India is concerned, is not a relevant criteria for rejecting the application. In absence of order under section 11(1)(a)(c), one cannot seek benefit for application of income for charitable or religious purposes, outside India.