Loading judgment…
Facts
The assessee, a charitable trust, had its application for registration under section 80G rejected by the CIT(E) on the grounds that its objects clause mentioned applying funds outside India and that it had not provided sufficient evidence of its activities. The appeal was filed after a delay of 79 days, which was condoned.
Held
The Tribunal held that the CIT(E)'s rejection was not justified as the mention of applying funds outside India in the objects clause does not automatically mean a violation of the Act, nor does it preclude the grant of registration. The Tribunal also found merit in the assessee's argument regarding evidence of activities and admitted additional evidence.
Key Issues
Whether the mention of applying funds outside India in the objects clause of a trust is a ground for rejection of registration under Section 80G and Section 12AB of the Income Tax Act, and whether the CIT(E) properly considered the evidence of the trust's activities.
Sections Cited
250, 80G, 12A, 12AB, 11
AI-generated summary — verify with the full judgment below
Before: SHRI PAWAN SINGH & SMT. RENU JAUHRI
Appellant by : Shri Prashant S. Ghumare Respondent by : Shri Arun Kanti Datta- CIT DR Date of Hearing 25.09.2025 Date of Pronouncement 30.09.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-
This appeal is filed by the assessee against the order of the CIT(Exemptions), Mumbai [hereinafter referred to as “CIT(A)”] dated 18.03.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”].
The grounds of appeal
are as follows:
1. THE ORDER BAD IN LAW, ILLEGAL AND WITHOUT JURISDICTION A.Y.N.A 1.1 In the facts and the circumstances of the case, and in law, the order rejecting provisional registration passed by Commissioner of Income Tax Exemption, Mumbai ['Ld. CIT'] in Form 10AD is bad in law, illegal and without jurisdiction, as - (i) the same is framed in breach of the statutory provisions of the Income tax Act, 1961 ['the Act']; and (ii) the same is arbitrary and perverse.
2. VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE 2.1 In the facts and the circumstances of the case, and in law, the impugned order is bad in law and illegal, as the same is framed in gross breach of the principles of Natural Justice. 2.2 Without prejudice to the generality of the above ground, the impugned order is bad in law and illegal as no sufficient and fair opportunity of being heard was provided to the Appellant. 2.3 It is submitted that in the facts and the circumstances of the case, and in law. the order is bad in law and illegal on this ground as well. WITHOUT FURTHER PREJUDICE TO THE ABOVE 3. REJECTION OF THE APPLICATION FOR REGISTRATION 3.1 The CIT erred in rejecting the provisional registration granted under clause (iv) of first proviso to subsection (5) of section 80G of the Act to the Appellant on the ground of alleged non-fulfilment of conditions prescribed in section 80G(5) of the Act. 3.2 While doing so, the CIT erred in: (i) Basing his action on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations; (iii) Ignoring relevant material and considerations as submitted by the Appellant; and (iv)Not appreciating the fact that the Appellant had never utilized any funds for foreign education. 3.3 It is submitted that in the facts and the circumstances of the case, and in law, no such rejection was called for.
4. LIBERTY The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing.”
A.Y.N.A 3. Brief facts are that the assessee is a trust registered under the Bombay Public Trust Act, 1950 w.e.f 08.12.2014. The Trust is also registered under section 12A and approved u/s. 80G of the Income Tax Act since A.Y. 2017-18.
Pursuant to the revised regime introduced by the Finance Act 2020, all the existing registered trusts had to obtain fresh registration u/s. 12AB and 80G of the Act. The assessee filed an application in Form 10A on 03.03.2022 and provisional approval u/s. 80G was granted w.e.f 10.03.2022 upto A.Y. 2024-25.
Thereafter, the trust applied for final approval u/s. 80G which was rejected by Ld. CIT(E) vide order dated 25.12.2024 with the following observations:
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 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 amendment in trust deed/MoA before the competent authority.
Although the assessee initiated the process for altering its object clauses relating to application of funds outside India, it also filed the appeal before the Tribunal.
At the outset, it is noticed that the appeal is filed after a delay of 79 days. The assessee has filed an application for condonation alongwith an affidavit explaining the reasons of delay.
It has been submitted that initially the assessee decided to amend the objects clause, in view of the order of rejection passed by ld. CIT(E) on this account. However, the assessee was subsequently advised to also file an appeal against the order of ld. CIT(E) by its counsel.
A.Y.N.A Accordingly, the appeal was filed on 13.05.2025 resulting in a delay of 79 days which was purely unifertional and due to bonafide reasons.
Considering the facts and circumstances of the case, we hereby condone the delay of 79 days in filing of the appeal as the same was due to bonafide reasons.
On merits, we have heard the rival submissions and perused the material placed before us. The sole reason for rejection of approval by ld. CIT(E) is the use of the term ‘outside India’ in some of the object clauses of the Trust relating to application of funds. In response to the show cause notice, issued by Ld. CIT(E), the assessee clarified vide letter dated 25.12.2024 that it had never given any funds for foreign education and that, in any case, there was no bar u/s. 80G of the Act restricting the application of funds only in India.
However, ld. CIT(E) vide his rejection order held that the clauses of the objects are in violation of the Act and hence rejected the application for approval.
It has been submitted by the ld. AR that this issue is covered in favour of the assessee by several decisions of the co-ordinate Benches, some of which are as under:
1.Jinseva Foundation v. CIT (E) – [ITA Nos. 3531 & 3532/MUM/2025] 2.Gulbanu A. Lalani Educational Trust v. CIT (E) – [ITA No.1045/Mum/2025] 3.Odhavji Chanabhai Peraj Charity Trust v. DCIT –[(2025) 177 taxmann.com 178 (Mumbai - Trib.)] 4.Dedhia Music Foundation v. CIT(E) - [(2025) 173 taxmann.com 394 (Mumbai - Trib.)] A.Y.N.A 5. TIH Foundation for IOT and IOE v. CIT (E)- [2025] 176 taxmann.com 561 (Mumbai - Trib.)
Specifically, in the case of Dedhia Music Foundation (Supra) the decision of the co-ordinate Bench is on identical facts and relevant portion 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.
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 "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 A.Y.N.A (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. Hence "actual application of income" is the condition to be satisfied for attracting the above said four clauses.
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.
A.Y.N.A 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. Nambyar Saarf 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.
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 observed earlier, such kind of application of income outside India (unless it is permitted by the CBDT) will exempted u/s 11 of the Act.
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 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.
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.
A.Y.N.A 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.
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.
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.
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.”
Respectfully following the decision of the co-ordinate Bench, we hereby set aside the order of Ld. CIT(E) with a direction to decide the assessee’s application for 80G subject to afresh and allow the same fulfilment of other requirements. Needless to add, the assessee should be given a reasonable opportunity of being heard by the Ld. CIT(E). A.Y.N.A