SUNANDA BIRLA FOUNDATION,MUMBAI vs. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI

Since common facts and interconnected issues arise in both these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience.

The assessee, Sunanda Birla Foundation, is a charitable trust constituted in 2007 and registered under the Maharashtra Public Trusts Act, 1950 (formerly the Bombay Public Trusts Act, 1950) vide PTR No. F-34351. Its objects, inter alia, relate to education, healthcare, and the promotion of Vedic philosophy and spiritual sciences.

The assessee was granted registration under section 12A of the Income-tax Act, 1961 (“the Act”) vide Form No. 10AC dated 31.08.2021 and approval under section 80G of the Act vide Form No. 10AC dated 15.10.2021, both being valid from Assessment Year 2022-23 to Assessment Year 2026-27.

Pursuant to the amended statutory scheme, the assessee filed an application in Form No. 10AB on 27.06.2025 under section 12A(1)(ac)(iii) of the Act seeking registration under section 12AB. It also filed an application on 13.08.2025 seeking approval under section 80G(5) of the Act.

During the course of consideration of the applications, the learned Commissioner of Income Tax (Exemption) [“CIT(E)”] issued a show-cause notice seeking clarification, inter alia, on two issues: first, the absence of substantial charitable expenditure or activities during the relevant period; and second, the existence of clauses III(9), III(12), III(14), III(15), III(16) and III(20) in the Trust Deed, which contemplated liaison with foreign entities, establishment of branches abroad and international collaborations, and according to the learned CIT(E), could permit application of income outside India.

In response, the assessee submitted that it had remained functional, continued to receive voluntary donations and had retained its corpus in furtherance of its charitable objects. It was further submitted that the impugned clauses were merely enabling provisions intended to facilitate academic, educational and spiritual exchange and collaboration and that, since inception, no funds had been applied, remitted or disbursed outside India.

The assessee also placed on record a resolution of its Board of Trustees dated 21.11.2025 resolving that its income and funds would be utilised within India and that no expenditure outside India would be incurred without obtaining the requisite prior approval of the CBDT under section 11(1)(c) of the Act.

The learned CIT(E), however, was not satisfied with the explanation and rejected the application by order dated 27.12.2025. The principal reasons recorded were the alleged absence of substantial charitable expenditure/activities and the existence of enabling clauses contemplating activities or affiliations outside India. The application for approval under section 80G was also rejected on the same date.

Before us, the learned Authorised Representative (“AR”) submitted that the learned CIT(E) had travelled beyond the permissible scope of enquiry while considering the application for registration under section 12AB. It was submitted that the objects of the assessee had already been accepted by the Department and that the assessee had held valid registration since 2021 on the same set of objects.

The learned AR placed reliance on the judgment of the Hon’ble Supreme Court in Ananda Social & Educational Trust v. CIT [2020] 114 taxmann.com 693 (SC), and submitted that the expression “activities” includes proposed activities and that the absence of substantial expenditure during the relevant period, by itself, could not establish that the activities of an otherwise genuine charitable institution were not genuine.

As regards the clauses relating to international activities, the learned AR submitted that the mere existence of enabling provisions in the trust deed could not, in the absence of any actual application or utilisation of income outside India, constitute a ground for refusing registration. It was submitted that the question of actual application of income is ordinarily relevant at the stage of assessment and has to be examined with reference to the facts of the relevant assessment year.

Reliance was placed, inter alia, on the decisions in CIT v. Manekji Mota Charitable Trust [2019] 109 taxmann.com 258 (Bom), Dedhia Music Foundation v. CIT(E) [2025] 173 taxmann.com 394 (Mum-Trib), Shamkris Charity Foundation v. CIT(E) [2025] 180 taxmann.com 58 (Mum-Trib), TIH Foundation for IOT and IOE v. CIT(E) [2025] 176 taxmann.com 561 (Mum- Trib) and M.K. Nambyar SAARCLAW Charitable Trust v. UOI [2004] 140 Taxman 616 (Del).

The Ld. DR, on the other hand, supported the order of the Ld. CIT(E). It was submitted that an assessee seeking registration should be able to demonstrate genuine charitable activities and that the clauses in the trust deed expressly contemplated activities outside India. According to the learned DR, such provisions were inconsistent with the statutory scheme governing application of income and, therefore, the rejection of the application was justified.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records we noticed that the rejection of the assessee’s application rests essentially on two considerations: the quantum of charitable expenditure/activities during the relevant period and the existence of clauses in the trust deed which contemplate international activities or affiliations.

As regards the first issue, the fact that the assessee may not have incurred substantial expenditure towards its charitable objects during the relevant period cannot, by itself, lead to the conclusion that its activities are not genuine. The scope of enquiry at the stage of registration is distinct from the exercise undertaken by the Assessing Officer while determining the assessee’s entitlement to exemption under sections 11 and 12 for a particular assessment year.

The Hon’ble Supreme Court in Ananda Social & Educational Trust (supra) has held, in the context of registration under section 12AA, that the expression “activities” includes proposed activities. The decision recognises that registration concerns the charitable character of the objects and the genuineness of the activities in the context of the statutory requirements and cannot be equated with an assessment of the income and expenditure of the trust for a particular year.

In the present case, the charitable objects of the assessee have not been found to be non-charitable. On the contrary, the assessee had already been granted registration under section 12A and approval under section 80G on the same set of objects. There is also no finding in the impugned order that the assessee has undertaken any activity contrary to its stated charitable objects or that the activities carried out by it are sham or non-genuine.

The decision of the Hon’ble Bombay High Court in CIT v. Manekji Mota Charitable Trust (supra) also supports the proposition that issues concerning application of income are ordinarily matters to be examined at the stage of assessment and are premature while considering registration.

We, therefore, find that the mere fact that the assessee did not incur substantial charitable expenditure during the relevant period could not, in the facts of the present case, constitute a valid ground for refusing registration under section 12AB.

The second issue concerns clauses III(9), III(12), III(14), III(15), III(16) and III(20) of the trust deed. On perusal of the material placed before us, it is evident that these clauses contemplate, inter alia, liaison and collaboration with foreign institutions/researchers and other forms of international academic or educational interaction.

However, the existence of an enabling provision in the trust deed cannot, by itself, be equated with actual application of the income of the trust outside India. The assessee has categorically stated that, since its inception, no income or funds have been remitted, disbursed or applied outside India. No contrary instance of actual application of income outside India has been brought on record by the Revenue.

The issue whether any particular expenditure constitutes application of income outside India, and the consequences thereof under section 11(1)(c), have to be examined with reference to the actual facts and circumstances in the relevant assessment year. The mere possibility that an enabling clause may be acted upon in the future cannot, in the absence of any actual violation or other material establishing that the activities of the assessee are not genuine, be treated as sufficient ground to deny registration.

The decisions of the coordinate Benches cited by the learned AR, including Dedhia Music Foundation, Shamkris Charity Foundation and TIH Foundation for IOT and IOE (supra), also support the distinction between a provision enabling a particular activity and the actual application of income pursuant thereto.

In the present case, the assessee has, in addition, placed on record the resolution dated 21.11.2025 of its Board of Trustees expressly providing that its income and funds shall be utilised within India and that no expenditure outside India shall be incurred without obtaining the requisite approval under section 11(1)(c). This resolution further supports the assessee’s explanation regarding the nature of the clauses contained in its trust deed.

In these circumstances, we are of the considered view that the learned CIT(E) was not justified in rejecting the application for registration merely on the basis of the absence of substantial expenditure during the relevant period or on the basis of the existence of enabling clauses contemplating international collaboration, particularly when there is no finding of actual application of income outside India or of any activity contrary to the charitable objects of the assessee.

Accordingly, the order of the learned CIT(E) dated 27.12.2025 rejecting the assessee’s application for registration under section 12AB is set aside. The learned CIT(E) is directed to grant registration to the assessee under section 12AB of the Act, subject to fulfilment of the other statutory requirements in accordance with law.

In the result, ITA No. 2390/MUM/2026 is allowed with no order as to costs.

This appeal concerns the rejection of the assessee’s application for approval under section 80G(5) of the Act.

It is evident from the impugned order that the rejection of approval under section 80G was consequential to the rejection of the assessee’s application for registration under section 12AB.

Since, for the reasons stated above, we have set aside the order rejecting registration under section 12AB and directed the learned CIT(E) to grant registration to the assessee, the very basis on which the approval under section 80G was rejected no longer survives.

Accordingly, the order dated 27.12.2025 rejecting the assessee’s application for approval under section 80G(5) is also set aside. The learned CIT(E) is directed to consider and grant approval under section 80G of the Act in accordance with law, consequent upon the grant of registration under section 12AB.

In the result, ITA No. 2398/MUM/2026 is also allowed with no order as to costs.

In the result, both appeals filed by the assessee are allowed.