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Facts
The assessee, Jinseva Foundation, applied for registration under section 12AB of the Income Tax Act. The CIT(Exemptions) rejected the application citing that the assessee's objects allowed for utilization of funds outside India, which was considered a violation of section 11 of the Act. The assessee argued that this was an incidental object and not a primary one, and that no such expenses had been incurred.
Held
The Tribunal held that the mention of utilizing funds outside India in the objects clause of the MOA does not necessarily lead to rejection of registration under section 12AB. It noted that the issue is covered by various High Court and Tribunal decisions, which state that application of income outside India is not a relevant criterion for rejecting registration, and that the exemption under section 11 is restricted to income applied in India. The Tribunal also set aside the rejection of application for registration under section 80G.
Key Issues
Whether the inclusion of clauses in the MOA allowing utilization of funds outside India is a valid ground for rejecting an application for registration under section 12AB of the Income Tax Act.
Sections Cited
12A, 12AB, 11, 11(1)(c), 80G
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: MS. KAVITHA RAJAGOPAL & SMT. RENU JAUHRI
ORDER PER RENU JAUHRI, AM These two appeals by the assessee are directed against two separate order both dated 27.03.2025 passed by the Ld. Commissioner of Income-tax (Exemptions), Mumbai [in short ‘the Ld. CIT(E)’] for assessment year 2025-26 respectively.
The grounds raised by the assessee in are reproduced as under:
Ground - 1 - The Hon. CIT (Exemptions) on the facts and in the The Hon. CIT (Exemptions) on the facts and in the circumstances of the case and also in law, erred in rejecting the circumstances of the case and also in law, erred in rejecting the circumstances of the case and also in law, erred in rejecting the application for registration under section 12A read with application for registration under section 12A read with application for registration under section 12A read with section 12AB of the Income 12AB of the Income-tax Act, 1961 ("the Act") on the grounds that the tax Act, 1961 ("the Act") on the grounds that the objects of the appellant are in violation of section 11 of the Act since objects of the appellant are in violation of section 11 of the Act since objects of the appellant are in violation of section 11 of the Act since the same provides for utilization of funds outside the same provides for utilization of funds outside India. The Hon. India. The Hon. CIT (Exemptions) failed to appreciate t CIT (Exemptions) failed to appreciate that no such expenses have hat no such expenses have been actually incurred outside India and if at all any such expense been actually incurred outside India and if at all any such expense been actually incurred outside India and if at all any such expense will be incurred in future, the sume will result in the bencfit of will be incurred in future, the sume will result in the bencfit of will be incurred in future, the sume will result in the bencfit of people in India. Accordingly, the rejection of the application is bad in people in India. Accordingly, the rejection of the application is bad in people in India. Accordingly, the rejection of the application is bad in law. Ground - 2- The Hon. CIT (Exemptions) on the facts and in the on. CIT (Exemptions) on the facts and in the circumstances of the case and also in law, erred in rejecting the circumstances of the case and also in law, erred in rejecting the circumstances of the case and also in law, erred in rejecting the said application even though provisional registration was granted said application even though provisional registration was granted said application even though provisional registration was granted with same objects and on same facts. with same objects and on same facts. Ground - 3 - Without prejudice to ground n Without prejudice to ground no. 1 and 2, the Hon. o. 1 and 2, the Hon. CIT (Exemptions) on the facts and in the circumstances of the case and (Exemptions) on the facts and in the circumstances of the case and (Exemptions) on the facts and in the circumstances of the case and also in law, failed to appreciate that utilization of funds also in law, failed to appreciate that utilization of funds also in law, failed to appreciate that utilization of funds outside India can at best lead to disallowance of exe best lead to disallowance of exemption u/s. mption u/s. 11 of the Act and cannot be a ground Act and cannot be a ground for rejection of registration u/s. 12A. for rejection of registration u/s. 12A. Ground - 4 4 - Without prejudice to the above, out of abundant Without prejudice to the above, out of abundant precaution and in good faith, the appellant is in the process of precaution and in good faith, the appellant is in the process of precaution and in good faith, the appellant is in the process of undertaking necessary amendments to the object clause of undertaking necessary amendments to the object clause of undertaking necessary amendments to the object clause of memorandum of association to addr memorandum of association to address the concerns raised by ess the concerns raised by the Hon. CIT (Exemptions). Accordingly, the rejection order may please Hon. CIT (Exemptions). Accordingly, the rejection order may please Hon. CIT (Exemptions). Accordingly, the rejection order may please be set-aside and the matter be restored to the file of the Hon. CIT aside and the matter be restored to the file of the Hon. CIT aside and the matter be restored to the file of the Hon. CIT (Exemptions) to consider the said application based on modified (Exemptions) to consider the said application based on modified (Exemptions) to consider the said application based on modified objects and grant the objects and grant the registration, 3. Brief facts of the case are that the assessee filed an application Brief facts of the case are that the assessee filed an application Brief facts of the case are that the assessee filed an application for provisional registration u/s 12A which was granted vide Form for provisional registration u/s 12A which was granted vide Form for provisional registration u/s 12A which was granted vide Form No. 10AC dated 22.02.2023. The assessee is No. 10AC dated 22.02.2023. The assessee is a company registered company registered u/s 8 of the Companies Act. Subsequently, the a u/s 8 of the Companies Act. Subsequently, the assessee filed an ssessee filed an application for regular registration on 30.09.2024 in Form No. application for regular registration on 30.09.2024 in Form No. application for regular registration on 30.09.2024 in Form No. 10AB. Ld. CIT(Exemptions) vide order dated 27.03.2025 rejected the 10AB. Ld. CIT(Exemptions) vide order dated 27.03.2025 rejected the 10AB. Ld. CIT(Exemptions) vide order dated 27.03.2025 rejected the application after observing that as per the trust deed/MOA, the application after observing that as per the trust deed/M application after observing that as per the trust deed/M objects are in violation of provisions of sec objects are in violation of provisions of section 11 of the Act as the tion 11 of the Act as the assessee intended to apply/receive funds outside India. The assessee intended to apply/receive funds outside India. The assessee intended to apply/receive funds outside India. The assessee explained in response to the show cause notice that the assessee explained in response to the show cause notice that the assessee explained in response to the show cause notice that the objects of the clause shall extend to whole of India objects of the clause shall extend to whole of India and and its activities will not be for the benefit of pe will not be for the benefit of people outside India. The assessee ople outside India. The assessee further clarified that the objects merely state that assessee can avail further clarified that the objects merely state that assessee can avai further clarified that the objects merely state that assessee can avai services from foreign counter services from foreign counterparts for the benefit of people in India parts for the benefit of people in India and hence, the objects are not in violation of section 11 of the Act. and hence, the objects are not in violation of section 11 of the Act. and hence, the objects are not in violation of section 11 of the Act.
The Ld. CIT(Exemptions) however did not accept the assessee’s CIT(Exemptions) however did not accept the assessee’s CIT(Exemptions) however did not accept the assessee’s explanation and proceeded to reject the application with the explanation and proceeded to reject the application with the explanation and proceeded to reject the application with the following observations: following observations:
4.2 The use of such words above referred objects in the MOA/trust 4.2 The use of such words above referred objects in the MOA/trust 4.2 The use of such words above referred objects in the MOA/trust deed clearly conveys its intention to utilise fun deed clearly conveys its intention to utilise fund outside India, d outside India, thereby leaving open the possibility for future endeavours, which thereby leaving open the possibility for future endeavours, which thereby leaving open the possibility for future endeavours, which may involve expenditure outside the country. Also, the applicant may involve expenditure outside the country. Also, the applicant may involve expenditure outside the country. Also, the applicant has accepted that it intends to avail services from the foreign has accepted that it intends to avail services from the foreign has accepted that it intends to avail services from the foreign counterparts. The applicant trust ought to h counterparts. The applicant trust ought to have amended these ave amended these clauses to align with the provisions of the Income Tax Act. However, clauses to align with the provisions of the Income Tax Act. However, clauses to align with the provisions of the Income Tax Act. However, it has failed to do so it has failed to do so 5. Registration under section 12AB is to be granted in terms of the 5. Registration under section 12AB is to be granted in terms of the 5. 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 provisions of section 12AB(1)(b) of the Act after being satisfied about provisions of section 12AB(1)(b) of the Act after being satisfied about the objects of the trust or institution, the genuineness of activities, objects of the trust or institution, the genuineness of activities, objects of the trust or institution, the genuineness of activities, and the compliance of any other law for the time being in force as and the compliance of any other law for the time being in force as and the compliance of any other law for the time being in force as are material for the purposes of achieving its objects. In the view of are material for the purposes of achieving its objects. In the view of are material for the purposes of achieving its objects. In the view of above mentioned violation, the undersigned is left above mentioned violation, the undersigned is left with no other with no other option but to reject the application seeking registration under section option but to reject the application seeking registration under section option but to reject the application seeking registration under section 12AB of the Act.
Aggrieved with the order of the Ld. CIT(Exemptions), the Aggrieved with the order of the Ld. CIT(Exemptions), the Aggrieved with the order of the Ld. CIT(Exemptions), the assessee has preferred an appeal assessee has preferred an appeal before the Tribunal before the Tribunal.
5.1 Before us, the Ld. AR has submitt Before us, the Ld. AR has submitted that the issue relating to ed that the issue relating to mention of words “outside India” in different clauses of “outside India” in different clauses of “outside India” in different clauses of MOA does not mean that it is in violation of the Act has been considered and not mean that it is in violation of the Act has been considered and not mean that it is in violation of the Act has been considered and decided in favour of the assessee in various decisions of the Co- decided in favour of the assessee in various decisions of the Co decided in favour of the assessee in various decisions of the Co ordinate Benches. The Ld. A ordinate Benches. The Ld. AR has placed reliance on the decision R has placed reliance on the decisions in the following cases : in the following cases :
(i) Odhavi Chanabhai Peraj Charity Trust (ITA No. 1164 & (i) Odhavi Chanabhai Peraj Charity Trust (ITA No. 1164 & (i) Odhavi Chanabhai Peraj Charity Trust (ITA No. 1164 & 1165/Mum/2025. . (ii) Dedhia Music Foundation (2025) 173 Taxmann.com 394 Dedhia Music Foundation (2025) 173 Taxmann.com 394 Dedhia Music Foundation (2025) 173 Taxmann.com 394 (Mum-ITAT)
6. The Ld. Departmental Representative (DR) on the The Ld. Departmental Representative (DR) on the The Ld. Departmental Representative (DR) on the other hand, relied on the order of the Ld. CIT(Exemptions) and argued that the relied on the order of the Ld. CIT(Exemptions) and argued that the relied on the order of the Ld. CIT(Exemptions) and argued that the application of funds outside India would b application of funds outside India would be in violation of the e in violation of the provisions of section 11 of the Act and hence rejection of section 11 of the Act and hence rejection of section 11 of the Act and hence rejection of registration was correct and deserves to be upheld. registration was correct and deserves to be upheld.
We have carefully heard the rival submissions and perused th We have carefully heard the rival submissions and perused th We have carefully heard the rival submissions and perused the decisions cited by the Ld. AR. decisions cited by the Ld. AR. We note that the issue is squarely e note that the issue is squarely covered by the decision of the Co covered by the decision of the Co-ordinate Bench of the case of ordinate Bench of the case of Dedhia Dedhia Music Music Foundation Foundation (supra) (supra) wherein wherein after after thorough thorough discussion of the issue, ion of the issue, it has been held as under: “11. As is evident from the above, the section lists various activities which qualify as 11. As is evident from the above, the section lists various activities which qualify as 11. As is evident from the above, the section lists various activities which qualify as charitable purpose but there is no restriction to the scope of such activities within the charitable purpose but there is no restriction to the scope of such activities within the charitable purpose but there is no restriction to the scope of such activities within the geographical boundary of India. geographical boundary of India. It is only section 11, as reproduced above, which places It is only section 11, as reproduced above, which places a geographical restriction allowing exemption only to incomes applied to charitable a geographical restriction allowing exemption only to incomes applied to charitable a geographical restriction allowing exemption only to incomes applied to charitable purposes in India. But even the said section does not completely rule out exemption to purposes in India. But even the said section does not completely rule out exemption to purposes in India. But even the said section does not completely rule out exemption to incomes applied outside Indi incomes applied outside India for charitable purposes, granting exemption to certain such a for charitable purposes, granting exemption to certain such applications, as mentioned in section 11(1)(c), subject to being approved by the Board. applications, as mentioned in section 11(1)(c), subject to being approved by the Board. applications, as mentioned 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 12. As is evident from the above, in the scheme of the Act, incomes applied outside India 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 charitable purposes are not completely and categorically ruled out from being eligible 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, ther 13. The Ld. Pr. CIT's order,in the present case, therefore denying registration to the efore denying registration to the applicant assessee merely for the reason that its objects included application of income applicant assessee merely for the reason that its objects included application of income 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, outside India, we hold, is not in accordance with law. More particularly when, admittedly, outside India, we hold, is not in accordance with law. More particularly when, admittedly, this was not the sole and main object of t this was not the sole and main object of the applicant assessee, but only its ancillary and he applicant assessee, but only its ancillary and incidental object. It is not the case therefore that there is to be no application of income incidental object. It is not the case therefore that there is to be no application of income 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 within India at all as per the objects. In fact the main object of the applicant assessee within India at all as per the objects. In fact the main object of the applicant assessee involves carrying out c involves carrying out charitable activities in India. In this factual situation, denying haritable activities in India. In this factual situation, denying registration u/s 12AA of the Act, for the reason that its incidental object entailed registration u/s 12AA of the Act, for the reason that its incidental object entailed 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 application of income outside India, we find, would result in the assessee being denied 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. me applied in India, which it would otherwise be entitled to under law. me applied in India, which it would otherwise be entitled to under law.
14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of 14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of 14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only section 11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only section 11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities carried out in India will qualify as charitable for grant of registration, is only for ties carried out in India will qualify as charitable for grant of registration, is only for ties carried out in India will qualify as charitable for grant of registration, is only for the purpose of determining the income which qualifies for exemption u/s 11 of the Act. the purpose of determining the income which qualifies for exemption u/s 11 of the Act. the purpose of determining the income which qualifies for exemption u/s 11 of the Act. The said section comes into operation only once registration is granted u/s 12A of the Act The said section comes into operation only once registration is granted u/s 1 The said section comes into operation only once registration is granted u/s 1 and therefore cannot be relevant for the purposes of granting registration u/s 12A of the and therefore cannot be relevant for the purposes of granting registration u/s 12A of the and therefore cannot be relevant for the purposes of granting registration u/s 12A of the Act. The scheme of the Act is that all entities carrying out charitable activities, as defined Act. The scheme of the Act is that all entities carrying out charitable activities, as defined Act. The scheme of the Act is that all entities carrying out charitable activities, as defined in section 2(15) of the Act, qualify to be registered as in section 2(15) of the Act, qualify to be registered as charitable entities subject to charitable entities subject to satisfaction of the concerned officer vis satisfaction of the concerned officer vis-a-vis their objects and activities, but the exemption vis their objects and activities, but the exemption is provided/restricted only to the extent of income which is applied for charitable purpose is provided/restricted only to the extent of income which is applied for charitable purpose is provided/restricted only to the extent of income which is applied for charitable purpose in India.
15. The issue we find, is 15. The issue we find, is squarely covered in favour of the assessee by the decisions squarely covered in favour of the assessee by the decisions relied upon by the Ld. Counsel for the assessee before us. In the case of MK Nambyar relied upon by the Ld. Counsel for the assessee before us. In the case of MK Nambyar relied upon by the Ld. Counsel for the assessee before us. In the case of MK Nambyar SAARC Law Charitable Trust (supra), we find, the application for grant of registration was SAARC Law Charitable Trust (supra), we find, the application for grant of registration was SAARC Law Charitable Trust (supra), we find, the application for grant of registration was rejected on the ground that the applicant itself had admitted that the scholarship could be nd that the applicant itself had admitted that the scholarship could be nd that the applicant itself had admitted that the scholarship could be paid to members even outside India. The Hon'ble High Court held that the application of paid to members even outside India. The Hon'ble High Court held that the application of paid to members even outside India. The Hon'ble High Court held that the application of income outside India is not a relevant criteria for rejecting the application for grant of income outside India is not a relevant criteria for rejecting the application for grant of income outside India is not a relevant criteria for rejecting the application for grant of registration u/s 12AA of the Act and the officer has to only restrict himself to the tration u/s 12AA of the Act and the officer has to only restrict himself to the tration u/s 12AA of the Act and the officer has to only restrict himself to the satisfaction about the objects and genuineness of the activities of the trust while granting satisfaction about the objects and genuineness of the activities of the trust while granting satisfaction about the objects and genuineness of the activities of the trust while granting registration with no restriction on the activities being carried out inside or outside India. registration with no restriction on the activities being carried out inside or outs registration with no restriction on the activities being carried out inside or outs The relevant findings of the Hon'ble High Court is as under: The relevant findings of the Hon'ble High Court is as under: 'The judgment of the court was delivered by 'The judgment of the court was delivered by B.C. Patel C.J. - M.K. Nambyar SAARC Law Charitable Trust has filed this petition M.K. Nambyar SAARC Law Charitable Trust has filed this petition M.K. Nambyar SAARC Law Charitable Trust has filed this petition against the order made by the Director of Income against the order made by the Director of Income-tax (Exem tax (Exemptions) New Delhi, on February 24, 2004. The aforesaid trust submitted two applications in Form No. 10A February 24, 2004. The aforesaid trust submitted two applications in Form No. 10A February 24, 2004. The aforesaid trust submitted two applications in Form No. 10A for registration under section 12A and recognition under section 80G of the Income for registration under section 12A and recognition under section 80G of the Income for registration under section 12A and recognition under section 80G of the Income- tax Act, 1961 (hereinafter referred to as "the Act"). The application tax Act, 1961 (hereinafter referred to as "the Act"). The application tax Act, 1961 (hereinafter referred to as "the Act"). The application was rejected on the ground that the applicant itself has admitted that the scholarships can be paid to the ground that the applicant itself has admitted that the scholarships can be paid to the ground that the applicant itself has admitted that the scholarships can be paid to the members even outside India. It is in view of this admission that the activities will the members even outside India. It is in view of this admission that the activities will the members even outside India. It is in view of this admission that the activities will be extended outside India as per the objects laid down, it was be extended outside India as per the objects laid down, it was 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 registration cannot be granted under section 12A of the Act and the approval of registration cannot be granted under section 12A of the Act and the approval of exemption under section 80G also cannot be granted. exemption under section 80G also cannot be granted. Section 11 of the Act refers to income from property held for charitable or religious Section 11 of the Act refers to income from property held for charitable or religious Section 11 of the Act refers to income from property held for charitable or religious purposes. The relevant purposes. The relevant provisions are reproduced hereunder: "11. (1) Subject to the provisions of sections 60 to 63, the following income shall not "11. (1) Subject to the provisions of sections 60 to 63, the following income shall not "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 be included in the total income of the previous year of the person in receipt of the be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held (a) income derived from property held under trust wholly for charitable or religious under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; purposes, to the extent to which such income is applied to such purposes in India; 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 and, where any such income is accumulated or set apart for application to such and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the i purposes in India, to the extent to which the income so accumulated or set apart is ncome so accumulated or set apart is not in excess of fifteen per cent, of the income from such property;... not in excess of fifteen per cent, of the income from such property;... not in excess of fifteen per cent, of the income from such property;... (c) income derived from property held under trust (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 (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which mote international welfare in which India is interested, to the extent to which mote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such inc the extent to which such income is applied to such purposes outside India ; ome is applied to such purposes outside India ; Provided that the Board, by general or special order, has directed in either case the Board, by general or special order, has directed in either case the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such that it shall not be included in the total income of the person in receipt of such that it shall not be included in the total income of the person in receipt of such income; (d) ****** 3. So far as the benefit 3. So far as the benefit of section 11(1)(a) is concerned, it can be extended only to the 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 extent to which such income is applied to such purposes in India. However, if 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 income is applied to the purposes outside India, then clause (c) will be applicable and income is applied to the purposes outside India, then clause (c) will be applicable and if the permission is if the permission is granted by the Board either by general or special order then, granted by the Board either by general or special order then, benefit can be extended. Section 12AA prescribes the procedure for registration. benefit can be extended. Section 12AA prescribes the procedure for registration. 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 Reading the section, it becomes clear that after the application is made, the officer Reading the section, it becomes clear that after the application is made, the officer has to call for documents has to call for documents or information from the Trust to satisfy himself about the 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 genuineness of the activities of the Trust. He can make further enquiry as he may 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 deem necessary. It is only after satisfying himself about the objects of the Trust and deem necessary. It is only after satisfying himself about the objects of the Trust and the genuineness of its activ the genuineness of its activities that he has to pass an order in writing registering the ities 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 Trust or institution. And if he is not satisfied, he can reject the same. This section 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 does not refer to the activities in India or outside India. It refers to application of does not refer to the activities in India or outside India. It refers to application of income for charitab income for charitable or religious purposes in India as also with direction or order of le 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 the Board for application of income as aforesaid outside India. Reading the order 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 2004, it is very clear that there is non-application of mind. It was application of mind. It was necessary for the Commiss necessary for the Commissioner to examine the purpose for satisfying himself that ioner to examine the purpose for satisfying himself that the activities are genuine. It was open for him to make necessary enquiries in this the activities are genuine. It was open for him to make necessary enquiries in this 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 behalf and to pass an order as per the procedure laid down under section 12AA of behalf and to pass an order as per the procedure laid down under section 12AA of the said Act. So far as income whi the said Act. So far as income which is applied outside India is concerned, is not a ch is applied outside India is concerned, is not a relevant criteria for rejecting the application. In absence of order under section relevant criteria for rejecting the application. In absence of order under section 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 11(1)(a)(c), one cannot seek benefit for application of income for charitable or religious 11(1)(a)(c), one cannot seek benefit for application of income for charitable or religious purposes, outside India. Theref purposes, outside India. Therefore, the order dated 24-2-2004 made by the Director 2004 made by the Director of Income-tax (Exemptions), Annexed at page 32 which is based on irrelevant criteria tax (Exemptions), Annexed at page 32 which is based on irrelevant criteria tax (Exemptions), Annexed at page 32 which is based on irrelevant criteria is quashed and set aside with a direction to consider the application strictly in is quashed and set aside with a direction to consider the application strictly in is quashed and set aside with a direction to consider the application strictly in accordance with law. It is made that accordance with law. It is made that even application under section 80G is required even application under section 80G is required to be considered afresh. It is directed that the application shall be disposed of within to be considered afresh. It is directed that the application shall be disposed of within to be considered afresh. It is directed that the application shall be disposed of within a period of four weeks by the Commissioner. a period of four weeks by the Commissioner.
16. The aforesaid decision of the Hon'ble Delhi High Court has been followed by the 16. The aforesaid decision of the Hon'ble Delhi High Court has been followe 16. The aforesaid decision of the Hon'ble Delhi High Court has been followe Coordinate Benches of the Tribunal in the case of National Informatics Centre Services Coordinate Benches of the Tribunal in the case of National Informatics Centre Services Coordinate Benches of the Tribunal in the case of National Informatics Centre Services Inc. (supra) ([2017] 88 taxmann.com 878/57 ITR(T) 457 (Delhi ([2017] 88 taxmann.com 878/57 ITR(T) 457 (Delhi - Trib.) Trib.)) 17. In view of the above, the order passed by the Ld.
In view of the above, the order passed by the Ld. CIT(E) denying registration u/s 12A 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 of the Act is set aside and the Ld.CIT(E) is directed to grant registration as applied for by 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."
In the result, the appeal of the assessee is allowed."
We may examine whether the ratio of above said We may examine whether the ratio of above said decision would also apply to the decision would also apply to the applications processed by Ld CIT(E) under new provisions of sec.12AB of the Act. Under the applications processed by Ld CIT(E) under new provisions of sec.12AB of the Act. Under 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, provisions of sec.11 to 13 of the Act, which are applicable to charitable trusts or institution, provisions of sec.11 to 13 of the Act, which are applicable to charitable trusts or institution, two authorities are involved, viz., two authorities are involved, viz., (a) the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or 12AB as the case may be. 12AB as the case may be.
(b) the assessing officer is the authority who assesses the total income of the charitable the assessing officer is the authority who assesses the total income of the charitable the assessing officer is the authority who assesses the total income of the charitable trust or institution for every assessment year. trust or institution for every assessment year.
7. We shall examine the provisions of sec.12AB of the Act. The authority to grant registration We shall examine the provisions of sec.12AB of the Act. The authority to grant registration We shall examine the provisions of sec.12AB of the Act. The authority to grant registration u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have been u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have been u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have been prescribed for the process of registration or cancellation of charitable prescribed for the process of registration or cancellation of charitable trusts or institution. trusts or institution.
(a) For new charitable trusts or institutions, provisional registration is granted u/s For new charitable trusts or institutions, provisional registration is granted u/s For new charitable trusts or institutions, provisional registration is granted u/s 12AB(1)(c) of the Act for a period of 3 years from the assessment year for which the 12AB(1)(c) of the Act for a period of 3 years from the assessment year for which the 12AB(1)(c) of the Act for a period of 3 years from the assessment year for which the registration is sought. registration is sought.
(b) Permanent registration sh Permanent registration shall be granted u/s 12AB(1)(a)/12AB(1)(b) of the Act for a all be granted u/s 12AB(1)(a)/12AB(1)(b) of the Act for a period of five years, when the charitable trusts or institutions apply for the same. period of five years, when the charitable trusts or institutions apply for the same. period of five years, when the charitable trusts or institutions apply for the same.
(c) Where a provisional registration or permanent registration is granted u/s12AB(1) of Where a provisional registration or permanent registration is granted u/s12AB(1) of Where a provisional registration or permanent registration is granted u/s12AB(1) of the Act, the Ld PCIT/CIT is empowered u/s 12AB(4) of the Act to cancel the the Act, the Ld PCIT/CIT is empowered u/s 12AB(4) of the Act to cancel the the Act, the Ld PCIT/CIT is empowered u/s 12AB(4) of the Act to cancel the registration in accordance with that provisions. registration in accordance with that provisions.
As noticed earlier, the assessing officer As noticed earlier, the assessing officer is the authority who is empowered to determine the is the authority who is empowered to determine the income of a charitable trust or institution and granting of exemption u/s 11 of the Act. As per income of a charitable trust or institution and granting of exemption u/s 11 of the Act. As per income of a charitable trust or institution and granting of exemption u/s 11 of the Act. As per sec.11(1), exemption u/s 11 is restricted "to the extent to which such income is applied to sec.11(1), exemption u/s 11 is restricted "to the extent to which such income is applied to sec.11(1), exemption u/s 11 is restricted "to the extent to which such income is applied to charitable purposes in India". Thus the recognition of geographical jurisdiction wherein the es in India". Thus the recognition of geographical jurisdiction wherein the es in India". Thus the recognition of geographical jurisdiction wherein the income was applied needs to be recognised or examined while computing total income of the income was applied needs to be recognised or examined while computing total income of the income was applied needs to be recognised or examined while computing total income of the charitable trust or institution. We also noticed that the income applied for noncharitable charitable trust or institution. We also noticed that the income applied for noncharitable charitable trust or institution. We also noticed that the income applied for noncharitable purposes or applied outside India will not be exempt u/s 11 of the Act, i.e., such income shall purposes or applied outside India will not be exempt u/s 11 of the Act, i.e., such income shall purposes or applied outside India will not be exempt u/s 11 of the Act, i.e., such income shall be taxable in India.
9. We shall compare the provisions of sec.12AA and sec. 12AB of the Act which prescribe the We shall compare the provisions of sec.12AA and sec. 12AB of the Act which prescribe the We shall compare the provisions of sec.12AA and sec. 12AB of the Act which prescribe the conditions for granting registration. conditions for granting registration. (A) SECTION 12AA:- "12AA. [Procedure for registration.] "12AA. [Procedure for registration.] (1) The Principal Commissioner or Commissioner, on receipt of an application for (1) The Principal Commissioner or Commissioner, on receipt of an application for (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A section (1) of section 12A, shall— (a) [call for such documents or information from the trust or institution as he thinks [call for such documents or information from the trust or institution as he thinks [call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about, necessary in order to satisfy himself about, — (i) the genuineness of activities of the trust or institution; and the genuineness of activities of the trust or institution; and (ii) the compliance of such the compliance of such requirements of any other law for the time being in force by 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 the trust or institution as are material for the purpose of achieving its objects, and 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] may also make such inquiries as he may deem necessary in this behalf; and] may also make such inquiries as he may deem necessary in this behalf; and] (b) after satisfying himself a after satisfying himself about the objects of the trust or institution and the bout the objects of the trust or institution and the genuineness of its activities as required under sub genuineness of its activities as required under sub-clause (i) of clause (a) and clause (i) of clause (a) and compliance of the requirements under sub compliance of the requirements under sub-clause (ii) of the said clause], he clause (ii) of the said clause], he— (i) shall pass an order in writing shall pass an order in writing registering the trust or institution; registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or shall, if he is not so satisfied, pass an order in writing refusing to register the trust or 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." institution, and a copy of such order shall be sent to the applicant." institution, and a copy of such order shall be sent to the applicant."
(B) SECTION12AB. 12AB. [Procedure for fresh 12AB. [Procedure for fresh registration.] [Ins. by the Act No. 38 of 2020, w.e.f. 1 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 (1) The Principal Commissioner or Commissioner, on receipt of an application made under (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall, section (1) of section 12A, shall,— (a) where the application is made under sub where the application is made under sub-clause (i) of the said clause, pass an order lause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; in writing registering the trust or institution for a period of five years; in writing registering the trust or institution for a period of five years; (b) where the application is made under sub where the application is made under sub-clause (ii) or sub-clause (iii) or sub clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause, clause (v) of the said clause,— (i) call for such documents or information from the trust or institution or make such call for such documents or information from the trust or institution or make such call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about inquiries as he thinks necessary in order to satisfy himself about inquiries as he thinks necessary in order to satisfy himself about—
(A) the genuineness of activities of the trust or institution; and (A) the genuineness of activities of the trust or institution; and (A) the genuineness of activities of the trust or institution; and (B) the compliance of such (B) the compliance of such requirements of any other law for the time being requirements of any other law for the time being in force by the trust or institution as are material for the purpose of in force by the trust or institution as are material for the purpose of in force by the trust or institution as are material for the purpose of achieving its objects; achieving its objects; (ii) after satisfying himself about the objects of the trust or institution and the after satisfying himself about the objects of the trust or institution and the after satisfying himself about the objects of the trust or institution and the genuineness of its activit genuineness of its activities under item (A) and compliance of the requirements under ies under item (A) and compliance of the requirements under item (B), of sub-clause (i), clause (i),— (A) pass an order in writing registering the trust or institution for a period offive years; or (A) pass an order in writing registering the trust or institution for a period offive years; or (A) pass an order in writing registering the trust or institution for a period offive years; or (B) if he is not so satisfied, pass an order in writing rejecting (B) if he is not so satisfied, pass an order in writing rejecting such application and also such application and also cancelling its registration after affording a reasonable opportunity of being heard; cancelling its registration after affording a reasonable opportunity of being heard; cancelling its registration after affording a reasonable opportunity of being heard; (c) where the application is made under sub where the application is made under sub-clause (vi) of the said clause, pass an order clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years in writing provisionally registering the trust or institution for a period of three years in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy from the assessment year from which the registration is sought, and send a copy from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution. such order to the trust or institution. 9.1. We notice that the provisions of sec.12AA(3) and 12AA(4) of the Act describes the power We notice that the provisions of sec.12AA(3) and 12AA(4) of the Act describes the power We notice that the provisions of sec.12AA(3) and 12AA(4) of the Act describes the power of Ld CIT(E) to cancel the registration. Similarly, the provisions of sec.12AB(4) empowers the of Ld CIT(E) to cancel the registration. Similarly, the provisions of sec.12AB(4) empowers the of Ld CIT(E) to cancel the registration. Similarly, the provisions of sec.12AB(4) empowers the Ld CIT(E) to cancel the registration already granted either provisionall Ld CIT(E) to cancel the registration already granted either provisionally or permanently. It can y or permanently. It can be noticed that the provisions relating to cancellation of registration granted under sec.12AA be noticed that the provisions relating to cancellation of registration granted under sec.12AA be noticed that the provisions relating to cancellation of registration granted under sec.12AA and sec.12AB are identically worded under the respective provisions. Hence, in our view, the and sec.12AB are identically worded under the respective provisions. Hence, in our view, the and sec.12AB are identically worded under the respective provisions. Hence, in our view, the ratio of the decision rendered in the conte ratio of the decision rendered in the context of sec.12AA can be conveniently applied to the xt of sec.12AA can be conveniently applied to the applications processed by Ld CIT(E) u/s 12AB of the Act. applications processed by Ld CIT(E) u/s 12AB of the Act.
However, it is noticed that the provisions of sec. 12AB(4) is elaborate vis However, it is noticed that the provisions of sec. 12AB(4) is elaborate vis-a-vis However, it is noticed that the provisions of sec. 12AB(4) is elaborate vis sec.12AA(3) & (4). Even though, in the instant case, the Ld C sec.12AA(3) & (4). Even though, in the instant case, the Ld CIT(E) has not specifically invoked IT(E) has not specifically invoked the provisions of sec.12AB(4) of the Act, we may examine the applicability of the said provision the provisions of sec.12AB(4) of the Act, we may examine the applicability of the said provision the provisions of sec.12AB(4) of the Act, we may examine the applicability of the said provision to the facts of the present case. The provisions of sec.12AB(4) reads as under:- to the facts of the present case. The provisions of sec.12AB(4) reads as under: to the facts of the present case. The provisions of sec.12AB(4) reads as under: "(4) Where registration or provisional regi "(4) Where registration or provisional registration of a trust or an institution has been stration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub section (1) or clause (b) of sub- section (1) of section 12AA, as the case may be, and subsequently, — section (1) of section 12AA, as the case may be, and subsequently, section (1) of section 12AA, as the case may be, and subsequently, (a) the Principal Commissioner or Commissione the Principal Commissioner or Commissioner has noticed occurrence of one or more r has noticed occurrence of one or more specified violations during any previous year; or specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the the Principal Commissioner or Commissioner has received a reference from the the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub Assessing Officer under the second proviso to sub-section (3) of section 143 for section (3) of section 143 for any previous year; or previous year; or (c) such case has been selected in accordance with the risk management strategy, such case has been selected in accordance with the risk management strategy, 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 formulated by the Board from time to time, for any previous year, the Principal formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall Commissioner or Commissioner shall — (i) call for such documents or call for such documents or information from the trust or institution, or make such information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or inquiry as he thinks necessary in order to satisfy himself about the occurrence or inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or pass an order in writing, cancelling the registration of such trust or pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all affording a reasonable opportunity of being heard, for such previous year and all affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations subsequent previous years, if he is satisfied that one or more specified violations subsequent previous years, if he is satisfied that one or more specified violations have taken place; have taken place; (iii) pass an order in writing, refusing to cance pass an order in writing, refusing to cancel the registration of such trust or l the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified institution, if he is not satisfied about the occurrence of one or more specified institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such t Assessing Officer and such trust or institution.
Explanation. — For the purposes of this sub For the purposes of this sub-section, the following shall mean "specified section, the following shall mean "specified violation", — (a) where any income derived from property held under trust, wholly or in part for where any income derived from property held under trust, wholly or in part for where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been charitable or religious purposes, has been applied, other than for the objects of the applied, other than for the objects of the trust or institution; or trust or institution; or (b) the trust or institution has income from profits and gains of business which is not the trust or institution has income from profits and gains of business which is not the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not incidental to the attainment of its objectives or separate books of account are not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental such trust or institution in respect of the business which is incidental such trust or institution in respect of the business which is incidental to the attainment of its objectives; or to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held the trust or institution has applied any part of its income from the property held the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which under a trust for private religious purposes, which does not enure for the benefit of does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the trust or institution established for charitable purpose created or established after the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of the commencement of this Act, has applied any part of its income for the benefit of the commencement of this Act, has applied any part of its income for the benefit of any particular religious co any particular religious community or caste; or (e) any activity being carried out by the trust or institution any activity being carried out by the trust or institution — (i) is not genuine; or is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to is not being carried out in accordance with all or any of the conditions subject to is not being carried out in accordance with all or any of the conditions subject to which it was registered; or which it was registered; or (f) the trust or institution has not complied with the requirement of any other law, as institution has not complied with the requirement of any other law, as institution has not complied with the requirement of any other law, as referred to in item (B) of sub referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, section (1), and the order, direction or decree, by whatever name called, holding that such non direction or decree, by whatever name called, holding that such non direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality." as either not been disputed or has attained finality." as either not been disputed or has attained finality."
It can be noticed from the provisions of sec. 12AB(4) of the Act, the registration already It can be noticed from the provisions of sec. 12AB(4) of the Act, the registration already 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 granted either provisionally or permanently may be cancelled by Ld CIT(E), if he is satisfied 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 r more specified violations have taken place. If he is not satisfied so, he may refuse r 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 to cancel the registration granted u/s 12AB of the Act. The expression „specified violation' is 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 defined in the Explanation. It can be noticed that the said definition is defined in the Explanation. It can be noticed that the said definition is definition", since it starts the expression "For the purposes of this sub-section, the following definition", since it starts the expression "For the purposes of this sub definition", since it starts the expression "For the purposes of this sub shall mean "specified violation". Hence, it is an exhaustive definition. Consequently, if there is shall mean "specified violation". Hence, it is an exhaustive definition. Consequently, if there is shall mean "specified violation". Hence, it is an exhaustive definition. Consequently, if there is any violation other than those stated in any violation other than those stated in the Explanation, then the Ld CIT(E) shall not get power 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 In the present case, according to Ld CIT(E), the objects clause enables the assessee to 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 apply its income outside India. According to Ld CIT(E), the same is not permit apply its income outside India. According to Ld CIT(E), the same is not permit and hence the registration provisionally granted to the assessee may be cancelled. We shall and hence the registration provisionally granted to the assessee may be cancelled. We shall 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 now examine as to whether the existence of objects for carrying out activities outside India or now examine as to whether the existence of objects for carrying out activities outside India or actual application of income outside India in acco actual application of income outside India in accordance with its objects, would fall under any rdance 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 of the categories of "specified violations" listed out in the Explanation to sec. 12AB(4) of the Act 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 Clause (a) would be attracted only if any income derived from the property held for 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 charitable purpose is applied other than for the objects of the charitable trust or 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 institution. Hence, so long as any income is applied for the objects of the charitable 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 rust or institution, the clause (a) would not get attracted. Thus, if the objects clause rust 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 of a charitable Trust or Institution permits carrying on objects outside India and if any 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 is applied for such objects, then it cannot be considered as applicati income is applied for such objects, then it cannot be considered as applicati income for objects other than the objects of the charitable trust or institution" falling income "for objects other than the objects of the charitable trust or institution" falling income "for objects other than the objects of the charitable trust or institution" falling within the meaning of clause (a). Consequently, the clause (a) would not be attracted. within the meaning of clause (a). Consequently, the clause (a) would not be attracted. within the meaning of clause (a). Consequently, the clause (a) would not be attracted.
(ii) Clause (b) would be attracted only if any business or profession is carried on and Clause (b) would be attracted only if any business or profession is carried on and 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 there is violation as mentioned therein. This clause will not be attracted for there is violation as mentioned therein. This clause will not be attracted for application of income for permitted objects outside India. application of income for permitted objects outside India.
(iii) Clause (c) would be attracted when income of trust held for private religious Clause (c) would be attracted when income of trust held for private religious 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 purposes is applied for those purposes, which does not ensure for the benefit of 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 public. The assessee herein is not a trust held for private religious purposes and public. The assessee herein is not a trust held for private religious purposes and hence this clause will not apply to the assessee herein. use will not apply to the assessee herein.
(iv) Clause (d) would be attracted when income of the trust is applied for particular Clause (d) would be attracted when income of the trust is applied for particular Clause (d) would be attracted when income of the trust is applied for particular religious community or caste. This clause will also not apply to the assessee herein. religious community or caste. This clause will also not apply to the assessee herein. religious community or caste. This clause will also not apply to the assessee herein.
(v) Clause (e) would be attracted Clause (e) would be attracted when any activity being carried out by the trust or when any activity being carried out by the trust or institution — (i) is not genuine; or is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to is not being carried out in accordance with all or any of the conditions subject to is not being carried out in accordance with all or any of the conditions subject to which it was registered. which it was registered.
This clause would be attracted when the activities of the charitable trust or institution is This clause would be attracted when the activities of the charitable trust or institution is 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 not genuine or in violation of any of the conditions subject to which the registration u/s 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 12AB was granted. In the instant case, the Ld CIT(E) has stated the acti 12AB was granted. In the instant case, the Ld CIT(E) has stated the acti have been carried on is not supported by the expenses incurred. According to Ld A.R, the have been carried on is not supported by the expenses incurred. According to Ld A.R, the 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 above said observations are against the facts available on record. Hence the above said above said observations are against the facts available on record. Hence the above said observations of Ld CIT(E) is dealt with separately infra. 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 Clause (f) would be attracted when there is failure to comply with the requirements of 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 "any other law". Under this clause "any other law" would mean any law other than "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 Income tax Act. This meaning can be understood from the Sub Income tax Act. This meaning can be understood from the Sub-clause (B) of clause (i) of sec.12AB(1)(b) of the Act, which reads as under: 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 " (B) the compliance of such requirements of any other law for the time being in force " (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". by the trust or institution as are material for the purpose of achieving its objects". by the trust or institution as are material for the purpose of achieving its objects".
The Ld CIT(E) has to ensu The Ld CIT(E) has to ensure that the charitable trust or institution has complied with the re 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 requirement of „any other law for the time being in force', as are material for the purpose of 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 achieving its objects. Here, it is pertinent to note that the verification by Ld CIT(E) should achieving its objects. Here, it is pertinent to note that the verification by Ld CIT(E) should restricted to compliance of those laws as are material for the purpose of achieving its objects. restricted to compliance of those laws as are material for the purpose of achieving its objects. 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 . It may be noticed that clauses (a),(c),(d) and (e) would be attracted only when there is . 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 application of income as mentioned in those clauses. Hence "actual application of income" 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 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 In our view, the provisions of sec.11(1) would not fall under the category of "any other 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 law", since it is only a computation provision. The provisions of sec.11(1) do not require the 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, charitable trust or institution to comply with any requirements, which are essential to achieve which are essential to achieve the objects of the trust. Further provisions of sec.11(1) do not state that the application of the objects of the trust. Further provisions of sec.11(1) do not state that the application of 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 income derived from property held under trust for activities carried outside India results in income derived from property held under trust for activities carried outside India results in violation of any law. Sec. 11 only violation of any law. Sec. 11 only states that the exemption under that section is restricted to 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 income applied for charitable purposes in India, i.e., it does not permit exemption of income 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 applied outside India. Hence income, if any, applied for objects outside India cannot be 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 o be violation of 'any other law' falling within the meaning of clause (f) of o be violation of 'any other law' falling within the meaning of clause (f) of Explanation to sec. 12AB(4) of the Act. Explanation to sec. 12AB(4) of the Act.
The foregoing discussions would show that the application of income of a charitable trust The foregoing discussions would show that the application of income of a charitable trust The foregoing discussions would show that the application of income of a charitable trust or institution outside India for carrying or institution outside India for carrying out its objects will not fall under any of the categories 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 of "specified violation" as mentioned in the Explanation to sec.12AB(4) of the Act. Hence, the 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 decision rendered by Hon'ble Delhi High Court in the case of M.K. Nambyar Saarf Law decision rendered by Hon'ble Delhi High Court in the case of M.K. Nambyar Saarf Law Charitable Trust v. Union of India Union of India [2004] 140 Taxman 616/269 ITR 556 (Delhi) [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 provisions of sec.12AB of the Act also, since the provisions of sec.12AB also do not refer 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. the activities carried in India or outside India.
In view of the foregoing discussions, it can be concluded that existence of any object for In view of the foregoing discussions, it can be concluded that existence of any object for 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 carrying out any activity outside India will not enable the Ld CIT(E) to deny registration u/s 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 12AB of the Act. As observed earlier, such kind of application of income outside India (unless it of income outside India (unless it is permitted by the CBDT) will not be exempted u/s 11 of the Act. is permitted by the CBDT) will not be 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 Hence, the first reasoning given by Ld CIT(E) is liable to be quashed. On merits of the Hence, the first reasoning given by Ld CIT(E) is liable to be quashed. On merits of the case, we are unable to agree with the interpretation given by the Ld CIT(E) to the objects case, we are unable to agree with the interpretation given by the Ld CIT(E) to the objects case, we are unable to agree with the interpretation given by the Ld CIT(E) to the objects clause of the assessee, which reads as under: clause of the assessee, which reads as under:- "Promote Indian heritage art "Promote Indian heritage art such as Indian Classical music, Organize regular concerts such as Indian Classical music, Organize regular concerts and performances by renowned and emerging Indian classical musicians, Establish or and performances by renowned and emerging Indian classical musicians, Establish or 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 support training school or institute to teach Indian classical music to students of all ages 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, ndian classical musicians to cover the costs of performance, travel, ndian classical musicians to cover the costs of performance, travel, and recording, Organize festivals and conferences that bring together Indian classical and recording, Organize festivals and conferences that bring together Indian classical and recording, Organize festivals and conferences that bring together Indian classical musicians and scholars from around the world." musicians and scholars from around the world." A careful perusal of the above cited object clause ta A careful perusal of the above cited object clause talks about the organizing festivals and lks about the organizing festivals and conferences that bring together Indian Classical musicians and scholars from around the conferences that bring together Indian Classical musicians and scholars from around the 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 world, i.e., it talks about mobilizing the Indian classical musicians and scholars, wherever world, i.e., it talks about mobilizing the Indian classical musicians and scholars, wherever they are located. It nowhere states they are located. It nowhere states that the income of the charitable trust or institution shall be 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. applied outside India. Even if it is applied outside India, then the assessee, subject to sec. 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 11(c) of the Act, would not get exemption of the income so applied u/s 11 of the Act. Hence the 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 d CIT(E) was not justified in rejecting the application of the on apprehension entertained by d 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 The second reasoning given by the assessee is that the expenses incurred by the 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, assessee do not prove the activities carried on by it. In this regard, the Ld A.R submitted that the Ld A.R submitted that the assessee has filed required documents before Ld CIT(E). He further submitted that the the assessee has filed required documents before Ld CIT(E). He further submitted that the 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 has also furnished additional evidences relating to the activities carried on by the assessee has also furnished additional evidences relating to the activities carried on by the assessee. Accordingly, he prayed that these ad assessee. Accordingly, he prayed that these additional evidences may be admitted and the ditional evidences may be admitted and the assessee may be provided with an opportunity to present all the details before Ld CIT(E) to assessee may be provided with an opportunity to present all the details before Ld CIT(E) to assessee may be provided with an opportunity to present all the details before Ld CIT(E) to prove the activities carried on by it. prove the activities carried on by it. 17.1. We find merit in the prayer of the assessee. We notice that the observatio We find merit in the prayer of the assessee. We notice that the observatio 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 Ld CIT(E) with regard to activities is general in nature, i.e., the Ld CIT(E) did not state the 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 deficiencies noticed by him in the documents furnished by the assessee. Further, the assessee deficiencies noticed by him in the documents furnished by the assessee. Further, the assessee has furnished additional evidences in order to satisfy has furnished additional evidences in order to satisfy Ld CIT(E) with regard to the Ld CIT(E) with regard to the genuineness of activities. Accordingly, in the interest of natural justice, we admit the genuineness of activities. Accordingly, in the interest of natural justice, we admit the genuineness of activities. Accordingly, in the interest of natural justice, we admit the additional evidences furnished by the assessee. additional evidences furnished by the assessee.
18. Accordingly, we set aside the impugned order passed by Ld CIT(E) rejecting the Accordingly, we set aside the impugned order passed by Ld CIT(E) rejecting the 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 cation filed by the assessee seeking permanent registration u/s 12AB of the Act and cation 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 restore all the issues to his file with the direction to process the application of the assessee 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. again afresh in the light of discussions made supra.
We shall not adjudicate the appeal filed by the assessee challenging the order passed by udicate the appeal filed by the assessee challenging the order passed by udicate 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. Ld CIT(E) rejecting the application filed by the assessee seeking recognition u/s 80G of the Act. 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 We notice that the Ld CIT(E) has rejected the application on the reasoning that 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 denied registration to the assessee u/s 12AB of the Act. In the preceding paragraphs, we have 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 cancelled the order passed by Ld CIT(E) and restored all the issues relating to the registration 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 sought by the assessee u/s 12AB of the Act. Following the said order passed by us in the the said order passed by us in the preceding paragraphs, we set aside the order passed by Ld CIT(E) rejecting the recognition preceding paragraphs, we set aside the order passed by Ld CIT(E) rejecting the recognition 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 u/s 80G of the Act and restore all the issues to his for examining the application afresh in the 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. light of discussions made supra.
Needless to mention, the assessee should be provided with proper opportunity of being Needless to mention, the assessee should be provided with proper opportunity of being Needless to mention, the assessee should be provided with proper opportunity of being heard.
In the result, both the appeals of the assessee are treated as allowed. In the result, both the appeals of the assessee are treated as allowed. In the result, both the appeals of the assessee are treated as allowed.” 7.1 We find that the above decision is squarely application with We find that the above decision is squarely application with We find that the above decision is squarely application with the facts of the present case. We therefore, hold that the mention of the facts of the present case. We therefore, hold that the mention of the facts of the present case. We therefore, hold that the mention of the term ‘outside India outside India’ in various clauses u/s 3(b)(41), 3(b)(42) and 3(b)(41), 3(b)(42) and 3b(43) in the MOA of the assessee do not call for rejection of 3b(43) in the MOA of the assessee do not call for reje 3b(43) in the MOA of the assessee do not call for reje registration as has been held in the decisions cited above. registration as has been held in the decisions cited above. registration as has been held in the decisions cited above. Accordingly, we direct the Ld. CIT(Exemptions) to consider the grant Accordingly, we direct the Ld. CIT(Exemptions) to consider the grant Accordingly, we direct the Ld. CIT(Exemptions) to consider the grant of registration subject to fulfilment of other requirements and for of registration subject to fulfilment of other requirements and for of registration subject to fulfilment of other requirements and for this purpose the matter is restored this purpose the matter is restored to Ld. CIT(E) to Ld. CIT(E) for decision of merits. Needless to add, the assessee should be given reasonable Needless to add, the assessee should be given reasonable Needless to add, the assessee should be given reasonable opportunity of being heard. opportunity of being heard. relates to rejection of application for relates to rejection of application for registration u/s 80G of the Act since the Ld. CIT(Exemptions) has registration u/s 80G of the Act since the Ld. CIT(Exemption registration u/s 80G of the Act since the Ld. CIT(Exemption been directed to consider and allow registration u/s 12AB of the been directed to consider and allow registration u/s 12AB of the been directed to consider and allow registration u/s 12AB of the Act, the rejection u/s 80G is also set aside with the direction to Ld. Act, the rejection u/s 80G is also set aside with the direction to Ld. Act, the rejection u/s 80G is also set aside with the direction to Ld. CIT(Exemptions) to decide decide the same after giving due opportunity to the same after giving due opportunity to the assessee.
In the result, both the appe In the result, both the appeals are allowed.