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Facts
The assessee, a charitable religious Trust, applied for registration under Section 12A. The CIT(E) rejected the application due to a clause in the trust deed related to foreign expenses, deeming it a violation of Section 11 of the Act.
Held
The Tribunal held that the violation of Section 11 cannot be the sole ground for rejecting a registration application under Section 12A, especially when the assessee has initiated steps to amend the offending clause.
Key Issues
Whether violation of Section 11 of the Income Tax Act can be a ground for rejection of application for registration under Section 12A, when steps are being taken to amend the trust deed.
Sections Cited
12AA, 12A, 11
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER & SHRI ANIKESH BANERJEE
O R D E R Per Anikesh Banerjee (JM):
Instant appeal of the assesse was filed against the order of the Learned Commissioner of Income-tax (Exemption), Mumbai [in short, ‘Ld.CIT(E)] passed under section 12AA of the Income-tax Act, 1961 (in short, ‘the Act’), date of order 30/12/2024.
2 ITA 274/Mum /2025 Shri Shitalnath Foundation 2. The assesse is a charitable religious Trust filed an application in Form 10AB U/s 12A(1)(ac)(ii) seeking registration 12AB of the Act. The assessee-trust is formed on 03/08/2016 and provisionally registered U/s 12Aw.e.ef. 31/05/2021. The Ld.CIT(E) has rejected the application on the ground that the assessee has taken the clause in the trust deed related to the foreign expenses. For violation of section 11 of the Act, the registration under section 12AA was duly rejected. The relevant paragraph 3.2 of the impugned order is extracted below:- “3.2 In response, the applicant made online submission on 27.12.2024. The applicant's reply with respect to violation of section 11 of the Act is reproduced in summarized as below: "Both the above ancillary objects intension is to spread awareness on the objects of the trust from India only and also to interact with any government and non-government agencies also from India only as the clause no. 4 of the trust deed specifically states about the area of Operation of the Trusts as All objects of the trust and its activities will be confined to India. Hence the trust can not operate from outside India and can not apply funds outside India." Applicant's reply is neither satisfactory nor conclusive. The applicant has stated that the clause no. 4 of the trust specifies that All objects of the trust and its activities will be confined to India. However, the words in the object, like "Interact with national/international governments and non-government agencies" clearly conveys that the applicant intends to utilise the funds outside India. Such objects leave room for any potential future endeavour that may be undertaken by the applicant trust which would require expenditure outside India. The applicant trust ought to have amended the clauses of the objects mentioned above which are in violation of the Act as discussed above. however, the applicant has not considered it. The applicant has not presented/submitted any documentary evidence/proof of passing the resolution regarding amendment in trust deed nor has it provided any proof that it has initiated the process for amendment in trust deed/MoA before the competent authority.”
3 ITA 274/Mum /2025 Shri Shitalnath Foundation 3. The Ld. AR submitted that the alleged contravention of the provisions of section 11 of the Act cannot be a ground for rejection of the application for permanent registration under section 12A of the Act. It was further submitted that the assessee has filed an appeal before this Bench and has initiated steps to amend the specific clause in the trust deed which formed the basis of objection by the Ld. CIT(E). An affidavit in this regard, executed by the trustee, Shri Rajesh M. Parekh, on 07/05/2025 and duly notarised on 09/05/2025, is placed on record at pages 1 and 2 of the paper book. It is further submitted that an application for amendment of the said clause has already been filed before the Hon’ble Assistant Charity Commissioner, Greater Mumbai Region, Worli, Mumbai. The Ld. AR placed reliance on the decision of the Co-ordinate Bench of the ITAT, Mumbai Bench “D”, in the case of Dedhia Music Foundation, & 744/Mum/2025, order dated 02/04/2025, wherein it was held that violation of section 11 of the Act cannot be a basis for denial of registration under section 12A.
The Ld. DR argued and relied on order of the Ld. CIT(E). But he had not made any objection against the documents filed by the Ld. AR.
We heard the rival submission and consider the documents available in record. On perusal of the material available on record, we note that the assessee has already undertaken steps to remove the impugned clause from the trust deed. In the interest of justice, we are of the considered view that the assessee deserves an opportunity to present the amended clause before the Ld. CIT(E), which formed the basis of rejection of its application. Accordingly, we set aside the impugned order and remand the matter to the file of the Ld. CIT(E) for de novo adjudication,
4 ITA 274/Mum /2025 Shri Shitalnath Foundation after granting the assessee an opportunity to submit the amended trust deed. Needless to mention, the assessee shall be afforded a reasonable opportunity of being heard before the final order is passed. In the result, the appeal filed by the assessee stands allowed.