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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
ORDER \nPER PRABHASH SHANKAR [A.M.] :-\nThe above captioned appeals have been filed by the assessee Trust\nagainst the orders passed by the Learned Commissioner of Income-tax\n(Exemptions), Mumbai [hereinafter referred to as “CIT(E)"] u/s.12AB and\n80G respectively of the Income-tax Act, 1961 [hereinafter referred to as\n"Act"] for the Assessment Years [A.Y.] 2025-26. Since issues involved are\ninterlinked and also the fact that appeals were heard together, they are\nbeing taken up together for adjudication vide this composite order for the\nsake of brevity. We take up first the appeal in ITA\nNo.1165/Mum/2025 relating to the rejection of application for\nregistration u/s 12AB of the Act.\n2. The grounds of appeal
s are as under:-\nITA No.1165/MUM/2025 (A.Y. 2025-26)\n1. Under the facts and in law, the learned CIT(E) - Income Tax Department\n(hereinafter referred to as ‘CIT(E)'), erred in passing an order u/s 12AB\nby rejecting the application of registration made by filing Form 10AB.\n1.1 Under the facts and in law, the learned CIT(E) erred in questioning\nthe objects of the trust and genuineness of activities of the trust solely\non the basis of misinterpreting certain clauses mentioned in the Trust\nDeed which intends that the appellant can apply funds outside India.\n1.2 Under the facts and in circumstances, the Learned CIT(E) failed to\nconsider the fact that the appellant has mentioned in the trust deed\nvide page No. 3 that the areas of operation of the trust would be\nwithin the boundaries of India.\n1.3 Under the facts and in law, the learned CIT(E) has erred in rejecting\nthe application for registration of Trust on the presumption that the\nfunds may be utilized outside India due to the general objects\nmentioned in the Trust Deed. This presumption is misplaced as it is\ncontrary to the established legal principle that decisions must be\nbased on actual conduct and not on conjectures or surmises.\n1.4 Under the facts and in law, the learned CIT(E) has failed to consider\nthe fact that the appellant has not till date incurred any expenditure\noutside India in attainment of its Objects. The Learned CIT(E)'s\ndecision is based on hypothetical assumptions without any evidence\nto support the allegation of potential utilization of funds outside\nIndia. Such decision is premature and speculative.\n1.5 Under the facts and in law, the learned CIT(E) has failed to consider\nthe facts that the inclusion of general clauses in the trust deed does not\nipso facto imply that the funds will be utilized outside India. These\nclauses merely provide flexibility for lawful and legitimate charitable\npurposes in the future.\n1.6 Under the facts and in law, the learned CIT (E) failed to consider\nthe fact that the appellant's primary focus remains on activities within\nIndia such as assisting Indian Students study abroad, promoting\nIndian products. The clauses referring to activities abroad are\nancillary and do not form part of the trust's objectives. Learned CIT\n(E) failed to appreciate this distinction.\n1.7 Under the facts and in law, the learned CIT(E) erred in invoking the\nprovisions of section 11 to reject the application for registration u/s\n12AB, despite section 11 primarily governing the exemption of the\nIncome derived from property held under Trust.\n1.8 Under the facts and in law and without prejudice to the above, the\nlearned CIT(E) failed to consider the provisions of section 11 (1)(c) of\nthe Act, which states that the provisions are attracted only if actual\nexpenditure is incurred outside India.\n1.9 Under the facts and in law, the learned CIT(E) failed in considering the\nfact that the provisions of section 11 (1)(c) cannot be invoked only on\nthe ground that the trust deed provides for activities outside India.\n1.10In the case of M.K. Nambyar Saarf Law Charitable Trust v. Union\nof India [2004] 140 Taxman 616 (Delhi), it was held that Registration\ncannot be denied to charitable or religious trust merely because\nincome is applied outside India. And if Income is so applied, then\nsection 11(1)(c) will be applicable and if the permission granted by\ngeneral or special order, then the benefit u/s 11 can be extended.\n2. Under the facts and in law, the learned CIT(E) failed to provide reasonable\nopportunity to the appellant to justify about the object of the appellant and\ngenunieness of the activities of the appellant.\n3. The assessee Trust('Applicant') filed an application in Form\n10AB u/s 12A(1)(ac)(iii) seeking registration under section 12AB of the\nAct.According to the order passed by the ld.CIT(E), the relevant\nprocedural mandate is governed by the provisions of Rule 17A of the IT\nRules, which is titled "Application for registration of charitable or\nreligious trusts, etc.” The sub rule (2) of Rule 17A mandates that the\napplication in Form 10AB is to be accompanied by certain specific\ndocuments mentioned in Rule 11AA(2), it was noted by him from various\nclauses of the trust deed/MOA, being the objects of trust deed/MOA,\nthe applicant intended to apply fund outside India. He observed that\nthese objects were in violation of section 11 of the Act. In response to the\nquery made in this regard, the applicant stated as under:\n“Trust deed dated 24.05.2023 which contains various clauses from 1 to\n27 & total pages are 40. Trust deed has stated before providing the\nmain objects and incidental objects as Boundaries, Limits and area of\nOperation which is reproduced herewith.\nClause No 3 on page no 6 of 40 of Trust deed dated 24.5 2023 which is\nreproduced herewith:\n“Area of Operation State that The Trust Shall Operate within the Boundaries\nof India\"\nSo the settlor and Trustees have already agreed and decided that trust\noperation will be WITHIN BOUNDERIES OF INDIA. Hence It clearly\nsays and means that\n• All activities or benefits will be within India,\n• End user or beneficiaries will be within India,\n• Any help or benefits will be for persons or human being staying\nin India\n• Any medical camp help, any education help to\nstudents/education institute or Relief of poverty for persons or\ninstitute having presence in India only will be provided.\nSo the Trustees cannot violate the basics principles of thrust stated in\nbeginning of Trust deed that TRUST FUND CAN NOT BE TO\nUTILISED OUTSIDE INDIA.\nFurther again before stating the various objects stated vide clause no\n7(1)(1) &(2) AND 7(11)(A) TO(G) of said trust deed, the settlor and\ntrustees have desired and agreed and confined in clause No 7 and page\nno 6 of trust deed that is reproduced hereinafter:\n“The Trustees shall execute the Aims and Objects throughout the State of\nIndia Only.\"\nSo again trust deed clearly lays down the rules and conditions that\nAim and objects to be confined to India only and not outside India.\nHowever various clauses/sentences/connotation stated in subsidiary\nclauses no 7(II)(A) (viil) 7(11)(A) (xxix), 7(||) (A) (xxxi) 7(II)(A) (xxxiv)\n7(11)(B) (xvii),7(II) (B) (xviiis). 7(ll)(F)(x1) and 7(ll)(F)(xxv) states and\ninterpret that wherever any advanced technology or know how or\nresearch work of any institute or person outside India are having will\nthe taken help of or may take some notes from them so it does describe\nor state that benefits or end use of beneficiaries should be available to\npersons staying outside India as it is already restricted in the\nbeginning of Trust deed that its operation and aims will be carried out\nin India only.So the trust will do activity or carry main objects which\nis restricted to INDIA only.\"\n3.
The ld.CIT(E) found the reply neither satisfactory nor\nconclusive. The applicant stated that trust operation will be within\nboundaries of India. However, the words in the object, like “giving\ntravelling fellowships in any branch of Science or art or learning\nassisting students to study abroad either by payment of a lumpsum or\nby payment of periodical sums or “Trust shall establish, maintain and\ncontrol institutions in India and elsewhere for the above object....” Or\n“To conduct and/or arrange foreign tours of the deserving candidates\n"clearly conveyed that it intended to utilise the funds outside India. Such\nobjects left room for any potential future endeavour may be undertaken\nby the assessee trust which would require expenditure outside India.\nAccording to him, the applicant trust ought to have amended the clauses\nof the objects mentioned above which are in violation of the Act as\ndiscussed above, however, the applicant has not considered it. The\nassessee had not presented/submitted any documentary evidence/proof\nof passing the resolution regarding amendment in trust deed nor has it\nprovided any proof that it has initiated the process for amendment in\ntrust deed/MOA before the competent authority. It is further stated that\nRegistration under section 12AB is to be granted in terms of the\nprovisions of section 12AB(1)(b) of the Act after being satisfied about the\nobjects of the trust or institution, the genuineness of activities, and the\ncompliance of any other law for the time being in force as are material\nfor the purposes of achieving its objects. He, therefore, concluded that\nthe applicant was not fulfilling the stipulated conditions prescribed for\napproval of application filed in Form 10AB. As such, the application\nseeking registration under section 12AB of the Act was rejected by him.\nBefore us, the ld.CIT(DR) has supported the order of the\nExemption authority. He also placed reliance on the decision of the\ncoordinate bench,Mumbai in the case of Sila For Change Foundation in\nITA No.4274 & 4275/MUM/2024wherein on identical facts, appeal against\nrejection of registration application u/s 12AB was dismissed.\n5. Per contra, the ld.AR has drawn attention to the objects of the\nTrust which clearly shows that all is activities are confined to the\nboundary of the country only and has no intention or object to do any\nactivity outside India. He further relied on the decision of coordinate\nbench of ITAT, Mumbai in the case of Dedhia Music\nFoundation(2025) 173 Taxmann.com 394(Mum-ITAT)stating\nthat facts of the instant case are identical wherein it was held that the\nCIT could not deny registration under section 12AB of the Act on the\nground that there was existence of any object clause for carrying out\nany activity outside India.However,such kind of application of income\noutside India, unless permitted by CBDT will not be exempted under\nsection 11 of the Act.\n6. We have carefully perused the record, gone through various\nclauses of the Trust deed. The ld.CIT has categorically stated that\ncertain words in the deed like “giving travelling fellowships in any\nbranch of Science or art or learning assisting students to study abroad\neither by payment of a lumpsum or by payment of periodical sums or\n"Trust shall establish, maintain and control institutions in India and\nelsewhere for the above object....” or “To conduct and/or arrange foreign\ntours of the deserving candidates clearly conveys that the assessee\nintends to utilise the funds outside India. Such objects leave room for\nany potential future endeavour may be undertaken by the assessee Trust\nwhich would require expenditure outside India. It appears that he had\nobjections to this clause only on which he inferred that the applicant\nhad left open option for its activity and operation outside India in future\nendeavours although we find that the applicant has categorically stated\nin the deed that all its activities as also the beneficiaries would be\nconfined to the boundaries of the country only. Relevant parts provide\nthat “Trust deed dated 24.05.2023 which contains various clauses from 1 to\n27 & total pages are 40. Trust deed has stated before providing the main\nobjects and incidental objects as Boundaries, Limits and area of Operation\nwhich is reproduced herewith.\nClause No 3 on page no 6 of 40 of Trust deed dated 24.5 2023 which is\nreproduced herewith:\n“Area of Operation State that The Trust Shall Operate within the Boundaries\nof India\"\nSo the settlor and Trustees have already agreed and decided that trust\noperation will be WITHIN BOUNDERIES OF INDIA. Hence It clearly\nsays and means that\n• All activities or benefits will be within India,\n• End user or beneficiaries will be within India,\n• Any help or benefits will be for persons or human being staying\nin India\n• Any medical camp help, any education help to\nstudents/education institute or Relief of poverty for persons or\ninstitute having presence in India only will be provided.\nSo the Trustees cannot violate the basics principles of thrust stated in\nbeginning of Trust deed that TRUST FUND CAN NOT BE TO\nUTILISED OUTSIDE INDIA.\nFurther again before stating the various objects stated vide clause no\n7(1)(1) &(2) AND 7(11)(A) TO(G) of said trust deed, the settlor and\ntrustees have desired and agreed and confined in clause No 7 and page\nno 6 of trust deed that is reproduced hereinafter:\n“The Trustees shall execute the Aims and Objects throughout the State of\nIndia Only.\"\nSo again trust deed clearly lays down the rules and conditions that\nAim and objects to be confined to India only and not outside India.\nHowever various clauses/sentences/connotation stated in subsidiary\nclauses no 7(II)(A) (viil) 7(11)(A) (xxix), 7(||) (A) (xxxi) 7(II)(A) (xxxiv)\n7(11)(B) (xvii),7(II) (B) (xviiis). 7(ll)(F)(x1) and 7(ll)(F)(xxv) states and\ninterpret that wherever any advanced technology or know how\norresearch work of any institute or person outside India are having\nwill the taken help of or may take some notes from them so it does\ndescribe or state that benefits or end use of beneficiaries should be\navailable to persons staying outside India as it is already restricted in the\nbeginning of Trust deed that its operation and aims will be carried\nout in India only.So the trust will do activity or carry main objects\nwhich is restricted to INDIA only.”\n6.1 Having gone through the contents of the order of the\ncoordinate bench in Dedhia Music Foundation (supra), we find\nthat in the impugned order as well the ld.CIT(E) rejected the application\nfor registration u/s 12AB on similar object clause in existence in the\napplication. Relevant parts of the order are extracted as under for the\nsake of clarity and brevity:\n\"11. As is evident from the above, the section lists various activities which qualify as\ncharitable purpose but there is no restriction to the scope of such activities within the\ngeographical boundary of India. It is only section 11, as reproduced above, which places a\ngeographical restriction allowing exemption only to incomes applied to charitable purposes in\nIndia. But even the said section does not completely rule out exemption to incomes applied\noutside India for charitable purposes, granting exemption to certain such applications, as\nmentioned in section 11(1)(c), subject to being approved by the Board.\n12. As is evident from the above, in the scheme of the Act, incomes applied outside India for\ncharitable purposes are not completely and categorically ruled out from being eligible for grant\nexemption.\n13. The Ld. Pr. CIT's order,in the present case, therefore denying registration to the applicant\nassessee merely for the reason that its objects included application of income outside India, we\nhold, is not in accordance with law. More particularly when, admittedly, this was not the sole\nand main object of the applicant assessee, but only its ancillary and incidental object. It is not\nthe case therefore that there is to be no application of income within India at all as per the\nobjects. In fact the main object of the applicant assessee involves carrying out charitable\nactivities in India. In this factual situation, denying registration u/s 12AA of the Act, for the\nreason that its incidental object entailed application of income outside India, we find, would\nresult in the assessee being denied exemption to income applied in India, which it would\notherwise be entitled to under law.\n14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of section\n11(1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities\ncarried out in India will qualify as charitable for grant of registration, is only for the purpose of\ndetermining the income which qualifies for exemption u/s 11 of the Act. The said section\ncomes into operation only once registration is granted u/s 12A of the Act and therefore cannot\nbe relevant for the purposes of granting registration u/s 12A of the Act. The scheme of the Act\nis that all entities carrying out charitable activities, as defined in section 2(15) of the Act,\nqualify to be registered as charitable entities subject to satisfaction of the concerned officer\nvis-a-vis their objects and activities, but the exemption is provided/restricted only to the extent\nof income which is applied for charitable purpose in India.\n15. The issue we find, is squarely covered in favour of the assessee by the decisions relied\nupon by the Ld. Counsel for the assessee before us. In the case of MK Nambyar SAARC\nLaw Charitable Trust (supra), we find, the application for grant of registration was rejected\non the ground that the applicant itself had admitted that the scholarship could be paid to\nmembers even outside India. The Hon'ble High Court held that the application of income\noutside India is not a relevant criteria for rejecting the application for grant of registration u/s\n12AA of the Act and the officer has to only restrict himself to the satisfaction about the objects\nand genuineness of the activities of the trust while granting registration with no restriction on\nthe activities being carried out inside or outside India. The relevant findings of the Hon'ble\nHigh Court is as under:\n'The judgment of the court was delivered by B.C. Patel C.J. - M.K. Nambyar SAARC Law\nCharitable Trust has filed this petition against the order made by the Director of Income-tax\n(Exemptions) New Delhi, on February 24, 2004. The aforesaid trust submitted two\napplications in Form No. 10A for registration under section 12A and recognition under section\n80G of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The application was\nrejected on the ground that the applicant itself has admitted that the scholarships can be paid to\nthe members even outside India. It is in view of this admission that the activities will be\nextended outside India as per the objects laid down, it was held that the registration cannot be\ngranted under section 12A of the Act and the approval of exemption under section 80G also\ncannot be granted. Section 11 of the Act refers to income from property held for charitable or\nreligious purposes. The relevant provisions are reproduced hereunder:\n\"11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be\nincluded in the total income of the previous year of the person in receipt of the income-\n(a) income derived from property held under trust wholly for charitable or religious purposes,\nto the extent to which such income is applied to such purposes in India; and, where any such\nincome is accumulated or set apart for application to such purposes in India, to the extent to\nwhich the income so accumulated or set apart is not in excess of fifteen per cent, of the income\nfrom such property; .. .\n(b)******\n(c )income derived from property held under trust-- (i)created on or after the 1st day of April,\n1952, for a charitable purpose which tends to promote international welfare in which India is\ninterested, to the extent to which such income is applied to such purposes outside India, and (ii\n)for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to\nwhich such income is applied to such purposes outside India ;\nProvided that the Board, by general or special order, has directed in either case that it shall not\nbe included in the total income of the person in receipt of such income;\n(d)******\n3. So far as the benefit of section 11(1)(a) is concerned, it can be extended only to the extent to\nwhich such income is applied to such purposes in India. However, if the income is applied to\nthe purposes outside India, then clause (c) will be applicable and if the permission is granted\nby the Board either by general or special order then, benefit can be extended. Section\n12AA prescribes the procedure for registration. Reading the section, it becomes clear that after\nthe application is made, the officer has to call for documents or information from the Trust to\nsatisfy himself about the genuineness of the activities of the Trust. He can make further\nenquiry as he may deem necessary. It is only after satisfying himself about the objects of the\nTrust and the genuineness of its activities that he has to pass an order in writing registering the\nTrust or institution. And if he is not satisfied, he can reject the same. This section does not\nrefer to the activities in India or outside India. It refers to application of income for charitable\nor religious purposes in India as also with direction or order of the Board for application of\nincome as aforesaid outside India. Reading the order dated 24-2-2004, it is very clear that there\nis non-application of mind. It was necessary for the Commissioner to examine the purpose for\nsatisfying himself that the activities are genuine. It was open for him to make necessary\nenquiries in this behalf and to pass an order as per the procedure laid down under section\n12AA of the said Act. So far as income which is applied outside India is concerned, is not a\nrelevant criteria for rejecting the application. In absence of order under section 11(1)(a)( c),\none cannot seek benefit for application of income for charitable or religious purposes, outside\nIndia. Therefore, the order dated 24-2-2004 made by the Director of Income-tax (Exemptions),\nAnnexed at page 32 which is based on irrelevant criteria is quashed and set aside with a\ndirection to consider the application strictly in accordance with law. It is made that even\napplication under section 80G is required to be considered afresh. It is directed that the\napplication shall be disposed of within a period of four weeks by the Commissioner.\n16. The aforesaid decision of the Hon'ble Delhi High Court has been followed by the\nCoordinate Benches of the Tribunal in the case of National Informatics Centre Services Inc.\n(supra) ([2017] 88 taxmann.com 878 (Delhi))\n17. In view of the above, the order passed by the Ld. CIT(E) denying registration u/s 12A of\nthe Act is set aside and the Ld.CIT(E) is directed to grant registration as applied for by the\nassessee.\n18. In the result, the appeal of the assessee is allowed.\"\n6. We may examine whether the ratio of above said decision would also apply to the\napplications processed by Ld CIT(E) under new provisions of sec. 12AB of the Act. Under the\nprovisions of sec.11 to 13 of the Act, which are applicable to charitable trusts or institution,\ntwo authorities are involved, viz.,\n(a) the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or 12AB\nas the case may be.\n(b) the assessing officer is the authority who assesses the total income of the charitable trust or\ninstitution for every assessment year.\n7. We shall examine the provisions of sec. 12AB of the Act. The authority to grant\nregistration u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have\nbeen prescribed for the process of registration or cancellation of charitable trusts or institution.\n(a) For new charitable trusts or institutions, provisional registration is granted u/s\n12AB(1)(c) of the Act for a period of 3 years from the assessment year for which the\nregistration is sought.\n(b) Permanent registration shall be granted u/s 12AB(1)(a)/12AB(1)(b) of the Act for a period\nof five years, when the charitable trusts or institutions apply for the same.\n(c) Where a provisional registration or permanent registration is granted u/s12AB(1) of the\nAct, the Ld PCIT/CIT is empowered u/s 12AB(4) of the Act to cancel the registration in\naccordance with that provisions.\n8. As noticed earlier, the assessing officer is the authority who is empowered to determine the\nincome of a charitable trust or institution and granting of exemption u/s 11 of the Act. As\nper sec.11(1), exemption u/s 11 is restricted "to the extent to which such income is applied to\ncharitable purposes in India". Thus the recognition of geographical jurisdiction wherein the\nincome was applied needs to be recognised or examined while computing total income of the\ncharitable trust or institution. We also noticed that the income applied for non- charitable\npurposes or applied outside India will not be exempt u/s 11 of the Act, i.e., such income shall\nbe taxable in India.\n9. We shall compare the provisions of sec.12AA and sec. 12AB of the Act which prescribe the\nconditions for granting registration.\n(A) SECTION 12AA:-\n\"12AA. [Procedure for registration.] (1) The Principal Commissioner or Commissioner, on\nreceipt of an application for registration of a trust or institution made under clause (a) or clause\n(aa) or clause (ab) of sub-section (1) of section 12A, shall--\n(a)[call for such documents or information from the trust or institution as he thinks necessary\nin order to satisfy himself about,--\n(i)the genuineness of activities of the trust or institution; and\n(ii)the compliance of such requirements of any other law for the time being in force by the\ntrust or institution as are material for the purpose of achieving its objects, and may also make\nsuch inquiries as he may deem necessary in this behalf; and]\n(b) after satisfying himself about the objects of the trust or institution and the genuineness of\nits activities as required under sub-clause (i) of clause (a) and compliance of the requirements\nunder sub-clause (ii) of the said clause], he--\n(i)shall pass an order in writing registering the trust or institution;\n(ii)shall, if he is not so satisfied, pass an order in writing refusing to register the trust or\ninstitution, and a copy of such order shall be sent to the applicant.\"\n(B) SECTION12AB 12AB. [Procedure for fresh registration.] [Ins. by the Act No. 38 of 2020,\nw.e.f. 1- 4-2021.] (1)The Principal Commissioner or Commissioner, on receipt of an\napplication made under clause (ac) of sub-section (1) of section 12A, shall,--\n(a)where the application is made under sub-clause (i) of the said clause, pass an order in\nwriting registering the trust or institution for a period of five years;\n(b)where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or\nsub-clause (v) of the said clause,--\n(i)call for such documents or information from the trust or institution or make such inquiries as\nhe thinks necessary in order to satisfy himself about--\n(A)the genuineness of activities of the trust or institution; and (B)the compliance of such\nrequirements of any other law for the time being in force by the trust or institution as are\nmaterial for the purpose of achieving its objects;\n(ii)after satisfying himself about the objects of the trust or institution and the genuineness of its\nactivities under item (A) and compliance of the requirements under item (B), of sub-clause (i),-\n(A) pass an order in writing registering the trust or institution for a period of five years; or (B)\nif he is not so satisfied, pass an order in writing rejecting such application and also cancelling\nits registration after affording a reasonable opportunity of being heard;\n(c) where the application is made under sub-clause (vi) of the said clause, pass an order in\nwriting provisionally registering the trust or institution for a period of three years from the\n assessment year from which the registration is sought, and send a copy of such order to the\ntrust or institution.\n9.
1. We notice that the provisions of sec.12AA(3) and 12AA(4) of the Act describes the power\nof Ld CIT(E) to cancel the registration. Similarly, the provisions of sec. 12AB(4) empowers the\nLd CIT(E) to cancel the registration already granted either provisionally or permanently. It can\nbe noticed that the provisions relating to cancellation of registration granted\nunder sec.12AA and sec. 12AB are identically worded under the respective provisions. Hence,\nin our view, the ratio of the decision rendered in the context of sec. 12AA can be conveniently\napplied to the applications processed by Ld CIT(E) u/s 12AB of the Act.\n10. However, it is noticed that the provisions of sec.12AB(4) is elaborate vis-a-\nvis sec.12AA(3) & (4). Even though, in the instant case, the Ld CIT(E) has not specifically\ninvoked the provisions of sec.12AB(4) of the Act, we may examine the applicability of the\nsaid provision to the facts of the present case. The provisions of sec. 12AB(4) reads as under:-\n\"(4) Where registration or provisional registration of a trust or an institution has been granted\nunder clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1)\nof section 12AA, as the case may be, and subsequently,--\n(a) the Principal Commissioner or Commissioner has noticed occurrence of one or more\nspecified violations during any previous year; or\n(b) the Principal Commissioner or Commissioner has received a reference from the Assessing\nOfficer under the second proviso to sub-section (3) of section 143 for any previous year; or\n(c) such case has been selected in accordance with the risk management strategy, formulated\nby the Board from time to time, for any previous year, the Principal Commissioner or\nCommissioner shall--\n(i) call for such documents or information from the trust or institution, or make such inquiry as\nhe thinks necessary in order to satisfy himself about the occurrence or otherwise of any\nspecified violation;\n(ii) pass an order in writing, cancelling the registration of such trust or institution, after\naffording a reasonable opportunity of being heard, for such previous year and all subsequent\nprevious years, if he is satisfied that one or more specified violations have taken place;\n(iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he\nis not satisfied about the occurrence of one or more specified violations;\n(iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the\nAssessing Officer and such trust or nstitution.\nExplanation.--For the purposes of this sub-section, the following shall mean "specified\nviolation",--\n(a) where any income derived from property held under trust, wholly or in part for charitable\nor religious purposes, has been applied, other than for the objects of the trust or institution; or\n(b) the trust or institution has income from profits and gains of business which is not incidental\nto the attainment of its objectives or separate books of account are not maintained by such trust\nor institution in respect of the business which is incidental to the attainment of its objectives;\nor\n(c) the trust or institution has applied any part of its income from the property held under a\ntrust for private religious purposes, which does not ensure for the benefit of the public; or\n(d) the trust or institution established for charitable purpose created or established after the\ncommencement of this Act, has applied any part of its income for the benefit of any particular\nreligious community or caste; or\n(e) any activity being carried out by the trust or institution--\n(i) is not genuine; or\n(ii) is not being carried out in accordance with all or any of the conditions subject to which it\nwas registered; or\n(f) the trust or institution has not complied with the requirement of any other law, as referred to\nin item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree,\nby whatever name called, holding that such non-compliance has occurred, has either not been\ndisputed or has attained finality.\"\n11. It can be noticed from the provisions of sec.12AB(4) of the Act, the registration already\ngranted either provisionally or permanently may be cancelled by Ld CIT(E), if he is satisfied\nthat one or more specified violations have taken place. If he is not satisfied so, he may refuse\nto cancel the registration granted u/s 12AB of the Act. The expression „specified violation“ is\ndefined in the Explanation. It can be noticed that the said definition is not an \"inclusive\ndefinition\", since it starts the expression \"For the purposes of this sub-section, the following\nshall mean \"specified violation\"\". Hence, it is an exhaustive definition. Consequently, if there\nis any violation other than those stated in the Explanation, then the Ld CIT(E) shall not get\npower to cancel the registration.\n12. In the present case, according to Ld CIT(E), the objects clause enables the assessee to\napply its income outside India. According to Ld CIT(E), the same is not permitted under the\nAct and hence the registration provisionally granted to the assessee may be cancelled. We shall\nnow examine as to whether the existence of objects for carrying out activities outside India or\nactual application of income outside India in accordance with its objects, would fall under any\nof the categories of \"specified violations\" listed out in the Explanation to sec. 12AB(4) of the\nAct or not.\n(i) Clause (a) would be attracted only if any income derived from the property held for\ncharitable purpose is applied other than for the objects of the charitable trust or institution.\nHence, so long as any income is applied for the objects of the charitable trust or institution, the\nclause (a) would not get attracted. Thus, if the objects clause of a charitable Trust or Institution\npermits carrying on objects outside India and if any income is applied for such objects, then it\ncannot be considered as application of income \"for objects other than the objects of the\ncharitable trust or institution\" falling within the meaning of clause (a). Consequently, the\nclause (a) would not be attracted.\n(ii) Clause (b) would be attracted only if any business or profession is carried on and there is\nviolation as mentioned therein. This clause will not be attracted for application of income for\npermitted objects outside India.\n(iii) Clause (c) would be attracted when income of trust held for private religious purposes is\napplied for those purposes, which does not ensure for the benefit of the public. The assessee herein\nis not a trust held for private religious purposes and hence this clause will not apply to the\nassessee herein.\n(iv) Clause (d) would be attracted when income of the trust is applied for particular religious\ncommunity or caste. This clause will also not apply to the assessee herein.\n(v) Clause (e) would be attracted when any activity being carried out by the trust or institution-\n(i) is not genuine; or\n(ii) is not being carried out in accordance with all or any of the conditions subject to which it\nwas registered. This clause would be attracted when the activities of the charitable trust or\ninstitution is not genuine or in violation of any of the conditions subject to which the\nregistration u/s 12AB was granted. In the instant case, the Ld CIT(E) has stated the activities\nclaimed to have been carried on is not supported by the expenses incurred. According to Ld\nA.R, the above said observations are against the facts available on record. Hence the above\nsaid observations of Ld CIT(E) is dealt with separately infra.\n(vi) Clause (f) would be attracted when there is failure to comply with the requirements of\n\"any other law\". Under this clause \"any other law\" would mean any law other than Income tax\nAct. This meaning can be understood from the Sub-clause (B) of clause (i)\nof sec. 12AB(1)(b) of the Act, which reads as under:-\n\"(B) the compliance of such requirements of any other law for the time being in force by the\ntrust or institution as are material for the purpose of achieving its objects\".\nThe Ld CIT(E) has to ensure that the charitable trust or institution has complied with the\nrequirement of any other law for the time being in force\", as are material for the purpose of\nachieving its objects. Here, it is pertinent to note that the verification by Ld CIT(E) should be\nrestricted to compliance of those laws as are material for the purpose of achieving its objects.\n12.
1. It may be noticed that clauses (a), (c), (d) and (e) would be attracted only when there is\napplication of income as mentioned in those clauses. Hence \"actual application of income\" is\nthe condition to be satisfied for attracting the above said four clauses.\n13. In our view, the provisions of sec.11(1) would not fall under the category of \"any other\nlaw\", since it is only a computation provision. The provisions of sec.11(1) do not require the\ncharitable trust or institution to comply with any requirements, which are essential to achieve\nthe objects of the trust. Further provisions of sec.11(1) do not state that the application of\nincome derived from property held under trust for activities carried outside India results in\nviolation of any law. Sec.11 only states that the exemption under that section is restricted to\nincome applied for charitable purposes in India, i.e., it does not permit exemption of income\napplied outside India. Hence income, if any, applied for objects outside India cannot be\nconstrued to be violation of 'any other law' falling within the meaning of clause (f) of\nExplanation to sec. 12AB(4) of the Act.\n14. The foregoing discussions would show that the application of income of a charitable trust\nor institution outside India for carrying out its objects will not fall under any of the categories\nof \"specified violation\" as mentioned in the Explanation to sec.12AB(4) of the Act. Hence, the\ndecision rendered by Hon'ble Delhi High Court in the case of M.K. Nambyar Saarf Law\nCharitable Trust (supra) will apply to the provisions of sec.12AB of the Act also, since the\nprovisions of sec. 12AB also do not refer to the activities carried in India or outside India.\n15. In view of the foregoing discussions, it can be concluded that existence of any object for\ncarrying out any activity outside India will not enable the Ld CIT(E) to deny registration u/s\n12AB of the Act. As observed earlier, such kind of application of income outside India (unless\nit is permitted by the CBDT) will not be exempted u/s 11 of the Act.\n16. Hence, the first reasoning given by Ld CIT(E) is liable to be quashed. On merits of the\ncase, we are unable to agree with the interpretation given by the Ld CIT(E) to the objects\nclause of the assessee, which reads as under:-\n\"Promote Indian heritage art such as Indian Classical music, Organize regular concerts and\nperformances by renowned and emerging Indian classical musicians, Establish or support\ntraining school or institute to teach Indian classical music to students of all ages and skill\nlevels, to Indian classical musicians to cover the costs of performance, travel, and recording,\nOrganize festivals and conferences that bring together Indian classical musicians and scholars\nfrom around the world.\"\nA careful perusal of the above cited object clause talks about the organizing festivals and\nconferences that bring together Indian Classical musicians and scholars from around the world,\ni.e., it talks about mobilizing the Indian classical musicians and scholars, wherever they are\nlocated. It nowhere states that the income of the charitable trust or institution shall be applied\noutside India. Even if it is applied outside India, then the assessee, subject to sec. 11(c) of the\nAct, would not get exemption of the income so applied u/s 11 of the Act. Hence the Ld CIT(E)\nwas not justified in rejecting the application of the on apprehension entertained by him.\n17. The second reasoning given by the assessee is that the expenses incurred by the assessee\ndo not prove the activities carried on by it. In this regard, the Ld A.R submitted that the\nassessee has filed required documents before Ld CIT(E). He further submitted that the assessee\nhas also furnished additional evidences relating to the activities carried on by the assessee.\nAccordingly, he prayed that these additional evidences may be admitted and the assessee may\nbe provided with an opportunity to present all the details before Ld CIT(E) to prove the\nactivities carried on by it.\n17.
1. We find merit in the prayer of the assessee. We notice that the observations made by Ld\nCIT(E) with regard to activities is general in nature, i.e., the Ld CIT(E) did not state the\ndeficiencies noticed by him in the documents furnished by the assessee. Further, the assessee\nhas furnished additional evidences in order to satisfy Ld CIT(E) with regard to the genuineness\nof activities. Accordingly, in the interest of natural justice, we admit the additional evidences\nfurnished by the assessee.\n18. Accordingly, we set aside the impugned order passed by Ld CIT(E) rejecting the\napplication filed by the assessee seeking permanent registration u/s 12AB of the Act and\nrestore all the issues to his file with the direction to process the application of the assessee\nagain afresh in the light of discussions made supra.\n19. We shall not adjudicate the appeal filed by the assessee challenging the order passed by Ld\nCIT(E) rejecting the application filed by the assessee seeking recognition u/s 80G of the Act.\n20. We notice that the Ld CIT(E) has rejected the application on the reasoning that the he has\ndenied registration to the assessee u/s 12AB of the Act. In the preceding paragraphs, we have\ncancelled the order passed by Ld CIT(E) and restored all the issues relating to the registration\nsought by the assessee u/s 12AB of the Act. Following the said order passed by us in the\npreceding paragraphs, we set aside the order passed by Ld CIT(E) rejecting the recognition u/s\n80G of the Act and restore all the issues to his for examining the application afresh in the light\nof discussions made supra.\n21. Needless to mention, the assessee should be provided with proper opportunity of being\nheard.\n22. In the result, both the appeals of the assessee are treated as allowed.\"\n8. We find that the above decision is squarely applicable to the\nfacts of the case as here also the ld.CIT( E) has rejected the application\nfor registration solely on account of intended activity outside the\ncountry. He failed to take note of the various clauses of the deed the\napplicant has repeatedly in several parts therein has categorically\nrepeated its entire activity as also the beneficiaries situated within the\nboundaries of the country only.\n8.1 In so far as the reliance placed by the ld.DR on the\ncoordinate bench in Sila for Change Foundation(supra) is concerned, we\nfind that the decision is distinguishable in the sense that as per the\nTrust deed one of the object clauses categorically stated “To provide\nsupport and other such developmental services to other\norganisations in India and outside India in the social sector\"\nwhich clearly showed its intentions to carry on activities outside the\ncountry which is not the case here. Moreover, the applicant therein was\namenable to modifying the Trust deed on the issue of activities outside\nthe country for which the tribunal accorded liberty in this regard.\n8.2 Respectfully following the above decision, we set aside the\norder passed by the ld.CIT(E) and direct him to allow registration to the\napplicant Trust. As a result, the grounds raised
by the assessee are\nallowed.\n9.ITA No.1164/MUM/2025 (A.Y. 2025-26)\n1. Under the facts and in law, the learned CIT(E) - Income Tax Department\n(hereinafter referred to as ‘CIT(E)'), erred in denying the recognition of\nthe trust under section 80G on the grounds of rejecting the application\nfor registration u/s 12AB,as per the order issued u/s 12AB dated\n23.12.2024.\n1.1 Under the facts and in law, the learned CIT(E) erred in\nquestioning the objects of the trust and genuineness of activities of\nthe trust solely on the basis of misinterpreting certain clauses\nmentioned in the Trust Deed which intends that the appellant can\napply funds outside India.\n1.2 Under the facts and in law, the learned CIT(E) has erred in\nrejecting the application for registration of Trust on the\npresumption that the funds may be utilized outside India due to\nthe general objects mentioned in the Trust Deed. This\npresumption is misplaced as it is contrary to the established legal\nprinciple that decisions must be based on actual conduct and not\non conjectures or surmises.\n1.3 Under the facts and in law, the learned CIT(E) has failed to\nconsider the fact that the appellant has not till date incurred any\nexpenditure outside India in attainment of its Objects. The\nLearned CIT(E) 's decision is based on hypothetical assumptions\nwithout any evidence to support the allegation of potential\nutilization of funds outside India. Such decision is premature and\nspeculative.\n1.4 Under the facts and in law, the learned CIT(E) has failed to\nconsider the facts that the inclusion of general clauses in the trust\ndeed does not ipso facto imply that the funds will be utilized\noutside India. These clauses merely provide flexibility for lawful\nand legitimate charitable purposes in the future.\n1.5 Under the facts and in law, the learned CTT (B) failed to consider\nthe fact that the appellant's primary focus remains on activities\nwithin India such as assisting Indian Students study abroad,\npromoting Indian products. The clauses referring to activities\nabroad are ancillary and do not form part of the trust's\nobjectives. Learned CIT (E) failed to appreciate this distinction.\n1.6 Under the facts and in law, the learned CIT(E) erred in invoking\nthe provisions of section 11 to reject the application for\nregistration u/s 12AB, despite section 11 primarily governing the\nexemption of the Income derived from property held under Trust.\n1.7 Under the facts and in law and without prejudice to the above, the\nlearned CIT(E) failed to consider the provisions of section 11. (1)(c)\nof the Act, which states that the provisions are attracted only if\nactual expenditure is incurred outside India.\n1.8 Under the facts and in law, the learned CIT(E) failed in\nconsidering the fact that the provisions of section 11. (1)(c) cannot\nbe invoked only on the ground that the trust deed provides for\nactivities outside India.\n1.9 In the case of M.K. Nambyar Saarf Law Charitable Trust v. Union\nof India [2004] 140 Taxman 616 (Delhi), it was held that\nRegistration cannot be denied to charitable or religious trust\nmerely because income is applied outside India. And if Income is\nso applied, then section 11(1)(c) will be applicable and if the\npermission granted by general or special order, then the benefit\nu/s 11 can be extended.\n2. Under the facts and in law, the learned CIT(E) failed to provide\nreasonable opportunity to the appellant to justify about the object of the\nappellant and genuineness of the activities of the appellant.\n3. All the aforesaid grounds are without prejudice to each other,\nindependent and in the alternative.\n10. As we have already set aside the order u/s 12AB of the Act\nand directed the CIT to allow the registration,consequently, the rejection\nof the application u/s 80G is also set aside with a direction to the CIT to\nallow the same. As a result, the grounds raised by the assessee are\nallowed.\n11. In the result, both appeals by the assessee are allowed.\nOrder pronounced in the open court on 28.07.2025.\nSd/-\nSANDEEP GOSAIN\nSd/-\nPRABHASH SHANKAR\n(न्यायिक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)\nPlace: मुंबई/Mumbai\nदिनांक / Date 28.07.2025\nLubhna Shaikh / Steno\nआदेश की प्रतिलिपि अग्रेषित/