TIH FOUNDATION FOR IOT AND IOE,POWAI vs. CIT (EXEMPTIONS), MUMBAI, MUMBAI

We have carefully considered the rival submissions and perused the material available on record. It is an undisputed fact that the assessee is a not-for-profit company incorporated under Section 8 of the Companies Act, 2013, established pursuant to the directions of the Ministry of Science and Technology, Government of India, and hosted by IIT Bombay. The assessee has been granted registration under Section 12AB of the Act for earlier assessment years, ie, A.Y. 2021-22 to AY 2025-26, and the present application was filed for continuation of registration. The only basis for rejection of registration by the Id. CIT(E) is the possibility of the assessee incurring expenditure outside India in furtherance of its objects, which, according to the Ld. CIT(E), contravenes the provisions of Section 11 of the Act. However, such reasoning does not find support either in the statutory scheme of Section 12AB or in judicial precedents. In this regard, the Hon'ble Delhi High Court in the case of N.K. Nambyar Saarf Law Charitable Trust (supra) has categorically held that the scope of Section 12AA (now Section 12AB) is limited to examining the genuineness of activities and the objects of the trust, and not the place of application of income. The Hon'ble Court observed that the fact that the trust may apply income outside India does not constitute a valid ground for denial of registration, since Section 11 itself provides a framework for allowing or disallowing exemption based on application of income in or outside India. Thus, this objection, being premature and irrelevant at the stage of registration, cannot be sustained. Similarly, the Coordinate Bench of the ITAT, Mumbai in Dedhia Music Foundation (supra) has held that the mere existence of an object permitting application of income outside India does not amount to a "specified violation" under Explanation to Section 12AB(4) of the Act. The Tribunal (A.Y.2024-25) TIH Foundation For IOT and IOE vs. CIT(Exemptions) concluded that unless and until the income is actually applied outside India in violation of the conditions of Section 11, it cannot be construed as a ground for cancellation or denial of registration under Section 12AB. Moreover, the application of income outside India, even if made, would only affect the exemption under Section 11(1), but cannot be construed as a contravention of law attracting rejection of registration. In the present case, the assessee has neither undertaken any impermissible application of income nor has the Ld. CIT(E) brought on record any specific violation of conditions prescribed under Section 12AB(1)(b) or Explanation to Section 12AB(4). The objects of the assessee are in line with the mission of the Central Government under the NM- ICPS initiative, and the activities are genuine and aimed at technological development in public interest. In view of the foregoing legal position and judicial precedents, we find the order passed by the Ld. CIT(E) to be unsustainable in law.