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Facts
The assessee, Karuna Evam Shanti Vahini Foundation, applied for registration under section 12AB of the Income Tax Act. The CIT(E) rejected the application, citing violations in the trust deed's objects (clauses B(10), B(27), B(30), B(37)) which allowed for application/receipt of funds outside India, contrary to Section 11 of the Act.
Held
The Tribunal noted that the assessee had initiated the process of amending its trust deed. Citing a previous decision, the Tribunal restored the application to the CIT(E) for de novo adjudication with a direction to consider the amended objects.
Key Issues
Whether the CIT(E) was justified in rejecting the registration application based on trust deed clauses allowing activities outside India, and whether the assessee was denied adequate opportunity to amend the deed.
Sections Cited
12AB, 11, 12A(1)(ac)(iii), 80G(5), 7(2)
AI-generated summary — verify with the full judgment below
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
Appellant by : Shri Samir Vora, Adv. Respondent by : Shri Biswanath Das (CIT - DR) Date of Hearing 24.04.2025 Date of Pronouncement 05.05.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Exemptions), Mumbai [hereinafter referred to as “CIT(E)”] u/s. 12AB(i)b(ii) of the Income-tax Act, 1961 [hereinafter referred to as “Act”].
The grounds of appeal are as under:- 1.1 The order passed u/s.80G(5) on 24.12.2024 by CIT(Exem), Ahmedabad rejecting the application for registration u/s 12AB is wholly illegal, unlawful and against the principles of natural justice.
A.Y. – N/A Karuna Evam Shanti Vahini Foundation Mumbai 2.1 The Ld. CIT(Exem), has grievously erred in law and or on facts in not appreciating that the appellant trust was not carrying on any activity outside India and as such, in substance, there was no violation of the condition provided u/s 11 of the Act. 2.2 That the in the facts and circumstances of the Id. CIT(Exem), ought not to have held that there was violation of the provisions of sec.11 in view of clause-B(10), (27), (30), (31) & (37) of the memorandum providing for activities outside India. 3.1 That the in the facts and circumstances of the ld. CIT(Exem), ought not to have rejected the application for registration by ignoring the actual activities carried on by the trust. It is, therefore, prayed that the rejection of the application for registration u/s 12AB and cancellation of the provisional registration by the CIT(Exem), may kindly be deleted.
Facts of the case are that the applicant assessee filed an application in Form 10AB u/s 12A(1)(ac)(iii) seeking registration under section 12AB of the Act. The ld.CIT(E) on verification of the application in Form 10AB filed by the applicant, found that the applicant Trust made submission from which it was noticed from the trust deed/MOA that point nos. B(10), B(27), B(30), B(31) and B(37) of the objects were in violation of provisions of section 11 of the Act as the Trust intended to apply/receive funds outside India. After obtaining submission of the applicant in this regard, the ld.CIT(E) concluded that the trust deed was in violation of statutory provisions, on account of following clauses :-
A.Y. – N/A Karuna Evam Shanti Vahini Foundation Mumbai “B(10) To provide technical support and guidance on programme learnings and experience to organizations interested in bridging the gaps in health equity, in India or in any other part of the world. B(27) To negotiate and enter into agreements and contracts with Indian and foreign Individuals……. B(30) To enter into any arrangements with any Government authorities, local, municipal or otherwise, or any other individual or entity, whether in India or abroad……, B(37) ……… Company and a member or members or his or their representatives or between the Company and any third party to arbitration in India or at any place outside India, and to observe and perform and do all acts, deeds, matters and things to carry out or endorse the awards”
3.1 It was observed that the use of such words in the MOA/trust deed clearly conveyed its intention to utilise fund outside India, thereby leaving open the possibility for future endeavours, which may involve expenditure outside the country. Also, the applicant had itself accepted that it intends to apply the funds outside India. The applicant Trust ought to have amended these clauses to align with the provisions of the Income Tax Act. However, it has failed to do so. Thus, based on the reasons mentioned above, this application for registration u/s 12A was not allowable. In conclusion, the application for grant of registration was rejected.
In this regard, the assessee submitted that though the perusal of accounts and other details indicates that the appellant trust has not incurred expenses outside India. In the course of hearing before the Bench, the ld. Authorised Representative pleaded that the assessee was A.Y. – N/A Karuna Evam Shanti Vahini Foundation Mumbai not allowed adequate opportunity to amend its deed. The appellant is a public charitable trust duly constituted as a company u/s 7(2) of the Companies Act, 2013 having CIN U85300MH2022NPL385655 under the Memorandum and Articles of Association as a non-profit organization. The main objects of the appellant trust is to design and implement interventions in public health that address health inequalities among vulnerable communities, to identify community needs and priority relating to excess healthcare etc. which are set out in the Memorandum of Association. It maintains regular books of accounts and other records which are subject to statutory audit.
We have considered the rival submissions. As per the ld. CIT(E) the aforesaid object leaves room for potential endeavour by the assessee trust which would result in expenditure outside India. During the hearing, the learned AR submitted that the assessee trust has initiated the process of amending its object. It may be stated here that the coordinate bench in the case of Sila for Change Foundation v/s CIT(E), in ITA No. 4274/Mum./2024, dated 20/12/2024 granted liberty to the assessee to specify the memorandum of the objects and file the application seeking final registration before the competent authority which may be considered in accordance with law. Therefore, having considered the facts and circumstances of the present case, we deem it A.Y. – N/A Karuna Evam Shanti Vahini Foundation Mumbai appropriate to restore the application for seeking registration under section 12AB of the Act to the file of the learned CIT(E) for de novo adjudication with a direction to the assessee to file its amended object before the ld. CIT(E), which may be considered in accordance with law.
In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 05/05/2025.