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Facts
The Assessee, a charitable organization, filed applications for registration under Section 12AB and approval under Section 80G of the Income Tax Act. The CIT(E) rejected these applications citing that the Assessee's Memorandum of Association (MOA) contained clauses allowing for utilization of funds outside India, violating statutory provisions.
Held
The Tribunal set aside the CIT(E)'s order and restored the matter back to the CIT(E). The CIT(E) is directed to re-adjudicate the applications after considering the amended MOA, which now clearly indicates the intention to carry out charitable activities within India. The Assessee is to provide necessary documentary evidence.
Key Issues
Whether the CIT(E) was justified in rejecting the application for registration and approval solely based on clauses in the MOA that allowed for foreign expenditure, when the Assessee has since amended these clauses?
Sections Cited
12AB, 80G, 12A(1)(ac)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER & Udya Dbanu Sahasrabha Foundation Flr-Grd. Kumbharwada 4th W, KK Krishnan Menan Marg, Dharavi, Mumbai – 400017 Maharashtra 400017 [PAN:AADCU3278J] …………. Appellant Commissioner of Income Tax Vs (Exemptions), Mumbai Room No. 601, 6th Floor, Cumballa Hill MTNL, TE Building, Pedder Road, Dr gopalrao Deshmukh Marg, Cumballa Hill, Mumbai 400026, Maharashtra …………. Respondent Appearance For the Appellant/Assessee : Ms. Sapna Jain For the Respondent/Department : Shri Manish Sareen Date Conclusion of hearing : 16.04.2025 Pronouncement of order : 29.04.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. These are two appeals preferred by the Assessee which were heard together and are being disposed of by way of a common order since the grounds raised arise from common factual matrix.
2. We would first take up Assessee against the order, dated 27/01/2025, passed by Commissioner of Income Tax (Exemption), Mumbai Assessment Year: 2024-25 [hereinafter referred to as the ‘CIT(E)’] whereby the application filed by the Assessee seeking registration under Section 12AB of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] was rejected.
The Assessee has raised following grounds of appeal : “1. That the learned CIT(Exemption) erred in disregarding the fact that the Appellant is carrying out genuine charitable activities within India and there is no intention of carrying charitable activities outside India.
2. That the learned CIT(Exemptions) failed to appreciate that the Appellant has duly complied with providing all necessary documents to establish its eligibility for registration under Section 12A and approval under Section 80G.
3. That the rejection order is causing the hardship to the Appellant in conducting the charitable activities.
4. The Appellant has placed application for modification in its Object Clause of the Memorandum of Association (MOA) to Ministry of Corporate Affairs (MCA).
5. That the Appellant reserves the right to raise additional grounds at the time of hearing.”
4. The relevant facts in brief are that the Assessee is a charitable organization established on 16/05/2023, with the primary objective of education, relief of poor, medical relief and upliftment of the society and its people through its activities. The Assessee filed an application in Form 10AB under Section 12A(1)(ac)(iii) on 11/07/2024 before the Ld. CIT(E) seeking registration under Section 12AB of the Act. The CIT(E) rejected the aforesaid application vide order dated 27/01/2025 which has been impugned by way of the present appeal. It emerges that the rejection order was primarily based on the following reasons given by the Learned CIT(E):
“3.1. The submission of the applicant is neither satisfactory nor conclusive. The following objects, as stated in the trust deed are in violation of statutory provisions, are produced below: "3(a)(1)- ......setting up of educational, research and training Assessment Year: 2024-25 institutions etc to aforesaid class of children, as may be necessary from time to time for the betterment of society and to mobilise resources from local communities and the people residing in India and or abroad. 3(b)(11)- .... to foster cooperation among local, state, national and International agencies for providing service. 3(b)(15)- To facilitate staring of activities in various cities, towns, villages in India and other parts of the world.... 3(b)(47) to promote sustainable development by offer better trading conditions to and securing rights of marginalised producers and workers in developing countries including India 3(b)(63)- To undertake collaborative programs including domestic, International with universities and institutions abroad..... 3(b)(64) to promote, develop, run, undertake, implement of colleges, schools, institutions, universities at various levels in India and abroad... 3(b)(65)-To launch fully owned companies, subsidiaries, satellite companies, joint venture, societies, trusts in India and abroad..... 3(b)(74)- To undertake, accept carryout support such social responsibilities and obligations in India or any part of the World..." 3.2. The use of such words above referred objects in the MOA/trust deed clearly conveys its intention to utilise fund outside India, thereby leaving open the possibility for future endeavours, which may involve expenditure outside the country. 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.”
The primary contention advanced on behalf of the Assessee is that the application filed by the Assessee for seeking approval under Section 12AB of the Act was rejected by the Learned CIT(E) on the ground that Memorandum of Association of the Assessee Company contained clauses conveying intention to utilized funds for charitable purpose outside India. During the appellate proceedings before the Tribunal, Assessment Year: 2024-25 the learned Authorized Representative for the Assessee submitted that necessary amendments to the Memorandum of Association has been made clearly indication the intention of the Assessee to carry out genuine charitable activities within India. It was submitted that, even earlier, the Assessee did not have any intention to carry out any charitable activity outside India. Since, now the necessary amendments have been carried out in the Memorandum of Association to clearly bring out the intention of the Assessee to carry out charitable activities within India, another opportunity be granted to the Assessee to make out a case for approval under Section 12AB of the Act.
Per contra Learned Departmental Representative submitted that at the relevant time the Memorandum of Association of the Assessee- Company that reflect intention to carry out the charitable activities outside India and therefore, the CIT(E) was justified in rejecting the application.
We have heard both the sides and have perused the materials on record. Given the facts and circumstances of the present case, we deemed it appropriate and in the interest of justice to set aside the impugned order passed by the Learned CIT(E) and restore the matter back to file of CIT(E) with the directions to adjudicate the application afresh after taking into consideration the amended Memorandum of Association in accordance with law. The Assessee is directed to file all the necessary documentary evidence in support of charitable activities of the Trust and amended Memorandum of Association before the Learned CIT(E). In terms of aforesaid, Ground No 1 and 4 are treated as allowed for statistical purposes while all the other Grounds raised by the Assessee are hereby dismissed as having been rendered infructuous.
In result in terms of paragraph 7 above, the present appeal preferred Assessment Year: 2024-25 by the Assessee is treated as allowed for statistical purposes.
Now, we will take up which has been preferred by the Assessee against the order, dated 27/01/2025, passed by the Learned CIT(E) whereby the application filed by the Assessee in Form 10AB under Clause (iii) of first proviso to sub Section (5) of the Section 80G of the Act for seeking approval under Section 80G of the Act was rejected.
The Assessee has raised following grounds of appeal : “1. That the learned CIT(Exemption) erred in disregarding the fact that the Appellant is carrying out genuine charitable activities within India and there is no intention of carrying charitable activities outside India.
2. That the learned CIT(Exemptions) failed to appreciate that the Appellant has duly complied with providing all necessary documents to establish its eligibility for registration under Section 12A and approval under Section 80G.
3. That the rejection order is causing the hardship to the Appellant in conducting the charitable activities.
4. The Appellant has placed application for modification in its Object Clause of the Memorandum of Association (MOA) to Ministry of Corporate Affairs (MCA).
5. That the Appellant reserves the right to raise additional grounds at the time of hearing.”
11. On perusal of impugned order, we find that the application filed by the Assessee for approval under Section 80G of the Act was rejected on account of rejection of application for registration under Section 12AB of the Act. Since we have set aside the order, dated 27/01/2025, whereby the application filed by the Assessee under Section 12AB of the Act was rejected by the Learned CIT(E), we deem it appropriate and in the interest of justice to set aside impugned order, dated 27/01/2025, with the directions to the Learned CIT(E) to decide the application under consideration filed for seeking approval under Assessment Year: 2024-25 Section 80G of the Act afresh after taking into account the order passed by the Learned CIT(E) disposing off the application filed by the Assessee in Form No.10AB under Section 12A(1)(ac)(iii) of the Act as per our directions in paragraph 7 above. In terms of the aforesaid all the grounds raised by the Assessee are treated as allowed for statistical purposes.
12. In result in terms of paragraph 11 above, the present appeal preferred by the Assessee is treated as allowed for statistical purposes.
In conclusion, both the appeals of the Assessee are treated as allowed for statistical purposes.