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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI OMKARESHWAR CHIDARA
ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 27/11/2024, passed by Ld. CIT(E), Mumbai. At the outset Ld.AR submitted that, assesse applied in form 10AB u/s.12A(1)(ac)(iii),seeking registration u/s 12AB of the Act. 2. It is submitted that, the assessee received provisional registration on 30/03/2022, for assessment years covering from Assessment Year: NA IIGJ Research and Laboratories Centre 2022-23 to 2024-25. It is submitted that subsequently the assesse was issued notice dated 17/09/2024, calling upon the assessee to furnish various details. Vide letter dated 03/10/2024 the assesse furnished relevant details on the e-portal as called for. 2.1. Subsequently, another notice was issued on 29/10/2024 calling upon assessee for further details in respect of certain specific clauses in the trust deed wherein, the assessee had intention to apply funds outside India. In response to said notice, the assesse requested for time to comply with, due to ongoing Diwali Festival. 2.2. Accordingly, another notice was issued on 16/11/2024 fixing the date of hearing on 19/11/2024. The assesse somehow could not comply with the said notice and the impugned order for was passed rejecting the registration, or non-furnishing of details and failure to comply with necessary compliance. Aggrieved by the order passed by the Ld. CIT(E) assesse is in appeal before this Tribunal.
3. The Ld.AR at the outset submitted that, the appeal may be remanded to Ld. CIT(E) by granting an opportunity to furnish all relevant details in respect of the quires raised vide notice dated 29/10/2024. 3.1. He submitted that, due to inadvertence the assesse failed to respond to the notice dated 16/11/2024. He submitted that in the interest of natural justice the assesse may be granted an opportunity of being heard. 3.2. On the contrary, the Ld. DR placed reliance on the following decision wherein the cancellation of was up held due to certain specified violations:
Assessment Year: NA IIGJ Research and Laboratories Centre i. Sila for Change Foundation Vs. CIT (E) in and 4275/MUM/2024 vide order d ated 20th December, 2024. ii. The decision of Hon’ble Delhi tribunal in case of India Brand Equity Foundation Vs ACIT(E), reported in (2012) 23 taxmann.com 323. iii. The decision of Hon’ble Delhi court in case of DIT(E) Vs. National Association of Software and services companies reported in (2012) 21 taxmann.com 213. 3.3. The Ld.AR in the rebuttal furnished following written submission scanned and reproduce as under: “1. The Appellant is a company limited by guarantee, incorporated on 24th July 2019. The primary object as per para 3(a) of the Memorandum of Association (Page 1 of the Paper book) is as under: "To promote, advance, improve, enhance, devise, evaluate, execute, protect, develop laboratories for Gems and Jewellery industry for promotion of export of Gems and Jewellery from India, test and certify the purity of metal in the Jewellery, and promote Gemology, encourage technical and practical education and study of gemology, diamonds, scientific aspects of all types of gemstones, establishing facilities for research and development, scientific examination centers, identification, grading and certification of gemstones and diamonds."
The Appellant had obtained provisional registration for AY 2022-23 to AY 2024-25 in Form 10AC vide order dated 30th March 2022. In accordance with the provisions of the Act, the Appellant filed Form 10AB on 14th May 2024, seeking final registration under section 12AB of the Act.
The Ld. CIT(Exemptions), Mumbai issued notice dated 17th September 2024 (Page 33-35 of the Paper book), seeking several details including financial statements, activities conducted, Memorandum and Articles of Association, etc. In response, complete details were furnished, vide letter dated 3rd October 2024 (Page 42 of the Paper book).
4. Based on review of the ancillary objects mentioned in para 3(b) of the Memorandum of Association, the Ld. CIT(Exemptions), vide notice dated 29th October 2024 (Page 44 of the Paper book) raised a query with respect to certain clauses of ancillary objects wherein reference was made to words such as “abroad", "world", "international organisation", etc. This includes activities such as publications, advertisements, receipt of grants or assistance from international organizations, attending global conferences, promote the Indian gemology market at global level, etc. It is submitted that the activities stated therein are for promoting Indian Gem & Jewellery Industry, more specifically in the field of grading and Assessment Year: NA IIGJ Research and Laboratories Centre gemology, at a global/international level. Therefore, the situs and benefit accruing from charitable activity proposed to be carried out by the Appellant is in India.
In response to the notice dated 29th October 2024, the Appellant sought time to furnish a response to the said notice as the office was closed on account of Diwali. The Ld. CIT(Exemptions) issued a subsequent notice dated 16th November 2024 (Page 47 of the Paper book). The said notice was inadvertently left to be attended. The Ld. CIT(Exemptions) passed order dated 27th November 2024 rejecting the application for registration under section 12AB of the Act on the ground that no response was filed to the notices issued earlier.
It is submitted that the Appellant had made substantial compliance to the notice issued by Ld. CIT(Exemptions) and due to inadvertent error, no response was filed in respect of the last notice. It is submitted that there was no malafide intent on the part of the Appellant in not responding to the notice. It is therefore prayed that the matter be restored to the file of the Ld. CIT(Exemptions) for de novo adjudication and that adequate opportunity of hearing be afforded to the Appellant before the application is disposed.
During the course of hearing on 24th March 2025, the Ld. Department Representative furnished copy of the following decisions in support of Ld. CIT(Exemptions) order for rejection of the registration: i. Sila for Change Foundation v. CIT(Exemptions) [TA No. 4274/Mum/2024] ii. DIT (Exemptions) v. National Association of Software & Service Companies [345 ITR 362] iii. India Brand Equity Foundation v. ACIT [23 taxmann.com 323] Our submissions in respect of the above-mentioned decisions are as under.
In the case of Sila for Change Foundation (supra), the ld. CIT(Exemptions) had denied registration under section 12AB of the Act on the ground that one of the objects mentioned was "provision of support and development services to other organizations in India and outside India in the social sector" which, according to him, violated section 11 of the Act..
In paragraphs 4.4.1 to. 4.4.5 at Pages 14-18 of the said order, the Tribunal has accepted that, it was open to a charitable institution to apply its funds on activities outside India provided that exemption was not granted to the extent of such application. In paragraph 5 at Page 18 thereof it was noted that there is an amendment in section 12AB by way of insertion of sub-sections (4) and (5) by the Finance Act, 2022 which would also trigger at the stage of grant of final registration. In this regard, the following aspects would require consideration:
a. The Ld. CIT(Exemptions) has not invoked the provisions of section 12AB of the Act and therefore the above provisions are not applicable to the facts in the present case. b. Sub-sections (4) and (5) of section 12AB would apply to a case where registration or provisional registration has been granted and subsequently the specified authority has inter alia notice occurrence of one or more specified violations. In such a case, the said authority may pass an order cancelling the registration of such trust. It is submitted that this power would be relevant in a case where registration is sought to be cancelled and not at the stage of grant of registration. c. Clause (f) of Explanation which defines "specified violation" refers to non-compliance with the requirement of any other law as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1) and the holding that occurrence of such non-compliance has either not been disputed or has attained finality. In this regard, the following will be relevant, which are in the alternative and without prejudice to any others: i. There should be a requirement in any other law for the time being in force which will be material for the purpose of achieving the objects of the trust and that there should be compliance of such requirement. It is submitted that section 11(1)(c) would not be regarded as such requirement as it is not any other law but a part of the Act. Further, this cannot be regarded as a 'requirement which will be material for the purpose of achieving the objects of the trust.. Such a requirement would mean a positive condition to be fulfilled and it should be material for achieving the objects, none of which are relevant in so far as section 11(1)(c) is concerned. ii. This requirement can trigger only upon an act of actual non-compliance. The clauses as relied upon by the CIT (Exemptions), Mumbai are enabling powers to obtain the objects of the trust which may or may not be exercised. It is not his case that there has been any non-compliance with section 11(1)(c) in the present case. d. If grant of registration is rejected on this ground, then section 11(1)(a) and 11(1)(b) which deals with the quantum of income for which exemption is to be granted and refers to the extent it has been applied to such purpose in India to be redundant and otiose as this requirement will never arise in any case in the absence of registration under section 12AB of the Act.
Assessment Year: NA IIGJ Research and Laboratories Centre e. With respect to the decision of Hon'ble Delhi High Court in the case of DIT v. National Association of Software and Services Companies (supra) and Hon'ble Tribunal in the case of India Brand Equity Foundation (supra), the issue involved was whether expenditure incurred outside India in connection with exhibition/fair outside India would constitute application of income under section 11 of the Act. It is submitted that the issue in the present case is with respect to registration under section 12AB of the Act and not with respect to allowability of application of income which is an issue dealing with computation of income. As stated above, the Assessing Officer has the jurisdiction to examine and assess the applicability of particular income or expense vis a viz. the provisions of section 11 to 13 of the Act. The examination of such issues at the time of registration would result in merger of registration and assessment proceedings which is not the intent of the law and render the assessment proceedings otiose.
In view of the above, it is submitted that the decisions cited by the Id. Department Representative may not be referred as requiring consideration by the CIT(Exemptions). If the direction is to proceed in accordance with law, it will certainly be open to the said authority to refer to the relevant legal position. It is submitted that, if the authority is directed to consider these decisions, then he may find himself to be bound by the same in view of directions contained in the appellate order and may not consider the distinguishing features as highlighted above.
The Appellant prays that the matter be restored to the file of the Ld. CIT(Exemptions) for de novo adjudication and adequate opportunity of hearing be granted to the Appellant.” We have perused the submissions advanced by both sides in the light on records placed before us.
It is noted that assesse did not get opportunity to respond to the last notice issued by the Ld.CIT(E) on the issues raised therein. In the interest of justice, the issue deserves to be remanded to the Ld. CIT(E) to considered the claim in the light of the above submission by both sides and in accordance with law. Needless to say that proper opportunity being heard must be granted to the assesse.
5. Accordingly, grounds raised by the assesse stands partly allowed for statistical purposes.