SHREE CAMBAY SWETAMBER VISHA SHRIMALI JAIN SAMAJ SAHAYAK TRUST, ,MUMBAI vs. COMMMSSIONER OF INCOMETAX(EXEMPTION), MUMBAI

26. Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust deemed fit in the facts and circumstances of the case, in the interest of justice.” Brief facts of the case are as under:

2. The assessee is trust incorporated on 07/04/1962 filed its return of income. 2.1 The Ld.AR submitted that the assessee was granted provisional registration under the provisions of sub-clause (vi) of clause (ac) of sub-section (1) of Section 12A of the Income Tax Act, 1962 for the Assessment Years 2022-23 to 2024-25. 2.2 The Ld.AR submitted that the Board of Trustees of the Appellant vide Resolution dated 12.12.2024 resolved to amend the clause 3(c) of the Trust Deed dated 07.04.1962 and it was also accepted by all the Trustees that no such donation for studying of the students abroad has been given by the trust in past and would also not be given in future. The Ld.AR submitted that since the convening of meeting of the Trustees took some time and there was no further opportunities granted by the Ld. Commissioner of Income Tax (Exemption), Mumbai for adjudication of the case, this evidence may be taken on record for adjudication of the case by this Hon'ble Tribunal.

“4. The process of obtaining registration under section 12A has undergone change that is detailed as under: 1) Up to 31.03.2021 the registration/approval was permanent in nature. 2) During the period from 01.04.2021 to 31.09.2023, this was the period of two step registration i.e. first provisional and subsequently regular registration. 3) Amended process w.e.f. 01.10.2023 where in only organizations who have not started any activity may apply for provisional registration and where the activity is commenced then direct application for five-year registration is permissible. 4.1. In the present facts of the case, the assessee, was incorporated on 28/07/2021 and filed its application under section 10Asubsequently. Thus, the assessee falls under the new regime of registration process, seeking registration/approval from 01.04.2021 to 30.09.2023, w.e.f. 01.04.2021 under section 12AB of the Act. The key features of registration under the amended scheme from 01.04.2021 to 30.09.2023 under section 12AB are as under: (i) Concept of provisional registration introduced for charity institutions is applicable to all applying for the first time, irrespective of whether they are new or existing institutions. (ii) Concept of perpetuity of registration stands withdrawn under the new scheme and provisional registration is valid for a maximum period of 3 years. The provisional registration is subsequently required to be regularized into five years regular registration within six months of commencement of activities or at least 6 months before the expiry of the provisional registration period. (iii) All the existing trusts or institutions which were registered under section 12A/ 12AA or approved under section 10(23C) and section 80G are mandatorily required to obtain registration under new scheme of registration under section 12AB or to obtain approval under section A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust 10(23C) and section 80G. The registration/approval shall remain valid for a period of five years from 1 April, 2021 i.e. from the AY: 2022-23. (iv) Registration/approval was subject to renewal every 5 years. 4.2. The assessee in the present facts of the case preferred application for the first time post July 2021. Thus, as per section 12AB and Rule 17, the assessee is required to pass through following two stages: 1) Firstly, the application is to be filed in Form 10A for provisional registration. The assessee in the present facts filed Form 10A r.w. Rule 17, on 06/09/2022. Based on the application made, a provisional registration was issued to the assessee u/s.12AB effective from 01/10/2021, placed at page 48 of the PB filed in ITA no. 4274/M/2024. 4.2.1. For seeking Provisional Registration, apart from the documents and information required for filing application under Form 10A, no other information will be sought for granting provisional registration. The relevant provision of section 12AB is reproduced as under: (1)The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall, (a)… (b)… (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, 4.2.2. Thus, it is apparent that, upon filing application in Form 10A (for Provisional registration) the concerned Income-tax Authority (CIT or PCIT) has to issue provisional registration certificate without any further verification or examination 4.3. In the second stage, this provisional registration is required to be converted into regular registration. The application for conversion is to be filed in Form 10AB at least 6 months before the expiry of the provisional registration period or within 6 months of the commencement of its activities, whichever is earlier. For Converting provisional registration into final registration, procedure is identical to what it was prevailing prior to 01.04.2021, under section 12AB(1)(b)(i).

A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust That is, the Ld. PCIT/CIT shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about genuineness of the activities of the trust or institution and the compliances of other laws. The relevant provisions are as under: (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; b) where the application is made under sub- clause (ii) or sub-clause (iii) or subclause (iv) or sub-clause (v) 66[or item (B) of sub-clause (vi)] of the said clause,— i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— a) the genuineness of activities of the trust or institution; and b) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (emphasis supplied) 4.3.1. Thus once the Ld.PCIT/CIT is satisfied on above aspects, then registration shall be granted in Form 10AD. In other case the application will stand rejected after granting an opportunity of being heard (as per section 12AB(1)(b)(ii) of the Act). Further, according to Sub-section 4 and 5 of section 12AB inserted by Finance Act, 2022, with effect from 01/04/2022, Ld.PCIT/CIT may cancel the registration (after providing reasonable opportunity of being heard) if it is found that, the activities are not genuine or are not carried out in accordance with the objects of trust/institution. At this juncture, we note the fact that provisions of sub sections are applicable to the present assessee based on the date of application filed seeking registration under section 12B of the Act. 4.3.2. Registration will also stand cancelled under section 12AB, if the authorities notice that, the activities of the trust or institution are carried out in a manner that the provisions of section11 and 12 do not apply due to operation of section 13(1), or, the trust or institution has not complied with the requirement of any other law for the time being in force as is material for the purpose of achieving its objects etc. In A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust case there is a specified violation as mentioned in Explanation to sub section 4, the Registration under section 12AB would be denied or stand cancelled, as the case may be. For the sake of convenience, relevant portion of sub section 4 are reproduced as under: (4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,— (a) the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or (b) the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub- section (3) of section 143 for any previous year; or (c) such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall— (i) call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution. Explanation.—For the purposes of this sub-section, the following shall mean "specified violation",— (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or (d) the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or (e) any activity being carried out by the trust or institution— (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered; or (f) the trust or institution has not complied 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 order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality. (5) The order under clause (ii) or clause (iii) of sub-section (4), as the case may be, shall be passed before the expiry of a period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of subsection (4). 4.3.3. One of the intention of Legislature to introduce sub clause (4) and (5) to the section 12AB is to address the issue related to the process of approval or cancellation or withdrawal thereof. Clause 3.3(a)(i) of memorandum explaining the provisions in finance bill, 2022 is as under: “3.3. Reference to the Principal Commissioner or Commissioner (PCIT/CIT) for the cancellation of registration/approval: a)The following issues related to the process of approval or registration, or cancellation or withdrawal thereof, have been noticed, namely:- i) Registration or approval of non-genuine trusts or institution under automated approval system: First and second provisos to clause (23C) of section 10 of the Act were substituted by new provisos by the A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 w.e.f. 01.04.2021. These provisos provided that the application for the approval of any trust or institution under the first regime, shall be made to the jurisdictional Principal Commissioner or Commissioner and such Principal Commissioner or Commissioner shall grant approval after examination of the application. Earlier such applications were required to be filed before the prescribed authority. Similarly, provisions of clause (ac) of sub-section (1) of section 12A provide that application for the trusts or institution under the second regime shall be made to the principal Commissioner or Commissioner. The provisional registrations or provisional approval orre-registrations or approvals in certain cases, under these clauses, are granted in an utomated manner and the respective rules have been amended accordingly. It is essential to ensure that non-genuine trusts or institutions do not get exemption provided by these provisions.” Thus, we do not agree with the argument advanced by the Ld.AR that since provisional registration is granted to the present assessee before u/s.12AB, final registration cannot be denied. 4.4. In the present facts, the assessee’s objects include clause 12, which is not in consonance with the main purpose to grant exemption under section 11(1)(a) of the Act for sale of convenience, the relevant portion are excluded as under. It is noted that, the assessee was offered opportunity of being heard, is apparent from the paper book filed before us. However, nothing on record is filed, to demonstrate that, the assessee took necessary steps to amend the objects which is in contravention to section 11(1)(a) of the Act. Admittedly it is not the case that, the assessee has already applied its funds as per object clause 12 of the memorandum. 4.4.1. It is relevant to note that section 11 (1) (a) was on statute from its inception to the provisions of section 11(1)(c ) that reads as under: Section 11…. (1)…. (a) to (b)….. (c) income derived from the property held under trust— (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: Provided that Board, A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; 4.4.2. From the above provisions, it is clear that, even otherwise, organisations created after 01/04/1952 were not empowered to do activities outside India, prior to the insertion of amended section under section 12A/AB. However, CBDT in certain circumstances may direct by a general or special order permitting certain activities, which tend to promote international welfare in which India is interested. “11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income— (a) income derived from property13 held under trust wholly13 for charitable or religious purposes13, to the extent to which such income13 is applied13 to such purposes in India13; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart16 is not in excess of 17[fifteen] per cent of the income from such property;” 4.4.3. Hon‟ble Delhi High Court in case of DIT (E) vs. National Association of Software and Services Companies reported in (2012) 208 Taxman 178 interpreted natural grammatical meaning of the words “to the extent to which such income is applied to such purposes in India” appearing in section 11(1)(a) of the Act. Courts have held that, the words „in India‟ appearing in section 11(1)(a), qualifies only the words ‘such purposes’, would not only be contrary to the plain grammatical meaning of section but also render the provisions of section 11(1)(c) redundant and otiose. Further the Courts have held that, if it was accepted that income of trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and was created on or after 01/04/1952 to apply to the CBDT for a general or special order for exemption. Hon’ble Delhi High Court in case of DIT E) vs. National Association of Software and Services Companies reported in (2012) 208 Taxman 178 explained that the literal interpretation of the statute was not, probably in consonance with the intent of the statute. Hon’ble Court however agreed that, it was illogical to allow expenditure paid to a student to study abroad but the same was not permissible if the payment was made directly to the foreign university.

A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust 4.4.4. In case of Jamsetji Tata Trust v. Jt. DIT (Exemption) reported in 148 ITD 388 coordinate bench of this Tribunal held that education grant given to Indian students for studying abroad fulfils conditions of application of money in order to claim exemption under section 11. It was observed that, the assessee applied the money for charitable purpose in India and the final execution of the purpose may be outside India but the same will not affect the conditions satisfied by the assessee. 4.4.5. The Courts have always proceeded on the footing that, section 11(1)(a) do not attract forfeiture over the entire income unlike the provisions of section 13(1). In other words, the Courts have held that, if a trust or institution is willing to pay taxes to the extent of its activities outside India, then to that extent it can have such activities. The decisions and the those referred in the written submissions filed by Ld.AR as well as submitted at the time of hearing, leads to support the contention of the Ld.AR that, the section 11(1)(a) are attracted only if, actual expenditure is incurred outside India. Section 11(1)(a) cannot be invoked only on the ground that the trust deed provides for activities outside India. Some decisions on this Principle are: A. Hon’ble Bombay High Court in the case of CIT v. State Bank of India reported in (1988) 169 ITR 298, considered the issue whether a trust for charitable purposes in India and abroad can claim exemption from its income where the trustees have discretion to apply the income either in India or abroad? Hon’ble Court observed that the trust deed provided, at the discretion of the trustees, to give 45 per cent of the income to the University of Athens. It was thus held that, the trust was eligible for exemption even though it provided for application of income abroad. However, the portion of income actually applied abroad or accumulated for application abroad was not exempt. B. Hon’ble Delhi High Court that in case of Digamber Jain Society for Child Welfare v. DGIT (Exemptions)reported in (2010) 228 CTR 517that, existence of other objects can not affect the charitable status of a Trust or NGOs. Hon’ble Allahabad High Court in the case of Ewing Christian College Society v. CCIT reported in [2009] 318 ITR 160 held that, the objective to serve the church and nation would not mean that the society was not existing solely for educational purposes; therefore, any additional object clauses normally should not affect the charitable status of a trust/institution/NGO.

A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust C. Similarly, Hon’ble Andhra Pradesh High Courtin CWT v. Trustees of the Nizam’s Religious Endowment Trust reported (1977) 108 ITR 229 relied by the Ld.AR, it was held that, the charitable or religious expenditure incurred in India will not be affected by a provision for activities outside India or even actual expenditures abroad. Exemptions towards activities in India remain intact and in the case of a clause in the trust deed empowering the trust to have activities outside India, there is no impact. And in the case of trust having activities outside India, the exemptions will be denied to the extent of the income applied outside India.

by the assessee in both appeal stands dismissed.

7. Liberty is granted 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. In the result appeals filed by the assessee stand dismissed.” Based on the above the matter is remitted to the Ld.CIT(E).

A.Y. 2025-26 Shree Cambay Swetamber Visha Shrimali Jain Samaj Sahayak Trust 4. Liberty is granted to the assessee to file the amended Trust deed and the Ld.CIT(E) is directed to consider the application dated 26/06/2024 in accordance with law. In the result the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 28/03/2025 Sd/- Sd/- (GIRISH AGRAWAL) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 28/03/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to:

(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.