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Facts
The assessee filed an application for registration under Section 12AB and 80G. The CIT(Exemption) rejected the application, citing that the trust's activities extended beyond India and also due to a perceived non-compliance with a show-cause notice.
Held
The Tribunal found that the assessee had a reasonable cause for non-compliance and had also modified its objectives to restrict activities within India. Therefore, the Tribunal set aside the CIT's order and remanded the matter for reconsideration.
Key Issues
Whether the CIT(Exemption) was justified in rejecting the registration application on grounds of activities outside India and alleged non-compliance, and whether the assessee was granted adequate opportunity.
Sections Cited
12 AB, 80G, 11(1)
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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
in-dispute involved in both the appeals are connected in both the appeals are connected in both the appeals are connected, therefore, same were heard together and disposed of same were heard together and disposed off by way of this by way of this consolidated order for for sake of convenience. are reproduced Grounds raised in are reproduced Grounds raised in ITA No. 4805/Mum/2024 are reproduced as under:-
“1. The learned CIT(Exemptions) has erred in rejecting the registration of The learned CIT(Exemptions) has erred in rejecting the registration of The learned CIT(Exemptions) has erred in rejecting the registration of the appellant, being a charitable trust on the pretext that it is engaged in the appellant, being a charitable trust on the pretext that it is engaged in the appellant, being a charitable trust on the pretext that it is engaged in doing charitable activities outside India. doing charitable activities outside India.
The learned CIT(Exemptions) has failed to grant the appell 2. The learned CIT(Exemptions) has failed to grant the appellant an 2. The learned CIT(Exemptions) has failed to grant the appell opportunity to describe the trust's objectives and explain that it does opportunity to describe the trust's objectives and explain that it does opportunity to describe the trust's objectives and explain that it does charitable activities only in India and does not apply any of its funds charitable activities only in India and does not apply any of its funds charitable activities only in India and does not apply any of its funds outside India.
The learned CIT(Exemptions) erred in providing less than three 3. The learned CIT(Exemptions) erred in providing less than three 3. The learned CIT(Exemptions) erred in providing less than three business days to comply with a notice on the objectives of the trust were business days to comply with a notice on the objectives of the trust were being questioned for the first time since its formation. being questioned for the first time since its formation.
The learned CIT(Exemptions) failed to take into consideration the 4. The learned CIT(Exemptions) failed to take into consideration the 4. The learned CIT(Exemptions) failed to take into consideration the numerous documents, photos, videos, etc. filed in the form of evidences numerous documents, photos, videos, etc. filed in the form of evidences numerous documents, photos, videos, etc. filed in the form of evidences in support of the trusts charitable objectives while responding to rt of the trusts charitable objectives while responding to rt of the trusts charitable objectives while responding to previous notices issued from the office of the learned CIT(Exemptions). previous notices issued from the office of the learned CIT(Exemptions). previous notices issued from the office of the learned CIT(Exemptions). The Appellant craves leave to amend, add or alter the Grounds of The Appellant craves leave to amend, add or alter the Grounds of The Appellant craves leave to amend, add or alter the Grounds of Appeal
at or before hearing of the appellant.” Appeal at or before hearing of the appellant.
3. Briefly stated, facts of the case are that the ated, facts of the case are that the assessee filed an assessee filed an application in prescribed form No. 10AB of the I rescribed form No. 10AB of the Income tax Rules, ncome tax Rules, 1962 [In short ‘The Rules’] 1962 [In short ‘The Rules’] seeking registration u/s 12 AB of the seeking registration u/s 12 AB of the Act. The Ld. Commissioner of Income he Ld. Commissioner of Income-tax (exemption) after tax (exemption) after verification of the prescribed form found that area of the operation of the prescribed form found that area of the operation of the prescribed form found that area of the operation of charitable activity of charitable activity of assessee included India and abroad. The Ld. Commissioner of Income Commissioner of Income-tax (exemption) asked the assessee to the assessee to & 4806/MUM/2024 4805 & 4806/MUM/2024 explain as why the application of the registration should not be why the application of the registration should not be why the application of the registration should not be rejected in view of the operation of the activities outside of the rejected in view of the operation of the activities outside of the rejected in view of the operation of the activities outside of the broader of the Indian territory, n territory, but in view of the no response on the no response on the part of the assessee part of the assessee, the Ld. Commissioner of Income the Ld. Commissioner of Income-tax (exemption) rejected the application observing as under: tion) rejected the application observing as under: tion) rejected the application observing as under:
As per provision of section 11(1) of the IT Act, 1961 exemptions As per provision of section 11(1) of the IT Act, 1961 exemptions As per provision of section 11(1) of the IT Act, 1961 exemptions subject to the grant of registration is accorded to income i.e. applied subject to the grant of registration is accorded to income i.e. applied subject to the grant of registration is accorded to income i.e. applied for charitable purpose for India. The above referred clauses in your for charitable purpose for India. The above referred clauses in you for charitable purpose for India. The above referred clauses in you trust proposed to apply public charitable funds received beyond trust proposed to apply public charitable funds received beyond trust proposed to apply public charitable funds received beyond Indian Shores. In view of the same, this application for grant of Indian Shores. In view of the same, this application for grant of Indian Shores. In view of the same, this application for grant of registration is not maintainable and the same is rejected. registration is not maintainable and the same is rejected. registration is not maintainable and the same is rejected.
4. Before us, the learned counsel for the assessee submits that Before us, the learned counsel for the assessee submits that Before us, the learned counsel for the assessee submits that a show cause notice was issued to the assessee on 18.07.2024, show cause notice was issued to the assessee on 18.07.2024, show cause notice was issued to the assessee on 18.07.2024, providing an opportunity to respond by 22.07.2024. The counsel providing an opportunity to respond by 22.07.2024. The counsel providing an opportunity to respond by 22.07.2024. The counsel referred to the show cause notice issued by the learned referred to the show cause notice issued by the learned referred to the show cause notice issued by the learned Commissioner of Income Tax (Exemption), available on page 68 of Commissioner of Income Tax (Exemption), available on page 68 of Commissioner of Income Tax (Exemption), available on page 68 of the paper book. Additionally, he cited the affidavit of the trustees on ook. Additionally, he cited the affidavit of the trustees on ook. Additionally, he cited the affidavit of the trustees on page 137, highlighting that the assessee was given less than three page 137, highlighting that the assessee was given less than three page 137, highlighting that the assessee was given less than three business days to respond. During this period, one of the trustees business days to respond. During this period, one of the trustees business days to respond. During this period, one of the trustees was traveling abroad, making it impractical to submit a timely was traveling abroad, making it impractical to submit a timely was traveling abroad, making it impractical to submit a timely response. The learned counsel further referred to pages 113-130 of response. The learned counsel further referred to pages 113 response. The learned counsel further referred to pages 113 the paper book, demonstrating that the assessee had duly modified the paper book, demonstrating that the assessee had duly modified the paper book, demonstrating that the assessee had duly modified its objectives to restrict its activities within India. In light of these its objectives to restrict its activities within India. In light of these its objectives to restrict its activities within India. In light of these circumstances, he requested that the assessee be circumstances, he requested that the assessee be granted another granted another opportunity to appear before the learned Commissioner of Income opportunity to appear before the learned Commissioner of Income opportunity to appear before the learned Commissioner of Income Tax (Exemption) and present its case. Tax (Exemption) and present its case.
& 4806/MUM/2024 4805 & 4806/MUM/2024
We have considered the rival submissions and examined the We have considered the rival submissions and examined the We have considered the rival submissions and examined the relevant records. It is evident that the application for registration relevant records. It is evident that the application for registration relevant records. It is evident that the application for registration under Section 12AB was primarily rejected due to non Section 12AB was primarily rejected due to non Section 12AB was primarily rejected due to non-compliance by the assessee. Before us, the learned counsel for the assessee has by the assessee. Before us, the learned counsel for the assessee has by the assessee. Before us, the learned counsel for the assessee has explained the circumstances that led to the failure to respond to the explained the circumstances that led to the failure to respond to the explained the circumstances that led to the failure to respond to the show cause notice. In our view, there was a reasonable cause for show cause notice. In our view, there was a reasonable caus show cause notice. In our view, there was a reasonable caus this non-compliance. Furthermore, the learned counsel has compliance. Furthermore, the learned counsel has compliance. Furthermore, the learned counsel has submitted that the assessee has already modified its objectives to submitted that the assessee has already modified its objectives to submitted that the assessee has already modified its objectives to restrict charitable operations within the territory of India, and a restrict charitable operations within the territory of India, and a restrict charitable operations within the territory of India, and a copy of this modification has been placed on record. In the interest copy of this modification has been placed on record. In t copy of this modification has been placed on record. In t of substantive justice, we find it appropriate to set aside the order of of substantive justice, we find it appropriate to set aside the order of of substantive justice, we find it appropriate to set aside the order of the learned Commissioner of Income Tax (Exemption) and remand the learned Commissioner of Income Tax (Exemption) and remand the learned Commissioner of Income Tax (Exemption) and remand the matter for reconsideration, taking into account the assessee's the matter for reconsideration, taking into account the assessee's the matter for reconsideration, taking into account the assessee's submissions. Needless to say, the assessee submissions. Needless to say, the assessee shall be granted a fair shall be granted a fair opportunity to be heard. Accordingly, the grounds raised in the opportunity to be heard. Accordingly, the grounds raised in the opportunity to be heard. Accordingly, the grounds raised in the appeal are allowed for statistical purposes appeal are allowed for statistical purposes.
has been filed against the The appeal, has been filed against the The appeal, ITA No. 4806/Mum/2024, has been filed against the cancellation of registration under Section 80G of the Act. The cancellation of registration under Section 80G of the Act. The cancellation of registration under Section 80G of the Act. The learned Commissioner of Income Tax (Exemption) rejected the learned Commissioner of Income Tax (Exemption) rejected the learned Commissioner of Income Tax (Exemption) rejected the application for registration under Section 80G on the grounds that application for registration under Section 80G on the grounds that application for registration under Section 80G on the grounds that registration under Section 12AB was denied to the assessee. Since stration under Section 12AB was denied to the assessee. Since stration under Section 12AB was denied to the assessee. Since we have remanded the issue of registration under Section 12AB to we have remanded the issue of registration under Section 12AB to we have remanded the issue of registration under Section 12AB to the the the learned learned learned Commissioner Commissioner Commissioner of of of Income Tax (Exemption) Income Income Tax Tax (Exemption) (Exemption) for for for reconsideration, we find it appropriate to similarly remand the reconsideration, we find it appropriate to similarly remand the reconsideration, we find it appropriate to similarly remand the & 4806/MUM/2024 4805 & 4806/MUM/2024 matter of registration under Section 80G for fresh adjudication. registration under Section 80G for fresh adjudication. registration under Section 80G for fresh adjudication. Accordingly, the grounds of appeal are allowed for statistical Accordingly, the grounds of appeal are allowed for statistical Accordingly, the grounds of appeal are allowed for statistical purposes.
In the result, both the appeals of the assessee are allowed for both the appeals of the assessee are allowed for both the appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open Court on Order pronounced in the open Court on 17/03/2025. /03/2025.