RYAN INTERNATIONAL FOUNDATION,KODAGU vs. COMMISSIONER OF INCOME TAX(EXEMPTIONS) , BANGALORE

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ITA 603/BANG/2025Status: DisposedITAT Bangalore03 June 2025Bench: SHRI. LAXMI PRASAD SAHU (Accountant Member), SHRI. SOUNDARARAJAN K (Judicial Member)12 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the trust was registered on 07.11.2021 and applied for registration on 24.08.2024. The reports from the jurisdictional AO and Range Head indicated that some expenditures were not in accordance with the trust deed and were high, with a questionable nexus to the charitable activity. The assessee was directed to amend its trust deed by 31.12.2024, but the amendment was made on 10.02.2025, leading to a delay in filing. The Tribunal observed significant expenditure under the electricity head (Rs. 37,52,794/- as of 31.03.2025) and noted that certain payables were shown under current liabilities. The Tribunal was of the view that the expenditure incurred and debited required in-depth examination with external vouchers. It was clarified that entries without external vouchers should not be treated as expenditure for the trust's objects. The Tribunal directed that the lower authorities would physically examine beneficiaries with their Aadhaar numbers, with the assessee's assistance. Consequently, the case was remitted back to the CIT(E) for examination, and the assessee was directed to substantiate its case with necessary documents without seeking unnecessary adjournments. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, M/s. Ryan International Foundation, filed an appeal against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)] rejecting its provisional registration granted on 24.02.2025 in Form No. 10AD. The rejection was primarily due to the omission of mandatory clauses (utilization, irrevocable, investment, and beneficiary) in the original trust deed and a delay in submitting the amended deed. The assessee contended that these omissions were inadvertent and the amendment deed was executed on 10.02.2025 and registered on 11.02.2025, prior to the rejection order, but could not be submitted within the stipulated timeframe due to practical difficulties. The assessee also argued that its main objective of providing shelter and empowerment to marginalized women falls under 'advancement of any other objects of general public utility' as defined under Section 2(15) of the Income Tax Act, 1961, and that significant expenses were incurred towards this objective.

What were the issues?

1. Whether the learned CIT(E) erred in rejecting the application for registration under Section 12AB of the Income Tax Act, 1961, on the grounds of inadvertent omission of mandatory clauses in the trust deed and delay in submitting the amended deed? (Question of law and fact, concerning Section 12AB and the conditions for charitable registration). Assessee's Contention: The omission of mandatory clauses was inadvertent, and the amendment deed was executed and registered before the rejection order. The delay in submission was due to practical difficulties. The assessee also argued that its activities of providing shelter and empowerment to marginalized women fall under 'advancement of any other objects of general public utility' as per Section 2(15). Revenue's Contention: The learned DR relied on the order of the lower authorities, submitting that huge expenditure was incurred which was not commensurate with the trust's objectives. The AO and Range Head had not recommended registration based on their observations, which were incorporated in the CIT(E)'s order, indicating the institution was not eligible for registration under Section 12AB.

Which sections of the Income-tax Act were involved?

Section 12AB,Section 2(15)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH : BANGALORE

Before: SHRI. LAXMI PRASAD SAHU & SHRI. SOUNDARARAJAN K

For Appellant: Shri. Vignesh K, CA
For Respondent: Shri. Muthu Shankar, CIT(DR)UTAT), Bangalore

Per Laxmi Prasad Sahu, Accountant Member :

1.

This appeal filed by the assessee against the Order passed by the CIT(E) regarding rejection of the provisional registration granted vide Order dated 24.02.2025 in Form No.10AD on the following grounds of appeal:

1. That the order of the learned Commissioner of Income Tax (Exemptions) in so far isprejudicial to the interest of the appellant is bad and erroneous in law and against the facts and circumstances of the case. Grounds on mandatory clause in the trust Deed: 2. That the learned Commissioner of Income Tax (Exemptions) erred in not considering the fact that the mandatory clauses were inadvertently omitted.

Page 2 of 12 3. The learned Commissioner of Income Tax (Exemptions) erred in not recognizing that the supplementary/amendment deed was duly made and executed on 10.02.2025, prior to the passing of the order of rejection. Grounds on significant activities of the Trust: 4. That the learned Commissioner of Income Tax (Exemptions) erred in not denying the fact that one of the appellant's main objectives is provide shelter to and empowerment of women who fall under marginalized groups.

5. That the learned Commissioner of Income Tax (Exemptions) erred in not appreciating the fact that 'empowerment of women' comes under 'advance of any other objects of general public utility'.

6. That the learned Commissioner of Income Tax (Exemptions) erred in not denying the fact that the appellant has incurred major expenses towards shelter to women who fall under marginalized groups. Grounds on expenses incurred towards other activities 7. That the learned Commissioner of Income Tax (Exemptions) erred in not considering the tact that the awareness drives, nutrition and health education, etc., was provided by the employees only who are health workers. Each of the above grounds is without prejudice to one another, the appellant craves the leave of the I lon'ble Income Tax Appellate Tribunal, Bangalore to add, delete, amend or otherwise modify all or any of the grounds of appeal

either before or at the time of hearing of this appeal.

2. Learned AR filed written submissions which is as under:

3. In addition to the above, the learned Counsel submitted that learned CIT(E) has wrongly rejected the application whereas the assessee has incurred expenditure as per its object mentioned in the trust deed.

4.

On the other hand, learned DR relied on the Order of the lower authorities and submitted that huge expenditure has been incurred which is not commensurate as per the objectives of the trust deed and the AO and Range Head, after verifying the documents, have not recommended for the registration as per their observation which is incorporated in the CIT(E)’s Order and submitted that Page 11 of 12 as per observation of the CIT(E), the institution is not eligible for registration under section 12AB of the Act.

5.

After hearing both the sides and perusing the entire material available on records, we noted from the documents that Trust was registered on 07.11.2021 and applied for registration on 24.08.2024 in Form 10AB. The case was transferred to jurisdictional AO (JAO) and Range Head. They have submitted their reports. The AO observed that the assessee has incurred some expenditure which are not in accordance with the trust deed and it is high and not insignificant and the nexus between the aharitable activity and the amount spent towards the expenditure and assessee was directed to amend its trust dded and it was directed to file the amended trust deed by 31.12.2024. Later the trust deed was amended on 10.02.2025 and there was delay in filing the same before the concerned authorities and Order was passed on 24.02.2025. We have also gone through the financial statement submitted by the assessee. We noted that the assessee has incurred huge expenditure under electricity head and in the balance sheet as on 31.03.2024, the assessee has shown under the current liabilities under different heads as payable. In the Invcome & expenditure account a sum of Rs. 37,52,794/- is debited as on 31.03.2025 as electricity expenses , We are of the view that the expenditure incurred and debited into income and expenditure account which requires examination in depth with the external vouchers and during the hearing it was clarified that if any entry is made without support of external voucher, it should not be treated as expenditure incurred for the purpose of object of the society and it was also clarified that the lower authorities will examine beneficiaries with their aadhaar numbers physically and the assessee will assist to the departmental officers . With this direction, the case is remitte back to the CIT(E) for examination and assessee is also directed to substantiate its case with the necessary documents and not to seek unnecessary adjournments for early disposal of the case.

6.

In the result, appeal of the assessee is allowed for statistical purposes.

Pronounced in the court on the date mentioned on the caption page.

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