DAWAT E ISLAMI AP, HYDERABAD,HYDERABAD vs COMMISSIONER OF INCOME TAX, (EXEMPTIONS), HYDERABAD

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN

PER S. RIFAUR RAHMAN, A.M. :

This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Exemptions)- Hyderabad, dated 29-09-2017.

Brief facts of the case are that the assessee filed an application in Form No.10A on 30-03-2017, seeking registration u/s. 12AA of the Income Tax Act [Act]. After verification of the information filed by the assessee, CIT(E) observed that the Trust incorporated on 05-03-2009 with an objective mentioned therein. As per the objective, Clause 3(v) as - The activities would be confined to the territory of India, but

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subsequently, on 17-04-2014, they amended the Trust Deed and deleted the above said Clause 3(v). When the same was enquired with the assessee, it was explained that they could not restrict the activities in India only. According to CIT(E), it is contrary to the provisions of Section 11(1)(a) of the Act. Accordingly, registration u/s. 12AA was denied. Aggrieved with the above order, assessee preferred an appeal before us, raising the following grounds of appeal:

“1. The order of the learned Commissioner of Income Tax (Exemptions) is against law, weight of evidence and probabilities of the case.

The learned Commissioner of Income Tax (Exemption) erred in passing an order under section 12AA by rejecting the claim of registration made by filing Form No.10A of the I.T Rules.

The learned Commissioner of Income Tax (Exemption) ought to have given one more opportunity in writing explaining the provisions of section 11(1)(a) in respect of the charitable activities to be confined to Indian Territory.

The learned Commissioner of Income Tax (Exemption) ought to have directed the assessee, by giving an opportunity in writing, to amend the trust deed so as to restore the original trust deed dt: 05.03.2009.

The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary”.

Ld.AR brought to our notice that the discrepancies pointed out by the Ld.CIT(E) was suitably corrected by the Trust. Therefore, the Trust is eligible for registration u/s. 12AA of the Act. Further, he submitted that Ld.CIT(E) should not have denied the exemption merely because the assessee’s

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activities are not restricted to within India. As per the Section 11(1), the exemption is granted to the activities, which are carried on within India. Any activity which is carried outside India, exemption may be denied to that extent. This is not the proper reason for denying the registration u/s. 12AA. He relied on the following two case law to support the contentions:

i. M.K. Nambyar Saare Law Charitable Trust Vs. Union of India & Ors. [269 ITR 556];

ii. ITA No. 997/Del/2014 (AY. 2013-14) in the case of National Informatics Centre Services Inc. Vs. DIT (Exemptions), dt. 17-04-2017;

On the other hand, Ld.DR submitted that assessee has modified the objects and its activities, subsequent to the impugned order. Therefore, this needs thorough investigation and verification by the Ld.CIT(E). Therefore, she submitted that it should be remitted back.

Considered the rival submissions and material on record. We noticed that Ld.CIT(E) denied the exemption u/s. 12AA of the Act, mainly for the reason that the activities of the assessee are extended beyond the territory of India. The courts have held that this is not the particular reason to deny the registration u/s. 12AA of the Act. In the case of M.K. Nambyar Saare Law Charitable Trust Vs. Union of India & Ors.

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[269 ITR 556], the Hon'ble High Court of Delhi has held as under:

“As the benefit of section 11(1)(a) is concerned, it can be extended only to the extent to which such income is applied to such purposes in India. However, if the income is applied to the purposes outside India, then clause (c) will be applicable and if the permission is granted by the Board either by general or special order, then, benefit can be extended. Section 12AA prescribes the procedure for registration. Reading the section, it becomes clear that after the application is made, the officer has to call for documents or information from the trust to satisfy himself about the genuineness of the activities of the trust. He can make further enquiry as he may deem necessary. It is only after satisfying himself about the objects of the trust and the genuineness of its activities that he has to pass an order in writing registering the trust or institution. And if he is not satisfied, he can reject the same. This section does not refer to the activities in India or outside India. It refers to application of income for charitable or religious purposes in India as also with direction or order of the Board for application of income as aforesaid outside India. Reading the impugned order it is very clear that there is non-application of mind. It was necessary for the Commissioner to examine the purpose for satisfying himself that the activities are genuine. It was open for him to make necessary enquiries in this behalf and to pass an order as per the procedure laid down under section 12AA of the said Act. So far as income which is applied outside India is concerned, is not a relevant criteria for rejecting the app1ication. In absence of order under section 11(1)(a) or (c), one cannot seek benefit for application of income for charitable or religious purposes, outside India. Therefore, the order passed by the Director of Income Tax (Exemptions) which is based on irrelevant criteria is quashed and set aside with a direction to consider the application strictly in accordance with law. It is made clear that even application under section 80G is required to be considered afresh”.

5.1. Therefore, by considering the above ratio, we are of the view that the Ld.CIT(E) should have given one more opportunity to assessee for making proper changes in the objectives of the Trust rather than rejecting the application under Rule 10A. Therefore, we are remitting the matter back

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to the file of Ld.CIT(E) to consider the amended Trust Deed and give proper opportunity of being heard to the assessee before making any decision in this aspect of granting registration u/s. 12AA and take appropriate decision under the law.

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

Order pronounced in the open court on 9th November, 2018

Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 9th November, 2018 TNMM

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Copy to :

Dawat E Islami AP, C/o. Shri Md. Afzal, Advocate, 11-5-465, Flat No. 402, Sherson’s Residency, Criminal Court Road, Red Hills, Hyderabad. 2. The Commissioner of Income Tax(Exemptions), Hyderabad.

Addl.CIT(Ex)-Hyderabad.

D.R. ITAT, Hyderabad.

Guard File.

DAWAT E ISLAMI AP, HYDERABAD,HYDERABAD vs. COMMISSIONER OF INCOME TAX, (EXEMPTIONS), HYDERABAD