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Facts
The appellant, a public trust promoting veganism and animal welfare, filed an application for approval under Section 80G of the Income Tax Act. The CIT(Exemption) rejected the application, citing that the trust's objects allowed for expenditure outside India.
Held
The Tribunal held that merely having objects that permit expenditure abroad does not automatically mean income is applied or expended outside India. Citing previous judgments, it clarified that the situs of expenditure is the key consideration, not the location where the purpose is achieved.
Key Issues
Whether the objects of the trust, which permit expenditure abroad, lead to rejection of approval under Section 80G?
Sections Cited
Section 80G, Section 11, Section 11(1)(c)(ii)
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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: JUSTICE (RETD.) C.V. BHADANG & SHRI B R BASKARAN
PER JUSTICE (RETD.) C.V. BHADANG, PRESIDENT :
By this appeal, the appellant-assessee is challenging the order dated 27.09.2024 passed by learned Commissioner of Income Tax (Exemption), Mumbai (‘CIT(Exemption)’ for short) thereby rejecting the application for approval filed by the appellant-Trust under Section 80G of the Income Tax Act, 1961 (‘Act’ for short). The application has been rejected solely on the ground that the Objects of the Trust have potential for the applicant-Trust to incur expenditure of its income outside India.
The brief facts are that the appellant, is a public trust formed mainly for promoting veganism, welfare of animals and promoting education against animal cruelty. The appellant-Trust had filed an application in Form 10AB of the Income Tax Rules requesting for grant of approval under Section 80G of the Act. The learned Discover Urjaa Charitable Trust CIT(Exemption) after perusal of the Trust deed observed that some of the Objects of the appellant-Trust are in violation of provisions of Section 11 of the Act, inasmuch as, the Trust intends to apply/receive funds from outside India. In such circumstances, a show cause notice came to be issued to the appellant seeking additional information vide notice dated 04.09.2024. In response thereto, the appellant filed letter dated 19.09.2024 alongwith an Affidavit setting out that the main Objects of the Trust is promoting veganism and creating awareness against animal cruelty. It was pointed out that the activities do not result into any benefit accruing to any person outside India and that no such expenditure shall be incurred, the benefit of which shall accrue outside India.
The learned CIT(Exemption), however, after going through the Objects of the Trust found that they leave room for any potential future endeavour by the appellant which would result in expenditure outside India. Thus, the application came to be rejected. Hence this appeal.
We have heard parties. Perused record.
It is submitted by the learned counsel for the appellant that the activities per se do not result into any expenditure being incurred by the appellant outside India. It is submitted that even grant of scholarship to an Indian student, for studying abroad cannot be said to be an expenditure incurred abroad. Reliance is placed on the decision of this Tribunal in ITO (Exemptions) vs JN Tata Endowment for the Higher Education of Indians in dated 23.08.2024. It is submitted that an application for modification of the Objects is also pending. It is pointed out that the said application is filed only by way of abundant caution so as to alleviate any apprehension as to the appellant-Trust applying the income or incurring expenditure outside India. It is submitted that the learned CIT(A) failed to give appropriate weight to the Affidavit dated 19.09.2024 filed by the appellant.
The learned DR for the respondent has submitted that looking to the Objects of the Trust, the possibility of application of income outside India cannot be ruled out as has been found by the learned CIT(Exemption). He submitted that the fact that the appellant-Trust has moved for modification of the Objects would itself indicate that the present Objects (as they stand) can lead to the application of income outside India and therefore, the application is rightly rejected.
We have considered the submissions made. The relevant Objects of the Trust as contained in the Trust deed, which are the basis for the learned CIT(Exemption) to reject the application read as under :-
“To grant, pay, or give scholarships, stipends, prizes, rewards, allowances and other financial help in cash or kind to students with a view to help them in pursuing their studies in schools, colleges, educational institutions, teaching commercial and other arts including teaching of cultural arts or other training, research and education works in India or abroad.” (Emphasis supplied)
On the basis of aforesaid Objects, the learned CIT(Exemption) has observed as under :-
“4. …………… Such objects leave room for any potential future endeavour may be undertaken by the assessee trust which would result in expenditure outside India. The assessee trust ought to have amended the clauses of the objects mentioned above which are in violation of the I.T Act but it has failed to do so.”
In our considered view, merely because the Objects provide for grant of scholarships/stipends or other financial help for the students to undertake training, research and educational works abroad cannot lead to a conclusion of application of income by the Trust or the Trust incurring such expenditure outside India. A useful reference in this regard may be made to the decision of the Tribunal in case of JN Tata Endowment for the Higher Education of Indians (supra). That was a case wherein the Trust had made a claim of exemption under Section 11 of the Act where a similar object of assessee granting student scholarships for studying in various institutions outside India was considered. This Tribunal relying upon the assessee’s own case for assessment year 2010-11 came to the conclusion that the scholarship granted to meet the cost of education abroad cannot be considered as money spent outside India. The Tribunal also relied upon the order in Jamsetji Tata Trust vs. Joint Director of Income- tax (Exemption) Range- II, (2014) 44 taxmann.com 447 (Mum.-Trib.), which in turn places reliance on para 6 of order of Chennai Bench of Tribunal in Bharata Kalanjali vs. ITO, 30 ITD 161 (Mad.) which reads as under :-
“6. The crucial question is only whether the conditions in section 11 are complied with. That section states that the income derived from property held under trust wholly for charitable purposes shall not be included in the total income to the extent to which such income is applied to such purposes in India. The question is whether this section requires the application of money in India or the carrying out of the purposes in India or both. The contention of the revenue is that apart from the money being spent in India even the purpose must be carried out in India.
The section itself contradicts this contention. Section 11(1)(c)(ii) provides that income applied to such purposes outside India is exempt in the case of trust created before 1st April, 1952 subject to the approval of the Board. This underlines the principle that Governments do not forego their revenue in favour of charges paid outside their countries and hence the relevant consideration is whether the situsof the application of the money and not the place in which the objects of the trust may become effective. It may be pertinent to refer to section 1 of 16 which exempts scholarships granted to meet the cost of education where also the CBDT itself does not consider scholarship granted for education abroad as money spent outside India. Similarly in the present case of such a wide object of propagation of art it would be difficult to confine it to the shores of the land. We are of the considered opinion that the expression "applied to such purposes in India" refers only to the situs of the expenditure and not" to the place 'where the "purposes" are carried out. The fact that the troupe gave the performance abroad is therefore no disqualification for treating the amount actually spent in India as application of the amount for charitable purposes. The Commissioner also referred to collections made for performances given as an activity for profit. We find that such performances do not constitute activities for profit as the collections are in the nature of donations received for the purposes of the trust. Hence this objection also cannot be sustained, it follows that the exemption granted by the Discover Urjaa Charitable Trust Income-tax Officer was not erroneous and did not require to be reviewed by the JN Tata Endowment for the Higher Education of Indians, Mumbai Commissioner. Hence his order u/s 263 is cancelled. The appeal is allowed."
A brief reference at this stage may also be made to the decision of co-ordinate Bench of this Tribunal in CEO Clubs India vs Director of Income-tax (Exemption), [2012] 25 taxmann.com 217 (Mum.) wherein the issue was whether the activities of the assessee which provided for conferences being held outside India would disentitle the Trust to registration. In para 11 of its order the Tribunal has observed as under :-
“11. The other objection of the DIT was that the activities of the Assessee were not confined to India and therefore registration cannot be granted. The basis for these observations is that conferences were to be held outside India. We are of the view that holding of conferences abroad would not make the activities of the Assessee being carried out outside India. The benefits of such conference will ultimate go to Assessee and its members. It cannot be said that the activities of the Assessee were carried on outside India.”
Ultimately, in para 10.7 of the order, the Tribunal held that the education grant given to Indian students in India for education/higher education abroad fulfils the conditions of application of money for such purpose in India.
In such circumstances, we find that the impugned order cannot be sustained. The appeal is accordingly allowed. The impugned order is set aside. The application filed by the appellant is restored to the file of learned CIT(Exemption) for disposal according to law in light of the observations made in para 11 above.
Order pronounced in the open court on 11/12/2024.
Sd/- Sd/- (B R BASKARAN) (JUSTICE (RETD.) C.V. BHADANG) ACCOUNTANT MEMBER PRESIDENT Mumbai; Dated : 11/12/2024 SSL