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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
Before: SHRI I.C. SUDHIR & SHRI B.P. JAIN
ORDER
PER B.P. JAIN, ACCOUNTANT MEMBER This appeal of the assessee arises from the order of DIT(E), New Delhi dated 17.12.2013 passed u/s.12AA(1)(b) r.w.s. 12A of the Income Tax Act, 1961. The assessee has raised the sole ground of appeal
as under: “On the facts and circumstances of the case, the learned Director of Income Tax (Exemption) has erred both on facts and in law in rejecting the application of the assessee for registration under Section 12A of the Income Tax Act, 1961.”
2. The brief facts of the case as are emanating from the order of learned DIT(E) vide order dated 17.12.2013 which is reproduced for the sake of convenience as under: “The applicant filed an application on 27.06.2013 in Form No.10A seeking registration u/s.12A of the Income Tax Act, 1961. Subsequently, letter/notice u/s.12A of the Act, 1961 dated 02.08.2013 was issued to the applicant requiring it to submit certain requisite documents/explanations on 12.08.2013 in support of its claim for registration u/s.12A of the IT Act.
However, on given date i.e. on 12.08.2013, no one attended nor any detail was filed in this regard. Subsequently, a reminder-1 in this case was issued on 14.08.2013 and case was fixed for 27.08.2013. Subsequently, on various dates Shri Girish Kumar, CS of the applicant company attended and filed details. On 06.09.2013, AR of the applicant was asked to file the details regarding amendment in area of operation duly endorsed by the Registrar of the Companies (ROS) and case was fixed for 19.09.2013. Subsequently, on 23.10.2013, AR of the applicant attended and he was asked to file the detail regarding amendment in area of operation duly endorsed by the ROS on 31.10.2013, mentioning that in case of non-compliance on the above mentioned date, case will be decided on the basis of material available on record. On 29.10.2013, AR of the applicant attended and requested for adjournment to file the requisite details and the same, case was fixed for 06.11.2013. Subsequently, on 05.01.2013 a letter dated 05.11.2013, submitted by the applicant regarding clarification in respect of area of operation within or outside India, which is reproduced as under:
This is to bring to your notice that the Section 12A or Section 11 does not restrict the registration of organization having international operations. This is based on the information given in the tax payers booklet issued by the Income Tax Department itself which is reproduced below:
Section 11 permits deduction of expenditure from income. The expenditure incurred by a trust or institution by way of applicant of income in India towards religious or charitable purposes, as per its memorandum, is deductible from the income. The assessee may also set apart and accumulate 15% of income for such application and such amount will also be taken as expenditure of the year. These provisions are applicable mutatis-mutandis to a partly religious or charitable trust. This section also permits deduction of expenditure incurred outside India, provided that such application of income promotes international welfare in which India is interested. However, for deduction of such expenditure, prior approval of the Board is required. In conformity with section 12, corpus donations constitute deductible expenditure under section 11(1)(d). The word ‘applied’ used in section 11 should be construed widely and not in narrow sense. We may have regard to some of the decided case.
3. I have carefully considered the submission made by the applicant and find no merit in it. A reference is made to provisions of section 11 of the IT Act, 1961, which is reproduced as under: “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 property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; 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 apart is not in excess of fifteen percent of the income from such property. (b) Income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart. (c) For application to such purpose in India, to the extent to which the income so set apart is not in excess of fifteen percent of the income from such property. 3.1 A perusal of section 11(1) clearly indicate that it applies to only such income as is applied for “charitable purposes in India.” Section 12A registration is for the purpose of section 11(1) exemption. Therefore such institutions, which apply its income outside India/carries out activities outside India, do not fall under the purview of section 12A and thus are not eligible for registration u/s.12A of the IT Act, 1961. 3.2 Further, the applicant has referred to Taxpayers booklet which mentions about exemption with regard to application of income outside India. The relevant provision is as per section 11(1)(c), which reads as under: Income derived from property held under trust- Created on or after the 1st day of April, 1952, for a charitable (i) purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purpose outside India, and For charitable or religious purposes, created before the 1st day of (ii) April, 1952, to the extent to which such income is applied to such purposes outside India. Provided that the Board, 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. 3.3 It is evident from above that section 11(1)(c) exemption is available to such trust created “for a charitable purpose which tends to promote international welfare which India is interested”. Further, prior approval of the Board is needed in such cases. In the case under consideration, the trust has not been created for any charitable purpose, which tends to promote international welfare in which India is interested. Moreover, the competent Authority in such case is CBDT and as such case is not covered even u/s.11(1)(c) of the IT Act, 1961.
4. In view of the detailed discussion as above, the applicants request for registration u/s.12A of the IT Act, is hereby rejected. The applicant is however at liberty to apply again after suitably amending its provisions.”
Learned counsel for the assessee, Shri Salil Kapoor, Advocate appearing along with Ms. Ananya Kapoor, Advocate argued that learned DIT(E) probably has misunderstood the facts of the case as averted himself regarding the amendment of the registration of the institution. Whereas there was no requirement of such amendment and no material has been brought on record to show why such amendment is required. It was further argued that there was no requirement for going into Section 11 which has been discussed by the learned DIT(E) at length. There is no dispute to the fact that the operations outside India are referred into main objects of the Institutions but no activities in this regard in any of the foreign country has been carried out till the end of the impugned year. The assessee is well aware of the provisions when he has to carry out the activities abroad, he has to take the permission of the Board. Since no such activity has been carried out and therefore there is no requirement of the approval of the Board. The final accounts of various years along with copy of memorandum of association and article of association are on record. None of the expenditure has been pointed out by the learned DIT(E) to have been incurred for any activity carried out outside India. Therefore in the circumstances and in view of the decision of Hon’ble Delhi High Court in the case of M.K. Numbyar Saarf Charitable Trust vs. Union of India, 269 ITR 556 (Del), the ld. DIT(E) is not authorized to deny the registration u/s.12A of the Act.
Learned DR, on the other hand, relied upon the order of learned DIT(E).
We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the assessee has placed on record the final accounts which have been perused by us. It is also not in dispute that the main objects of the institution include the carrying out of the activities outside India. Learned DIT(E) as well as learned DR arguing the matter before us has not brought on record the necessity of the amendment of the main objects and the necessity application of Section 11(1) of the Act. None of the expenditure has been pointed out either by the learned DIT(E) or by the learned DR which have been incurred by the assessee for carrying out any activity outside India. While granting the registration u/s.12AA(1), the DIT(E) on receipt of the application for registration of the institution has to satisfy himself about genuineness of the activities of the Trust and making such inquiries as may deem necessary in this behalf after satisfying himself about the objects of the trust or institution on the genuineness of his activities. In this regard as mentioned hereinbefore the objects of the trust are there to carry out the activities outside India but no activity as such has been carried out, and therefore, no approval of the Board is required to be taken from the Board. There is no necessity to make the amendment of the main objects. Also none of the activities has been brought to our notice by the learned DR and no material placed before us to show that any expenditure outside India has been incurred by the assessee or any activity outside India has been carried out. In such circumstances and facts of the case, the learned DIT(E) is not justified in denying registration u/s.12AA r.w.s. 12A of the Act. The reliance is placed upon the decision of Hon'ble Delhi High Court in the case of N.K. Numbyar Saarf Law Charitable Trust (supra). The relevant paragraph of the decision is reproduced hereunder: “3. So far 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 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 order dated 24.02.2004, 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 application. In absence of order under section 11(1)(a)(c), one cannot seek benefit for application of income for charitable or religious purposes outside India. Therefore, the order dated 24.2.2004 made by the Director of Income- Tax(E), Annexed at page 32 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 that even application under section 80G is required to be considered afresh. It is directed that the application shall be disposed of within a period of four weeks by the Commissioner.”
Respectfully following the above decision of Hon'ble Delhi High Court, I direct the DIT(E) to grant the registration as applied for by the assessee.
In the result, the sole ground of the assessee is allowed.
Order pronounced in the open court on this day 17th April, 2017