BAREFOOT COLLEGE INTERNATIONAL,KISHANGARH vs. CIT EXEMPTION, JAIPUR

ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(E), Jaipur dated 31-08-2023 for the assessment year 2024-25 wherein the assessee has raised the following grounds of appeal. ‘’1. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by mentioning rejection of claim u/s 12ABwhereas assesse had filed application for approval u/s 80G(5)(iii).

5. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of discrepancies in Article of Association whereas Memorandum of Association of the assessee puts clear restriction on distribution of profits.

6. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of not submitting the details in desired format resulting in non-genuineness whereas the assesse had duly provided all the details required from it.

7. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on 3 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR ground of violation of section 11(1)(c) of the Income Tax Act, 1961 whereas there if no such violation made by the assesse. 8. The. Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by not following principal of nature justice during the course of hearing of application for approval u/s 80G(5)(iii).

2. Filing application after more than 3 years from commencement of activities, and also less than six month from the lapse of period for which provisional certificate was given. 2.1. While examining the application of the assessee for its claim of approval u/s 80G of the Act, the applicant was asked to file details regarding the commencement of activities of the applicant which is reproduced as under:-

In response to the above, the applicant had submitted the submission which was not found tenable by the ld. CIT(E). It is noted that the ld. CIT(E) has elaborately discussed the issue as mentioned in his order but conclusively rejected claim of registration u/s 12AB for approval u/s 80G(5)(iii).of the Act by observing as under:- ‘’08. In view of above discussion assessee's claim of registration section 12AB is liable to be rejected and thus being rejected on following grounds:-

 Filing application after more than 3 years from commencement of activities, and also less than six month from the lapse of period for which provisional certificate was given.  Violation of FCRA, willful wrong declaration and non- genuineness of activities Assessee is engaged in business activities including export & no proper separate books of accounts are made  Discrepancies in Article of Association  Not submitting the details in desired format resulting in non- genuineness.  Violation of section 11(1)(c)

2.2 Being aggrieved by the order of the ld. CIT(E) , the assessee carried the matter before this Bench with the prayer that the order passed by ld. CIT(E) should be quashed and allow approval u/s 80G of the Act to the assessee. ‘’Facts of the Case :

1. Barefoot College International was established on July 20, 2015 as Section 8 Company, registered under the Companies Act, 2013, with the aim of preservation of environment by making available renewable technology to the developing world and promoting solar electrification, empowering rural women across India and contributing to the achievement of the United Nations' sustainable development goals (UNSDGs). Founded in Rajasthan, the organization is headquartered in Harmara village, Kishangarh, Rajasthan. It operates with the fundamental belief that women should be at the forefront of all initiatives for economic and social development.

2. To achieve its objectives, Barefoot College International, sources grants from various funding agencies / donors and also carry on incidental activities of the nature of trade or business to achieve financial sustainability, viability and self reliance through its own

6 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR activities. The incidental surplus arising from such activities is reinvested in growth and strengthening its social and humanitarian projects.

3. Recently the company has changed its name from “Barefoot College International” to “Empbindi International Association”. In pursuance thereof the Registrar of Companies, Jaipur has issued new incorporation certificate. (Refer Paper Book No. 5, Page No. 460).

4. Similar change in name has taken place in MOA & AOA of the Company and also clause 39 of the AOA of the Company has been deleted. (Refer Paper Book No. 5, Page No. 461-486)

5. Company is engaged in doing charitable activities as per its MOA. Objects includes preservation of environment by making available renewable technology to the developing world and promoting solar electrification. engage in Grass Roots, R & D, product development and testing within all renewable technologies applicable to the rural poor, women empowerment etc.

6. To fulfil its objectives, the Company provided training to trainees for manufacture and maintenance of solar systems and during the course of training various solar products i.e. HLS 40 WP, Diva 5200, Devi, Bindi, REW, etc. are manufactured which are subsequently sold by the company, both in domestic and international territories as an incidental business activity.

7. The business carried out by the company is incidental to promotion of main objects of the company particularly Object Clause (iv), (v) & (xi) of MOA of the Company.

8. The use of Solar products by people results into environment protection by reducing pollution (carbon emission) and also save the natural resources i.e. coal, crude oil, wood etc. which are otherwise used to generate electricity.

9. All such sales / service activities have been done by the Barefoot College International as Manufacturer / Vendor in the ordinary course of Trade, Business and Commerce carried out by it. The income earned by the Company from all these activities is used to promote main objectives of the company.

10. There are two divisions of the Company i.e. General Division and Project Division.

10. General A/cs are maintained for recording transactions related to the activities of the nature of trade, commerce or business carried out by General Division of the Company.

7 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 11. Projects A/cs are maintained for recording transactions relating to the charitable activities of the assessee carried out by Project Division of the Company.

12. The company was duly registered u/s 12A of the Act by order dated 27.06.2016. The said registration was migrated to new Regime by order dated 28/05/2021 for a period of 5 years (AY 2022-23 to 2026-27). Though in the order provisional registration was mentioned, later on CBDT vide Circular No. 11 of 2022, dated 03/06/2022, clarified that such provisional approval issued during FY 2021-22, shall be read as approval. (Refer Paper Book No. 1, Page No. 28-39) 13. That the company applied for provisional approval u/s 80G(5) of the Income Tax Act, 1961 on dated 09-12-2020 and got the approval order on dated 09-07-2021 (Refer Paper Book No. 1, Page No. 40-41).

14. That the company applied for regularization of approval under clause (iii) of the first proviso to section 80G(5) of the Act, on dated 02/02/2023 in Form 10AB (Refer Paper Book No. 1, Page No. 44-51).

15. The Ld. CIT (Exemp), Jaipur vide order dated 31/08/2023 (though uploaded on income- tax portal on 01/09/2023) has rejected the application filed in Form 10AB, however mentioned rejection of claim u/s 12AB instead of correct section 80G(5)(iii). Being aggrieved by the order passed by the Ld. CIT (Exemp), the company is in appeal before the Hon’ble Bench and raised the following grounds of appeals. Grounds of Appeal – No.

1. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by mentioning rejection of claim u/s 12AB whereas assessee had filed application for approval u/s 80G(5)(iii).

Detailed Submission :

1. The assessee applied for regularization of approval under clause (iii) of the first proviso to section 80G(5) of the Act, on dated 02/02/2023 in Form 10AB (Refer Paper Book No. 1, Page No. 44-51).

2. The Ld. CIT (Exemp), in his order at Page No. 3, Para No. 1, correctly mentioned the relevant section i.e. 80G(5)(iii).

8 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 3. However, at Page No. 32 of CIT (Exemp) order, Para No. 8, relevant section is quoted as 12AB and no reference to section 80G(5)(iii) was made. In this case, our contention is that no order has been passed by CIT (Exemp) for our application regarding approval of 80G, which was required to be passed within 6 months of the end of the month in which relevant application was filed.

4. In Society for the Promotion of Education, Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax (2008) 216 CTR (All) 167, the Hon’ble Allahabad High Court held that non disposal of an application for registration before the expiry of six months as provided u/s 12AA (2) would result in deemed grant of registration. Hon’ble Supreme Court of India, in appeal filed by the department in this upheld the decision regarding deemed registration.

Please also note that relevant proceedings were closed on Income Tax Portal on dated 5. 01/09/2023, whereas the last date as per 3rd proviso to section 80G(5) was 31/08/2023. Copy of screen shot of E-Proceedings Tab of Income Tax Portal is attached herewith. In view of the order not being passed for relevant section together with delayed closure of the e-proceedings on Income Tax Portal, the order passed by the Ld. CIT (Exemp) is erroneous and liable to be quashed and 80G approval is allowable to the assessee. (Refer Paper Book No. 5, Page No. 487) Grounds of Appeal

– No.

2. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of delayed application filed by the assessee whereas assessee there existed reasonable cause behind slight delay in submission of application.

Detailed Submission :

1. That our Company is Registered as a Charitable Company under section 8 of the Companies Act, 2013 and also having approval u/s 12AB of the Income-tax Act for the period from AY 2022-23 to AY 2026-27. (Refer Paper Book No. 1, Page No. 28-30)

2. That the company applied for provisional approval u/s 80G(5) of the Income Tax Act, 1961 on dated 09-12-2020 and got the approval order on dated 09-07-2021 (Refer Paper Book No. 1, Page No. 40-41).

3. That the company applied for regularization of approval under clause (iii) of the first proviso to section 80G(5) of the Act, on dated 02/02/2023 in Form 10AB (Refer Paper Book No. 1, Page No. 44-51).

9 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 4. That the activities of the Company were already commenced as on the date of issue of provisional approval. As per the clause (iii) of the First Proviso to section 80G(5), application for grant of approval was to be made in Form No. 10AB, where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier. Relevant portion is reproduced hereunder : Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,— (i) where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the 1st day of April, 2021; (ii) where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period; (iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier;

5. A perusal of the above, makes it clear that nothing was mentioned about the institutions whole activities have already been commenced as on the date of approval.

6. The Hon’ble Central Board of Direct Taxes, vide Circular No. 16/2021, dated 29th August, 2021, on consideration of difficulties reported by the taxpayers and other stakeholders in electronic filing of certain forms, extended the date of electronic filing of such forms (which included Form No. 10AB) for which the last date of filing falls on or before 28th Feb. 2022 to 31st March, 2022 (Refer Paper Book No. 4, Page No. 389-391).

7. Again vide Circular No. 8/2022, Dated 31st March, 2022, CBDT extended the date of filing of application for approval in Form 10AB till 30th Sept. 2022. (Refer Paper Book No. 4, Page No. 392)

8. Thereafter vide Circular No. 6 of 2023, Dated 24th May, 2023, in order to mitigate the genuine hardship, the CBDT extended the date of filing application in Form 10A and Form 10AB till 30/09/2023 (Refer Paper Book No. 4, Page No. 393-398)

9. In the last circular, dated 24th May, 2023, date of filing of Form 10AB was extended only with reference to application under clause (iii) of the first proviso to clause (23C) of section 10 or under sub-clause (iii) of clause (ac) of sub-section (1) of section 12A. However no relaxation was given for application of approval under clause (iii) of first proviso to section 80G(5).

10. In para 4 (page 2) of the said circular, it is admitted that several trust have not been able to apply for registration / approval within the required time due to genuine hardship. This has led to rejection of the applications simply on the ground that these were delayed.

12. Please also note that nothing is mentioned in section 80 G that if application for renewal in Form 10AB could not be filed within stipulated time period, what consequences will arise. In the Income Tax Act or say any other Act, specific provisions are given regarding levy of penalty, fee, interest, denial of benefit etc. in case some one fails to comply with any provision. However in section 80G of the Income-tax Act, 1961, no specific consequence is stipulated, hence denial of registration on the basis of delayed submission is not justified. Ld. CIT (Exemp.) in his own presumption decided that delayed application is liable to be rejected which is contrary to the intention of legislature.

Grounds of Appeal

– No. 3 The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of violation of FCRA, willful wrong declaration and non- genuineness of activities whereas assessee had received consideration for providing services from outside India and no violation of FCRA has been made by it, no willful wrong declaration has been made and all the activities of the assessee are genuine. Detailed Submission :

1. The assessee company earned income from grants / donations / other activities of the nature of trade, commerce or business for achieving its charitable objectives as per section 2(15) of the I T Act.

2. The assessee is also carrying out activities of the nature of Trade, Commerce or Business. These activities are incidental to the attainment of the objectives of the Company. Separate Books of Accounts have been maintained.

11 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 3. Revenue earned from activities of the nature of trade, commerce or business includes sales of products and services, both domestic and out of India. Income earned from services includes income earned from Indian sources as well as Income earned from foreign sources (Export of Service).

4. We have entered into service contracts with these entities and provided various services as mentioned in the service agreements. Sample copies of service agreements are given at Paper Book No. 4, Page Nos. 399-424 5. All these services, whether provided to foreign entities or Indian entities, were for an agreed consideration and these are not charitable services. All of these services are incidental to the attainment of main objects of the Company. As these services were provided during the course of trade, commerce or business carried on by the company, separate books of accounts have been duly maintained and submitted the copy of the same to CIT Jaipur.

6. Disposal instructions were given to the Bank for foreign inward remittance, clearly mentioning the purpose of remittance, name of remitter, amount of remittance etc.

7. Foreign Inward Remittance Advice is thereafter issued by the Bank as per instruction given to it by the company which is in line with the instruction received by the Bank from remitter of money.

8. It is also to be noted that ultimately it is the remitter of money whose mandate is important. Whether it is engaging a vendor to carry out the work or providing grant-in- aid. In the present case, different entities, whether Indian or Foreign, obtained service of the company by virtue of the service agreement and paid agreed consideration.

9. The consideration for services rendered by the company resulted into some surplus in the hands of company because there was no stipulation regarding expenditure to be done to carry out the service activity. It is altogether different from the grant based working where the expenditure are to be incurred as per given line items and normally no surplus accrues or arises.

10. As far as services provided to various foreign entities are concerned, these services are classified as Export of Service. Though export of service has not been defined in the Income Tax Act, 1961, however we can refer to provisions of Goods and Service Tax Act, 2017 for this purpose. The said law is to regulate supply of goods and services.

11. Please refer to the Goods and Service Tax Act, 2017, Section 2(6) “Export of services” to understand the meaning of supply of any services (Refer Paper Book No. 4, Page No. 385-388).

12. As per our understanding on the subject matter and referring the laws of the land under IGST Act, all the above-mentioned conditions are clearly fulfilled, considering the provisions of IGST Act regarding Place of Supply as defined in Section 13 of IGST Act. As per the provisions of section 13, in the present case, Place of Supply will be the Location of Service Recipient. As per Section 2(93) of the CGST Act, 2017, ‘Recipient’ 12 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR is defined as the Person who is liable to pay consideration. Hence, in our case, Service Recipient are those entities who have remitted amount to Barefoot College International. Therefore, Place of Supply will be the location of such Entities which is outside India (Refer Paper Book No. 4, Page No. 385-388).

13. Accordingly company has classified these services as Export of Service and declared it accordingly in the GST Returns field by it for the relevant period. Copies of GST Annual Returns (GSTR-9) for FY 2019-2020, 2020-2021 & 2021-2022 are annexed with Paper Book No. 4 (Page Nos. 436-459) to verify the said fact.

14. Therefore, it can be concluded that the above service provided by Barefoot College International is covered under Export of Service. The service income (both domestic and foreign) earned by the Company is separate from Grant / Donations.

15. Ld. CIT (Exemp) has treated these services as charitable services and therefore opined that these are covered under FCRA. His main contention was that services like covid relief services, women education and empowerment are charitable services. However he did not specify the reasons why these to be treated as charitable services. However on the basis of these observations, Ld. CIT (Exemp), alleged violation of FCRA, willful wrongly declaration and non-genuineness of activities.

17. Your kind attention is drawn to the provision of section explanation 3 u/s 2(1)(h) and section 4 (b) read with section 3 of the Foreign Contribution (Regulation) Act, 2010 which exempts payment in the course of international trade or commerce, or in the ordinary course of business transacted outside India (Paper Book No. 5, Page Nos. 488- 493) Relevant extract is reproduced hereunder : Explanation 3 – Any amount, received by any person from any foreign source in India, by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods of services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent of a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause.

13 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 19. In the present case, the amounts were received from foreign entities by the company for providing certain services and it should not be treated as foreign contribution, because of the following reasons : i. Whether any service is charity or otherwise, can not be decided by the nature of activity involved. Rather it is to be decided by the motive of service provider behind the provision of services. ii. For example covid relief services, provided by any entity without profit motive, with the main intention of providing relief to the patients can be treated as charitable services. However when similar services are provided by other entity, for agreed consideration (which normally involve profit margin as well), can not be treated as charitable services and FCRA approval is not required. Take example of a Hospital treating foreign patients and getting bill payment from foreign source is not subjected to FCRA Approval. iii. The services were provided under a service agreement as per mandate given by recipient thereof. The amount paid by the foreign entities to the assessee were not paid as grant or donation but were paid as charges for services to be provided by the company as per their instructions. iv. These services were provided by the company in the ordinary course of trade, commerce or business carried out by it. v. Amount received by the assessee as fee charged towards education and training services i.e. (i) Training Services to women tea worker in Assam, providing service under an education program through developing a video to create awareness, information and counselling to local audience in rural communities, (ii) Jacinta & Dasara – Under the service contract barefoot college international will engage in providing service under an education program through developing a video to create awareness, information and counselling to local audience in rural communities and Digital Night School to support girls education (iii) Women Light the World (though FOBC) – education service fee received for correspondence course are outside the ambit of foreign contribution. The Ld. CIT (Exemp) has treated these educational services as liable to FCRA in his own presumption, in complete disregard of the facts of the case and applicable law in respect thereof. vi.Please also note that owing to some clerical mistake, in one of disposal instruction given to the Bank for receiving foreign remittance USD 69276, name of the remitter was mentioned as “women light the world INC” whereas the actual remitter was Friends of Barefoot College. However the Invoice issued by the Company in the regard, (Inv. No. BCI/14/2021-22) was in the name of Friends of Barefoot College, USA and the advice for Foreign Inward Remittance issued by Bank of Baroda dated 31/05/2021 for USD 69276 also bears the name of remitter as Friends of Barefoot College, USA. Copy of agreement entered into with Friends of Barefoot College, USA is also available for verification. The Ld. CIT (Exemp), solely on the basis of clerical mistake in documents submitted to the Bank, commented that the assessee is receiving money from women light world in its books while he is disclosing the same as being received under service contract from Friends of Barefoot International, USA. He further 14 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR pointed out that assessee is receiving money from party with whom it has no service agreement. This observation by the Ld. CIT (Exemp) are based on his own presumption, in complete disregard of the facts of the case and applicable law in respect thereof. (vii) These services were provided for an agreed consideration with included profit margin as well. vii. These services were accounted for in the business books (General A/c) of the assessee which are separate from the charity books (Project A/c) maintained by it. viii. These services were duly reported as export of services in the GST Returns filed by the company.

Grounds of Appeal

– No.

4. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of engaging in business activities and non-maintenance of proper separate books of accounts whereas assessee is carrying on business incidental to the attainment of its main objects and proper and separate books of accounts have been maintained by the assessee. Detailed Submission :

1. Section 11 (4A) of the Income Tax Act, 1961, specifies twin conditions regarding exemption of profits and gains of business for a Trust / Institution :

i. Maintenance of separate books of accounts of business carried on by the assessee. ii. Business activity should be incidental to the attainment of the objectives of the institution. Both these conditions were duly fulfilled in the case of the assessee company.

15 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 2. Company is engaged in doing charitable activities as per its MOA. Object Clause (iv) is preservation of environment by making available renewable technology to the developing world and promoting solar electrification. Object Clause (v) is to engage in Grass Roots, R & D, product development and testing within all renewable technologies applicable to the rural poor, object (xi) is related to women empowerment.

3. To fulfill its objectives, the Company provided training to trainees for manufacture and maintenance of solar systems and during the course of training various solar products i.e. HLS 40 WP, Diva 5200, Devi, Bindi, REW, etc. are manufactured which are subsequently sold by the company, both in domestic and international territories as an incidental business activity.

4. The business carried out by the company is incidental to promotion of main objects of the company particularly Object Clause (iv), (v) & (xi) of MOA of the Company.

5. The use of Solar products by people results into environment protection by reducing pollution (carbon emission) and also save the natural resources i.e. coal, crude oil, wood etc. which are otherwise used to generate electricity.

6. Please note that Renewable energy sources – which are available in abundance all around us, provided by the sun, wind, water, waste, and heat from the Earth – are replenished by nature and emit little to no greenhouse gases or pollutants into the air.

7. As per the UN Secretary-General António Guterres Four key climate change indicators – greenhouse gas concentrations, sea level rise, ocean heat and ocean acidification – set new records in 2021. This is yet another clear sign that human activities are causing planetary-scale changes on land, in the ocean, and in the atmosphere, with dramatic and long-lasting ramifications. The key to tackling this crisis is to end our reliance on energy generated from fossil fuels - the main cause of climate change and greenhouse gases. Renewable energy technologies like wind and solar are cheaper than coal and other fossil fuels. We now need to put them to work, urgently, at scale and speed to reduce the Greenhouse gases.

8. Though the Ld. CIT (Exemp) in his order at Page No. 31 (Para No. 7.3) has found it laughable still the fact remains that Solar energy technologies and power plants do not produce air pollution or greenhouse gases when operating. Using solar energy can have a positive, indirect effect on the environment when solar energy replaces or reduces the use of other energy sources that have larger effects on the environment.

16 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 9. All such sales / service activities have been done by the Barefoot College International as Manufacturer / Vendor in the ordinary course of Trade, Business and Commerce carried out by it. The income earned by the Company from all these activities is used to promote main objectives of the company. A detailed chart is given hereunder for better clarity : Sr. Nature of activity Description of Reference to the MOA of the No. Activity Company 1. Sale of Solar Products – Relief to the poor, Incidental to Object Clause (v) Preservation of & (iv) – Product development and Manufactured during the Environment testing within all renewable course of training provided technologies applicable to rural poor, to the trainees. make new and renewable technology accessible to the developing world, promoting solar electrification and installation of solar plants.

2. Sale of Coffee, Honey & Relief to the poor, Incidental to Object Clause (xi) – Super 5 Advancement of Women Empowerment, training on General Public entrepreneurship, livelihood training – Women are trained to Utility of ethically sourced organic honey, grow coffee, trained for bee- coffee and nutritional products. keeping, making of nutritional products etc. The produce generated by women in the course of training and thereafter, is sold by the company.

3. Sale of Services Relief to the poor, Incidental to Object Clause (vi) – Education, Medical Education, Research, Social welfare – Digital Literacy Training, Relief, and Object Clause (xi) Women Covid Relief Services, Advancement of Empowerment, Women Health, Content creation services, General Public training on entrepreneurship, Education support Services Utility improving lives of community Community Support Services, Digitalization of course curriculum etc.

11. In this regard, it is submitted that the company is carrying on business which is incidental to the attainment of its main objectives.

13. The Ld. CIT (Exemp) has also stated that that if assesse would have been selling the products produced during the training, same may be considered incidental, but if assesse is manufacturing and selling solar products on line of any other business, same can never be consider its incidental activity, it is its main activity (Page No. 26, Para No. 4.13 Last Paragraph) However in the case of the assessee, as already submitted that the products manufactured during the course of training only are being sold, hence it is correct to treat it as incidental activity. Assessee is not functioning as a normal business entity which is engaged in manufacture and sale of products as alleged by Ld. CIT (Exemp).

15. The Hon’ble Supreme Court in the case of CIT v Gujarat Maritime Board (2007) 295 ITR 561 (SC), relying on the judgement in case of Ahmedabad Rana Caste Association v CIT (1971) 82 ITR 704(SC) held that since the proviso to section 2(15) applies only to GPU activities the benefits of exemption sections 11 to 13A and 80G of the Act cannot be denied to institutions and organisations falling within the categories of medical relief, relief of the poor, education, yoga, wildlife and heritage conservation merely because they carry on an activity generating profit, so long as they fulfil the requirements of section 11(4A) . 16. In the case of the assessee, incidental business is being carrying on as a part of the objects and is fully related to the objects of the trust i.e. preservation of environment and women empowerment, hence is fulfills the condition imposed by section 11(4A) for claiming exemption.

18. During the course of hearing of the case by Ld. CIT (Exemp), it was submitted that proper and separate books of accounts have been maintained for the activities carried out by the Company of the nature of trade, commerce or business.

20. BCI General A/cs are maintained for recording transactions related to the activities of sale and services of the nature of trade, commerce or business carried out by General Division of the Company.

21. BCI Projects A/cs are maintained for recording transactions relating to the charitable activities of the assessee carried out by Project Division of the Company.

19 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 26. Audit Reports in Form 10B for consolidated accounts and Audit Reports in Form 3CA- 3CD for General A/cs u/s 44AB were also obtained from Chartered Accountants. These audit reports were e-filed on the Income Tax Portal every year. (Refer Paper Book No. 2, Page Nos. 147-230 and Paper Book No. 3, Page Nos. 231-348).

2021- Net Income from Business of Net Income from Business was reported 22 Rs.23,73,992/- was shown under under Schedule AI and Exemption u/s 11 Schedule AI of Income Tax Return form. of the Income Tax Act, 1961 was claimed.

20 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 2022- Receipts from Business was shown Income and Application with respect to 23 under Schedule AI of Income Tax Business were shown under respective Return form and Application of Income schedules in order to avoid any TDS was shown under Schedule ER and mismatch as compared to Form 26AS and Schedule EC of Income Tax Return Exemption u/s 11 of the Income Tax Act, form. 1961 was claimed.

Grounds of Appeal

– No.

5. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of discrepancies in Article of Association whereas Memorandum of Association of the assessee puts clear restriction on distribution of profits. Detailed Submission :

1. As per Clause No. 5 (ii) of MOA of the Company, distribution of profits is prohibited. As per the provisions of the Companies Act, 2013, in case of conflict between MOA & AOA, the provisions of MOA will supersede.

21 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 2. The Company had not carried out any buy-back of shares till date. The buy-back of shares as mentioned in the AOA (a hypothetical presumption), can only take place at the face value of shares only, without including accumulated profits, due to restrictions imposed by Clause 5(ii) of the MOA. Hence in any case, buy back will not result into distribution of profits of the Company and there will no violations of the conditions of section 12AA / 80G.

3. However now the assessee company has altered its Articles of Association and deleted the Clause No. 39, related to buy-back of shares. Copy of the same is attached herewith. (Paper Book No. 5, Page 467-486).

4. In view of the alteration in Articles of Association and the fact that no buy back of shares has ever been carried out by the company till date, the objections raised by the Ld. CIT (Exemp) and rejection of 80G approval on this ground is not justified.

Grounds of Appeal

– No.

6. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of not submitting the details in desired format resulting in non- genuineness whereas the assessee had duly provided all the details required from it. Detailed Submission :

1. The Ld. CIT (Exemp) has pointed out at Page No. 30, Para No. 6.2 of this order that the applicant did not submit detailed reply alongwith desired format, only submitted ledger of the account of the trust.

3. We have enclosed the details of all the activities of the assessee for last 3 years, which were duly submitted to the Ld. CIT (Exemp) during the course of hearing on 11/08/2023 and the same is available on his file. (Refer Paper Book No. 4, Page No. 425-432)

4. Information supported by documentary evidences as required during the course of hearing on 11/08/2023 in desired format were submitted by the assessee on dated 17/08/2023 and the same is available on his file. On the conclusion of hearing on that, no other information was

5. Thereafter final show cause notice was issued by the Ld. CIT (Exemp) on dated 28/08/2023, calling for explanation on certain points. However, in that show cause notice, no mention was made regarding any pending information / documents which were not submitted till that date (Paper Book No. 4, Page Nos. 433-434).

7. Sir, the fact remains that the assessee had duly submitted all the desired information in desired format as suggested by Ld. CIT (Exemp) and also submitted copies of ledger accounts and also produced voucher files to verify the said information.

8. As all the desired information was duly submitted, objections raised by the Ld. CIT (Exemp) is this regard are not justified.

9. In view of the above submission and considering the facts of the case and provisions of law, you are requested to kindly allow 80G approval.

Grounds of Appeal

– No.

7. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting application on ground of violation of section 11(1)(c) of the Income Tax Act,1961 whereas there if no such violation made by the assessee.

Detailed Submission :

1. Ld. CIT (Exemp) has alleged regarding violation of section 11 (1)(c).

2. Section 11(1)(c) of the Income Tax Act, 1961 reads as under: “Income from property held for charitable or religious purposes.

23 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 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— c. income derived from property held under trust— i. created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and ii. for charitable or religious purposes, created before the 1st day of 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. In his order at Page No. 30, Para No. 7.1, Ld. CIT (Exemp) has mentioned that an amount of Rs. 1.99 Cr was incurred as fidelity expenses in FY 2019-20 and concluded that activities of the trust / institution are related to activities abroad and assessee is making expenditure abroad, in violation of section 11(1)(c) of the Act.

4. In this regard it is submitted that said expenditure of Rs. 1.99 Cr in FY 2019-20, was by General Division of the Company assessee out of an equivalent amount received under a service contract for execution of fidelity international project.

5. In absence of CBDT approval u/s 11(1)(c) of the Act, no such application of income outside India is eligible for exemption u/s 11. Therefore the Company did not claim tax exemption u/s 11 on income of General Division of the Company, being profits & gains of business, and offered said Income to income-tax in its ITR, which the Ld. CIT (Exemp) has himself stated in his order and queried why the assessee has paid income tax in FY 2019-20.

6. Sir, not getting approval for any application of any income outside India, results into denial of exemption for that income. However it can not be treated as specified violation and should not result into denial of 80G approval.

24 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 7. In the newly introduced section 115BBI of the Income Tax Act, specific provision has been for taxability of income of a trust for which exemption u/s 11(1)(c) is not available @ 30%, applicable w.e.f. AY 2023-2024. 115BBI. (1) Where the total income of an assessee, being a person in receipt of income on behalf of any fund or institution referred to in sub-clause (iv) or any trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), of clause (23C) of section 10 or any trust or institution referred to in section 11, includes any income by way of any specified income, notwithstanding anything contained in any other provision of this Act, the income-tax payable shall be the aggregate of,— (i) the amount of income-tax calculated at the rate of thirty per cent on the aggregate of such specified income; and (ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of specified income referred to in clause (i). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provision of this Act in computing the specified income referred to in clause (i) of sub- section (1). Explanation.—For the purposes of this section, "specified income" means,— (a) income accumulated or set apart in excess of fifteen per cent of the income where such accumulation is not allowed under any specific provision of this Act; or (b) deemed income referred to in Explanation 4 to the third proviso to clause (23C) of section 10, or sub-section (1B) or sub-section (3) of section 11; or (c) any income, which is not exempt under clause (23C) of section 10 on account of violation of the provisions of clause (b) of the third proviso of clause (23C) of section 10, or not to be excluded from the total income under the provisions of clause (d) of sub-section (1) of section 13; or (d) any income which is deemed to be income under the twenty-first proviso to clause (23C) of section 10 or which is not excluded from the total income under clause (c) of sub- section (1) of section 13; or (e) any income which is not excluded from the total income under clause (c) of sub-section (1) of section 11.]

8. Similar changes have been made in newly introduced Form 10B applicable for AY 2023- 24 (Refer Paper Book No. 4, Page Nos. 359-376).

9. These amendments in law, though not retrospective, however makes is clear that what is stipulated in the Income Tax Act, is taxability of such income, in case approval u/s 11(1)(c) is not available, but it can not lead to rejection of approval u/s 80G.

10. As the company had already paid income tax on such income, by not claiming exemption u/s 11 for that year, as per applicable provisions of that year, it has duly complied with the Act and no violation has been made.

11. Ld. CIT (Exemp) has also stated in his order at Page No. 31-32 (Para No. 3), that my making sales abroad, assessee is also contravening 11(1)(c) of the Income Tax Act.

12. In this regard it is submitted that Ld. CIT (Exemp) has misunderstood the relevant provisions. Earning of income from outside India is different from application of Income outside India.

13. Section 11(1)(c), requires approval of CBDT in case any income is applied outside India, which is not the case here. Activities of making sales abroad and earning income therefrom and applying such income in India is outside the ambit of section 11(1)(c) and does not required approval of CBDT.

14. In view of the above discussion, observations of Ld. CIT (Exemp) regarding violation of section 11(1)(c) are incorrect and rejection of 80G approval on that ground is not justified.

Grounds of Appeal

– No.

8. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by not following principal of nature justice during the course of hearing of application for approval u/s 80G(5)(iii). Detailed Submission :

1. Sir, application for approval u/s 80G was filed by the Assessee on dated 02/02/2023 and first questionnaire was issued by Ld. CIT (Exemp) on dated 14/03/2023 which was duly replied by the assessee.

2. Thereafter proceedings were conducted offline by Ld. CIT(Exemp) and last hearing date was 17/08/2023.

3. Please note that case was to be time barred on 31/08/2023.

4. Final show cause notice was issued by Ld. CIT (Exemp) on 28/08/2023 by mentioning date as 30/08/2023 (Paper Book No. 4, Page Nos. 433-434).

5. Sir, issuance of final show cause by giving less than 7 days time is against the principles of natural justice and also violates guidelines / directions issued by CBDT in this regard.

6. Though the assessee had duly replied the show cause notice dated 28/08/2023, still the fact remains that any order passed in violation of the principles of natural justice is liable to be quashed.

– No.

9. The Ld. Commissioner of Income Tax (Exemption) erred in law as well as facts of the case by rejecting the application for approval u/s 80G(5)(iii). Detailed Submission : In view of the submissions made hereinbefore with reference to the each grounds of appeal, we can draw the following conclusion :

1. That the Ld. CIT (Exemp) has not mentioned relevant section while passing rejection order for Form 10AB.

2. That the order passed by the Ld. CIT (Exemp) was uploaded on the Income-tax portal beyond the time limit prescribed for it.

3. That the delay caused in submission for Form 10AB was due to reasonable cause and beyond the control of the assessee.

4. That no violation of FCRA provisions has been made by the assessee, no wilful declarations have been made and all the activities of the assessee are genuine.

5. That the assessee is carrying incidental business for attainment of its objects and proper separate books has been maintained for it.

6. After the amendment of Articles of Association of the Company, clause permitting buy- back of shares has been deleted.

7. All the desired information / details / documents have been duly submitted by the assessee during the course of hearing of the case.

• Filing application after more than 3 years from commencement of activities, and also less than six month from the lapse of period for which provisional certificate was given. • Violation of FCRA, willful wrong declaration and non-genuineness of activities • Assesse is engaged in business activities including export & no proper separate books of accounts are made • Discrepancies in Article of Association • Not submitting the details in desired format resulting in non- genuineness • Violation of section 11(1)(c)

28 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR Assessee has taken total 9 grounds of appeals to challenge the order passed by the CIT (Exemp). As the issue involved is rejection of approval sought under clause (iii) of first proviso to section 80G(5), therefore, all the grounds taken by the assessee are being summarized and decided taking into consideration all the facts and circumstances in the case. It is noted that the ld. AR has also filed the detailed written submission to counter the order of the ld CIT(E). From the entire conspectus of the case, it is observed that the assessee had filed application in Form 10AB for approval under clause (iii) of first proviso to section 80G(5), rejection of claim u/s 12AB is not applicable in this case. It is observed that the assesee could not file application in Form 10AB within prescribed time limit due to reasonable cause. It was submitted to us that there were technical glitches on the Income Tax Portal, which caused delay in filing of application in Form 10AB by the assessee. We also noted that CBDT had extended the date of filing of Form 10AB, firstly upto 31-03-2022, secondly upto 30.09.2022 and finally upto 30-09- 2023 through circulars. The difficulties reported by the taxpayers and other stakeholders in electronic filing of certain forms was the main reason behind the extension. Though in the final extension, reference to section 80G was missing, however for other sections due date of Form 10AB was extended to mitigate genuine hardship. As in the present case the assessee was also required to file Form

29 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR 10AB for 80G approval, hence the contention of the assessee that there existed reasonable cause behind the delay needs to be accepted and rejection of application on ground of delay is not justified. It is also worthwhile to mention that no violation of FCRA provisions has been committed by the assessee as all the activities carried out by it are covered by the exemptions given by the FCRA Act and no willful wrong declaration has been made by the assessee, hence it is incorrect to treat the activities of the assesee as non-genuine by the ld. CIT(E). We also find from the documents available before us that the payment in the course of international trade or commerce, or in the ordinary course of business transacted outside India are not covered under FCRA provisions. We also noted that proper separate books of accounts have been maintained by the assessee for carrying on the business which is incidental for attainment of its main objects, thereby fulfilling the conditions laid down by section 11(4A) of the Act and therefore assessee’s income from business is eligible for exemption u/s 11. The Hon’ble Supreme Court in the case of Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 (SC) has held that all that is required for the business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of objective of the trust or institution. In Asstt. CIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278, the Hon’ble Supreme Court held that for a business to be an incidental business, it should be carried on 30 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR as a part of the objects or be related to the objects of the trust. We have observed that one of main objects of the assessee is preservation of environment by making available renewable technology to the developing world and promoting solar electrification. The assessee carried out business including export of Solar Products which is directly related to the objects of the assessee. Separate books of accounts were duly maintained by the assessee which were also got audited and audit report in Form 44AB was also filed electronically. In view of the aforesaid, rejection of 80G approval on ground of assessee engaging in business activity including export and non-maintenance of separate books of accounts is not justified. It is also brought to our notice that the Assessee has already altered its Articles of Association and removed the Clause related to buy-back of shares and since no buy-back of shares has taken place since inception of the company till date then rejection of approval on ground of discrepancy in Articles of Association is no longer justified. It is also found that during the course of hearing of the case by the ld CIT (Exemp), the assessee had duly provided all the details / information required from it in desired format. We also found from the records available before us that no claim of exemption u/s 11 has been made by the assessee in relation to expenditure incurred outside India by assesee which requires approval of CBDT, hence no violation of 11(1)(c) is proved. We also noted that only 3 days time was given to the assessee to reply to the show cause notice, however since the assesee

31 BAREFOOT COLLEGE INTERNATIONAL VS CIT (E), JAIPUR had complied with the show cause notice issued by the ld. CIT (Exemp), therefore the grounds taken by the assessee for violation of natural justice is infructuous. In view of the above facts and circumstances of the case, the rejection of application for approval u/s 80G(5) by the ld CIT (Exemp) is held to be not justified and thus he is directed to allow approval u/s 80G(5) as per application in Form 10AB dated 02.02.2023 filed by the assessee. Thus the appeal of the assessee is allowed.

3.0 In the result, the appeal filed by the assessee is allowed Order pronounced in the open court on 20/02/2024.

Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20 /02/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Barefoot College of International, Ajmer 2. izR;FkhZ@ The Respondent- The CIT(E), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 596/JP/2023) vkns'kkuqlkj@ By order,