2023 (9) TMI 744 - AT - Income Tax

Exemption u/s 11 - application for registration u/s. 12AB was rejected - mandation to obtain necessary approval as per section 11(1)(c) for the international projects/activities not adhered - HELD THAT - We note that the assessee has been granted provisional registration and the assessee filed application in Form 10AB for regular registration which has been rejected by the CIT(E) stating that the assessee has not followed the provisions of section 11(1)(c) and not complied with the requirements of the provisions of the Act as well as failed to prove the genuineness of the activities of the trust. We have gone through the documents placed containing the photographs and summary of the activities of the trust within India as well as outside India as narrated. For the activities outside India, it is mandatory to obtain necessary approval as per section 11(1)(c) of the Act which has not been complied by the assessee. Permission from the Board is mandatory as per section 11(1)(c) for the above international projects/activities. It is also not clear whether the MAVIM (2017-2018) project is national or international project. There is contradiction in the trust deed since the Preamble states that the income shall be applied for the stated objects of the Trust in India, whereas the object clause at sl. No. 4 allows work in India and other countries. We also note from the order of the CIT(E) that the assessee has not submitted documents to prove the genuineness of the charitable activities undertaken by it. We confirm the order of the ld. CIT(E). Decided against assessee.

Summary

Issues:
The appeal concerns the denial of registration under section 12AA of the Income Tax Act by the CIT(Exemptions) due to the failure of the assessee to comply with the provisions of section 11(1)(c) and prove the genuineness of its activities.

Issue 1: Applicability of Section 11(1)(c) and Registration under Section 12AA:
The assessee, a trust registered under the Indian Trusts Act, filed for registration under section 12AA. The CIT(Exemptions) rejected the application as the assessee did not obtain necessary approval under section 11(1)(c) for conducting activities outside India. The trust argued that section 11(1)(c) was not applicable as it had not engaged in activities outside India. However, the tribunal found that the trust had indeed conducted international projects, necessitating permission under section 11(1)(c). The tribunal upheld the CIT(E)'s decision, emphasizing the importance of complying with the Act's provisions and proving the genuineness of charitable activities.

Issue 2: Compliance with Trust Deed and Activities Undertaken:
The trust deed outlined charitable objectives, including poverty reduction projects at national and international levels. Despite the trust's claims of only operating within India, evidence showed international projects such as studies in Nepal, Bangladesh, and India, as well as rehabilitation projects for Nepali women. The tribunal noted the contradiction between the preamble stating income application for Indian objectives and the trust's allowance for work in other countries. The lack of documentation to substantiate the genuineness of charitable activities further weakened the assessee's case.

Decision:
The tribunal dismissed the appeal, affirming the CIT(E)'s decision to reject the registration application under section 12AA. The failure to obtain necessary approval for international activities under section 11(1)(c) and the lack of evidence regarding the trust's charitable endeavors led to the denial of registration. The tribunal stressed the need for trusts to adhere to statutory requirements and demonstrate the authenticity of their activities to qualify for registration under the Income Tax Act.