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2025 (4) TMI 592 - AT - Income TaxRejecting the applications filed seeking permanent registration u/s. 12AB and Section 80G - as per CIT(E) objects of the assessee leave room for any future potential endeavour that may result in incurring expenditure outside India which is in violation of sec.11 of the Income tax Act AND activities claimed to have been done are not justified by the expenses incurred by the assessee. HELD THAT - CIT(E) has to ensure that the charitable trust or institution has complied with the requirement of any other law for the time being in force as are material for the purpose of achieving its objects. Here it is pertinent to note that the verification by CIT(E) should be restricted to compliance of those laws as are material for the purpose of achieving its objects. As noticed that clauses (a), (c), (d) and (e) would be attracted only when there is application of income as mentioned in those clauses. Hence actual application of income is the condition to be satisfied for attracting the above said four clauses. In our view the provisions of sec.11(1) would not fall under the category of any other law since it is only a computation provision. The provisions of sec.11(1) do not require the charitable trust or institution to comply with any requirements which are essential to achieve the objects of the trust. Further provisions of sec.11(1) do not state that the application of income derived from property held under trust for activities carried outside India results in violation of any law. Sec.11 only states that the exemption under that section is restricted to income applied for charitable purposes in India i.e. it does not permit exemption of income applied outside India. Hence income if any applied for objects outside India cannot be construed to be violation of any other law falling within the meaning of clause (f) of Explanation to sec.12AB(4) of the Act. The foregoing discussions would show that the application of income of a charitable trust or institution outside India for carrying out its objects will not fall under any of the categories of specified violation as mentioned in the Explanation to sec.12AB(4) of the Act. Hence the decision rendered in the case of M.K. Nambyar Saarf Law Charitable Trust 2004 (5) TMI 51 - DELHI HIGH COURT will apply to the provisions of sec.12AB of the Act also since the provisions of sec.12AB also do not refer to the activities carried in India or outside India. It can be concluded that existence of any object for carrying out any activity outside India will not enable the CIT(E) to deny registration u/s 12AB of the Act. As observed earlier such kind of application of income outside India (unless it is permitted by the CBDT) will not be exempted u/s 11 of the Act. Hence the first reasoning given by Ld CIT(E) is liable to be quashed. Second reasoning given by the assessee is that the expenses incurred by the assessee do not prove the activities carried on by it. In this regard the Ld A.R submitted that the assessee has filed required documents before Ld CIT(E). He further submitted that the assessee has also furnished additional evidences relating to the activities carried on by the assessee. Accordingly he prayed that these additional evidences may be admitted and the assessee may be provided with an opportunity to present all the details before Ld CIT(E) to prove the activities carried on by it. We find merit in the prayer of the assessee. We notice that the observations made by Ld CIT(E) with regard to activities is general in nature i.e. the Ld CIT(E) did not state the deficiencies noticed by him in the documents furnished by the assessee. Further the assessee has furnished additional evidences in order to satisfy Ld CIT(E) with regard to the genuineness of activities. Accordingly in the interest of natural justice we admit the additional evidences furnished by the assessee. Accordingly we set aside the impugned order passed by Ld CIT(E) rejecting the application filed by the assessee seeking permanent registration u/s 12AB of the Act and recognition u/s 80G and restore all the issues to his file with the direction to process the application of the assessee again afresh in the light of discussions made supra.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Rejection of Registration under Section 12AB
2. Justification of Activities by Expenses
3. Rejection of Recognition under Section 80G
SIGNIFICANT HOLDINGS
The Tribunal's decision underscores the distinction between eligibility for registration and the scope of exemption under the Income Tax Act, emphasizing that potential activities outside India should not preclude registration if the primary activities align with charitable purposes within India.
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