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TMI Blog2021 (4) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... s being carried out/extended outside India also. The Ld.CIT(E) observed that the Act rules out grant of exemptions of incomes applied for charitable purpose outside India, allowing operation outside India only for limited purpose subject to approval by the Central Board of Direct Taxes. Accordingly, he derived from the same and held that the activities of a trust can be treated as charitable only when its income is applied for the activities carried out in India only. For the aforesaid reasons he denied grant of registration u/s 12 A of the Act to the assessee. The relevant f indings of the CIT(E) at paras 5 and 6 of the order are as under: "5. In response to the fixation letter dated 20.12.201J, the applicant trust has not submitted the reply. The reminder was issued on 15.01.2020 to the trust to submit the reply to questionnaire on or before 24.01.2020. In response, the applicant trust has submitted the response online on ITBA. On perusal of the trust deed of the trust provided in the submission, it is noticed that operation will be extended outside INDIA also which mentioned at Sr. no. 7(r) of the objects incidental or ancillary to the attainment of the main objects & same ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of clause for opening of branches outside India & there is no provision in trust deed that the appellant society shall incur any expenses outside India out of funds collected from India & also there is no prohibition under Income Tax to open branches outside India. 3. That the Ld. Commissioner of Income Exemptions Chandigarh has wrongly rejected the registration u/s 12AA of Income Tax Ac during lockdown period and before 1-6-2020 hurriedly in order to avoid of benefit granted by Finance Act 2020 to appellant trust. 5. That the Assessee craves for permission to add, amend, alter or withdraw any grounds of appeal with approval of the hon'ble bench." 4. During the course of hearing before us, the Ld. Counsel for the assessee contended that the Ld.CIT(E), while denying grant of registration, had referred to the provisions of section 11 of the Act which denied exemption to incomes applied outside India for charitable purposes, which provision was applicable only while computing or determining the exempt income of entities which qualified for the same under the section. That for the purpose of grant of registration the Ld.CIT(E) was only required to consider the genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fulfilled and the provisions of section 11 (1) (c) are not relevant for the said purpose, being applicable only while determining the income entitled to exemption u/s 11 of the Act. That in any case carrying out charitable activities outside India was not the sole or main object but only incidental/ancillary object of the applicant assessee. 9. What is therefore to be decided is whether the law provides for any such geographical limitation in carrying out charitable activities for the purposes of recognising an entity as charitable and eligible for registration as such u/s 12 A of the Act. We have gone through the provisions of the Act relating to charitable entities, relevant for adjudicating the issue before us, i. e section 11, 12, 12A,12 AA & 2 (15) of the Act. While section2 (15) defines charitable purposes, section 11 exempts incomes, derived from properties held under trust, to the extent applied for charitable purposes. Section 12 A imposes the requirement of seeking registration for the purposes of availing the exemption u/s 11, and the process of granting registration is governed by section 12 AA. Since in the present case registration has been denied u/s 12 AA of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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; (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution." 10. As per section 12 AA of the Act, the Commissioner, while considering the application of the trust/societies, has to satisfy himself regarding the genuineness of the objects and the activities of the trust/societies, whether they are for charitable purposes or not. Charitable purpose is defined u/s 2(15) of the Act as under: "S.2 (15) (15) Charitable purpose includes relief of the poor, education, [ yoga,] medical relief, [ preservation of environment (including water- sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incidental object entailed application of income outside India, we find, would result in the assessee being denied exemption to income applied in India, which it would otherwise be entitled to under law. 14. Further as rightly pointed out by the Ld. Counsel for the assessee, the provisions of section 11 (1)(c) of the Act, which the Ld.CIT(E) has relied upon for holding that only activities carried out in India will qualify as charitable for grant of registration, is only for the purpose of determining the income which qualifies for exemption u/s 11 of the Act. The said section comes into operation only once registration is granted u/s 12A of the Act and therefore cannot be relevant for the purposes of granting registration u/s 12A of the Act. The scheme of the Act is that all entities carrying out charitable activities, as defined in section 2 (15) of the Act, qualify to be registered as charitable entities subject to satisfaction of the concerned officer vis a vis their objects and activities, but the exemption is provided/restricted only to the extent of income which is applied for charitable purpose in India. 15. The issue we find, is squarely covered in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rived from property held under trust- (b) (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 (c) (ii) for charitable or religious purposes, created before the 1 st day of April, 1952, to the extent 1o which such income is applied to such purposes outside India: (d) 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;.." (e) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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