9911796707
TMI Blog2025 (4) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... it and to file appeal after consulting the tax counsel. It has resulted in a marginal delay of 32 days in filing these appeals. Accordingly, it is stated that the delay is not intentional and accordingly prayed that the delay may kindly be condoned. 2.1. We heard the Ld.DR on this preliminary issue. Having regard to the submissions made in the affidavit, we are of the view that there was a reasonable cause for the assessee in filing both the appeals belatedly. Accordingly, we condone the delay in filing these appeals and admitted them for hearing. 3. The facts relating to the case are stated in brief. The assessee is a non-profit organization, incorporated u/s. 8 of the Companies Act, 2013 on 08-12-2023. The main objects of the assessee read as under: "Promote Indian heritage art such as Indian Classical music, Organize regular concerts and performances by renowned and emerging Indian classical musicians, Establish or support training school or institute to teach Indian classical music to students of all ages and skill levels, to Indian classical musicians to cover the costs of performance, travel, and recording, Organize festivals and conferences that bring together Indian cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 12AB of the Income tax Act, 1961 is concerned. The words in the object: "Promote Indian heritage art such as Indian Classical music, Organize regular concerts and performances by renowned and emerging Indian classical musicians, Establish or support training school or institute to teach Indian classical music to students of all ages and skill levels to Indian classical musicians to cover the costs of performance, travel and recording, Organize festivals and conferences that bring together Indian Classical musicians and scholars from around the world." means the assessee intends to utilise the funds outside India while bringing musicians and scholars from outside India to participate in conferences and festivals organized by the assessee. Such objects leave room for any potential future endeavour may be undertaken by the assessee trust which would require expenditure outside India. Further, the assessee has not presented/submitted any documentary evidence/proof of passing the resolution regarding amendment in trust deed nor has it provided any proof that it has initiated the process for amendment in trust deed/MoA before the competent authority. Additionally, proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w:- "11. Income from property held for charitable or religious purposes. (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 per cent of the income from such property;" A careful perusal of the above said provisions would show that the entire income of a charitable trust or institution is not exempt automatically, as in the cases covered by sec.10 of the Act. The exemption of income is restricted "to the extent to which such income is applied to charitable purposes in India." Hence, if any portion of income is applied either for non-charitable purposes or applied outside India, then the assessee is not eligible for exemption u/s 11 of the Act of such portion of income so applied, meaning thereby, the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution." As per the scheme of the Act, the charitable trusts or institutions are initially given provisional registration for three years. Then they have to apply for permanent registration within the time prescribed in the Act. 5.2. In the instant case, clause (b) is applicable. As per the provisions of that section, the Ld CIT(E) has to satisfy himself with the following:- (a) Objects of the trust or institution (b) Genuineness of its Activities (c) Compliance of requirements under any other law as mentioned in clause (B) of clause (i) of Sec. 12AB(1)(b). In the instant case, the ld CIT(E) has cited two reasons for rejecting the application of the assessee seeking permanent registration, viz., (a) The objects of the assessee leave room for any future potential endeavor that may result in incurring expenditure outside India, which is in violation of sec.11 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA need to be 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 12A 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,12AA & 2(15) of the Act. While section 2(15) defines charitable purposes, section 11 exempts incomes, derived from properties held under trust, to the extent applied for charitable purposes. Section 12A 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 12AA. Since in the present case registration has been denied u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elfare 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; (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 12AA 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that its 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 favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty; . .. (b)****** (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; (d)****** 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 docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .11 to 13 of the Act, which are applicable to charitable trusts or institution, two authorities are involved, viz., (a) the Ld PCIT or CIT is empowered to grant or cancel registration u/s 12A, 12AA or 12AB as the case may be. (b) the assessing officer is the authority who assesses the total income of the charitable trust or institution for every assessment year. 7. We shall examine the provisions of sec.12AB of the Act. The authority to grant registration u/s 12AB is the Ld PCIT or CIT. Under sec, 12AB of the Act, the three steps have been prescribed for the process of registration or cancellation of charitable trusts or institution. (a) For new charitable trusts or institutions, provisional registration is granted u/s 12AB(1)(c) of the Act for a period of 3 years from the assessment year for which the registration is sought. (b) Permanent registration shall be granted u/s 12AB(1)(a)/12AB(1)(b) of the Act for a period of five years, when the charitable trusts or institutions apply for the same. (c) Where a provisional registration or permanent registration is granted u/s12AB(1) of the Act, the Ld PCIT/CIT is empowered u/s 12AB(4) of the Act to cancel the registration in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub-clause (iv) or sub-clause (v) of the said clause,- (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about- (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii)after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),- (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfied that one or more specified violations have taken place; (iii) pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations; (iv) forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution. Explanation.-For the purposes of this sub-section, the following shall mean "specified violation",- (a) where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or (b) the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or (c) the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or (d) the trust or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itution, the clause (a) would not get attracted. Thus, if the objects clause of a charitable Trust or Institution permits carrying on objects outside India and if any income is applied for such objects, then it cannot be considered as application of income "for objects other than the objects of the charitable trust or institution" falling within the meaning of clause (a). Consequently, the clause (a) would not be attracted. (ii) Clause (b) would be attracted only if any business or profession is carried on and there is violation as mentioned therein. This clause will not be attracted for application of income for permitted objects outside India. (iii) Clause (c) would be attracted when income of trust held for private religious purposes is applied for those purposes, which does not ensure for the benefit of public. The assessee herein is not a trust held for private religious purposes and hence this clause will not apply to the assessee herein. (iv) Clause (d) would be attracted when income of the trust is applied for particular religious community or caste. This clause will also not apply to the assessee herein. (v) Clause (e) would be attracted when any activity being car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14. 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 by Hon"ble Delhi High Court in the case of M.K. Nambyar Saarf Law Charitable Trust (supra) 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. 15. In view of the foregoing discussions, it can be concluded that existence of any object for carrying out any activity outside India will not enable the Ld 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of natural justice, we admit the additional evidences furnished by the assessee. 18. 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 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. 19. We shall not adjudicate the appeal filed by the assessee challenging the order passed by Ld CIT(E) rejecting the application filed by the assessee seeking recognition u/s 80G of the Act. 20. We notice that the Ld CIT(E) has rejected the application on the reasoning that the he has denied registration to the assessee u/s 12AB of the Act. In the preceding paragraphs, we have cancelled the order passed by Ld CIT(E) and restored all the issues relating to the registration sought by the assessee u/s 12AB of the Act. Following the said order passed by us in the preceding paragraphs, we set aside the order passed by Ld CIT(E) rejecting the recognition u/s 80G of the Act and restore all the issues to his for examining the application afresh in the light of discussions made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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