9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 679 - AT - Income TaxRejection of application u/s 80G - object clauses of the trust deed which contemplate activities both in India and abroad - HELD THAT - As decided in Sila for Change Foundation 2025 (4) TMI 1252 - ITAT MUMBAI the assessee s objects include clause 12 which is not in consonance with the main purpose to grant exemption under section 11(1)(a) of the Act for sale of convenience the relevant portion are excluded as under. It is noted that the assessee was offered opportunity of being heard is apparent from the paper book filed before us. However nothing on record is filed to demonstrate that the assessee took necessary steps to amend the objects which is in contravention to section 11(1)(a) of the Act. Admittedly it is not the case that the assessee has already applied its funds as per object clause 12 of the memorandum. We are of the opinion that the assessee cannot be granted registration u/s. 80G unless the relevant clauses are modified or amended. Decided against assesseee.
The core legal questions considered by the Tribunal in this appeal revolve around the eligibility of the assessee trust for registration under section 80G of the Income Tax Act, specifically:
(1) Whether the rejection of the assessee's application for registration under section 80G by the Ld. CIT (Exemptions) was justified, particularly in light of the object clauses of the trust deed which contemplate activities both within and outside India; (2) Whether the Ld. CIT (Exemptions) erred in not judicially considering the written submissions filed by the assessee before rejecting the application; (3) The applicability and interpretation of the amended provisions of section 12AB of the Income Tax Act, especially concerning provisional and final registration of charitable trusts, and the impact of "specified violations" on registration; (4) The legal effect of object clauses permitting the application of funds outside India on the eligibility for exemption under sections 11 and 80G, and whether the trust's activities contravene statutory requirements; (5) The procedural and substantive requirements for converting provisional registration into final registration under the amended regime. Issue-wise Detailed Analysis: Issue 1: Validity of Rejection of Application under Section 80G Based on Object Clauses The Tribunal examined the object clauses of the trust deed, notably Clause 5A(8) and 5B(4), which provide for grants of scholarships and medical aid to deserving persons "in India or abroad," as well as Clause E related to endowments for public welfare institutions and religious bodies. The Ld. CIT(E) interpreted these clauses as permitting utilisation of funds outside India, which under section 11(1)(a) of the Act, generally disqualifies the trust from exemption unless prior approval is obtained from the CBDT. The Tribunal referred to the amended provisions of section 12AB, which require strict compliance with conditions for registration, including genuineness of activities and conformity with the objects of the trust. The Tribunal noted that the assessee had not amended the object clauses to restrict activities within India, which was a prerequisite under the amended law for final registration under section 12AB and consequently for 80G approval. Precedents were examined, including decisions of various High Courts and coordinate benches of the Tribunal, which clarified that while actual expenditure outside India may be permissible to the extent it is declared and taxed, the trust deed itself must not contain clauses that prima facie allow activities outside India without requisite approvals. The Tribunal distinguished between the trust's intention to pay scholarships in Indian rupees to students studying abroad and the legal interpretation of the object clauses that explicitly mention activities abroad, which could lead to "specified violations" under section 12AB(4). Hence, the Tribunal upheld the view that the presence of such object clauses without amendment or clarification was a valid ground for rejection of the application for final registration under section 80G. Issue 2: Consideration of Written Submissions by Ld. CIT(E) The assessee contended that the Ld. CIT(E) failed to judicially consider its written submissions explaining the nature of activities and clarifying that payments would be made in India in Indian rupees. The Tribunal found on record that the assessee was given opportunity of being heard and had filed detailed replies. However, the Tribunal observed that mere submissions without amendment of the trust deed or other documentary proof were insufficient to satisfy the statutory requirements under section 12AB. The Tribunal emphasized that the statutory provisions mandate examination of the trust deed and compliance with the law, not merely reliance on verbal or written submissions. Therefore, rejection on the ground of non-compliance with section 12AB was justified and did not constitute an error of law. Issue 3: Interpretation and Applicability of Amended Section 12AB and Related Provisions The Tribunal extensively analyzed the amended provisions of section 12AB introduced by the Finance Act, 2022, effective from 1 April 2022. It highlighted the two-stage registration process: provisional registration granted on filing Form 10A without detailed scrutiny, and final registration granted after verification of genuineness of activities and compliance with other laws upon filing Form 10AB. The Tribunal noted that the provisional registration granted to the assessee was valid for three years and that final registration requires satisfaction of the Principal Commissioner or Commissioner regarding genuineness and compliance. The Tribunal referred to sub-sections (4) and (5) of section 12AB, which empower cancellation or refusal of registration if "specified violations" occur, including activities not genuine or not in accordance with objects, or non-compliance with other laws. It was held that the object clauses permitting activities abroad without amendment constituted a "specified violation" as per the Explanation to section 12AB(4), justifying rejection of final registration. The Tribunal rejected the assessee's argument that provisional registration precluded rejection of final registration, clarifying that provisional registration is a limited grant and final registration is subject to detailed scrutiny. Issue 4: Effect of Object Clauses Permitting Activities Outside India on Eligibility for Exemption The Tribunal examined the statutory framework under section 11(1)(a) and (c) which restrict exemption to income applied for charitable purposes in India, with limited exceptions for activities outside India subject to CBDT approval. It reviewed judicial pronouncements, including:
The Tribunal concluded that while actual expenditure abroad may be permissible to some extent, the presence of object clauses permitting activities abroad without requisite amendments or approvals is a statutory hurdle under the amended section 12AB regime, and the trust must amend its objects to comply. Issue 5: Procedural Requirements and Opportunity to Amend Trust Deed The Tribunal noted that the assessee was granted liberty to amend the trust deed to remove or clarify objectionable clauses and reapply for final registration. The Tribunal emphasized that compliance with the amended registration regime is mandatory and that the assessee cannot claim exemption under section 80G without satisfying these conditions. The Tribunal also observed that the assessee will not be able to avail exemption for the assessment year 2024-25 due to the time required for amendment and approval. Significant Holdings: "The words in the object 'Grants of scholarship for education to deserving student studying in India or abroad----Grant of medical help and treatment of the poor and deserving persons in India and abroad' means to utilise the funds outside India. Such objects leave the room for any potential future endeavour may be undertaken by the assessee trust which would result in expenditure outside India. The assessee trust must have amended the clauses of the objects mentioned above which are envoy elation of the IT act." "Under section 80G is to be accorded to the applicant after satisfying oneself of the genuineness of activities and the compliance of all the conditions mentioned in section 80G(5) clause (i) to (v) of the act. In the absence of satisfactory compliance by the applicant, the undersigned is unable to arrive at a satisfactory conclusion on these parameters." "Upon filing application in Form 10A (for Provisional registration) the concerned Income-tax Authority (CIT or PCIT) has to issue provisional registration certificate without any further verification or examination." "For Converting provisional registration into final registration, procedure is identical to what it was prevailing prior to 01.04.2021, under section 12AB(1)(b)(i). That is, the Ld. PCIT/CIT shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and the compliances of other laws." "Registration will also stand cancelled under section 12AB, if the authorities notice that, the activities of the trust or institution are carried out in a manner that the provisions of section 11 and 12 do not apply due to operation of section 13(1), or, the trust or institution has not complied with the requirement of any other law for the time being in force as is material for the purpose of achieving its objects etc." "The condition to satisfy that the objects of the trust are not in violation to compliance under any other law for time being in force towards achieving the material purposes of the objects is now become necessary to be established by the assessee at the time when its application is scrutinised for converting provisional to final registration." "We therefore do not find any merit in the arguments advanced by the Ld.AR and the same stands rejected based on the discussions and analysis of the relevant provisions and decisions on the issue. As a consequence, the application seeking 80G also stands rejected." "Liberty is granted to the assessee to specify the memorandum of the objects and file the application seeking final registration before the competent authority which may be considered in accordance with law." The Tribunal's final determination was to dismiss the appeal and uphold the rejection of the application for registration under section 80G due to non-compliance with the amended provisions of section 12AB, primarily on account of object clauses permitting activities outside India without amendment. The assessee was granted liberty to amend the trust deed and reapply, but exemption for the relevant assessment year was denied.
|
