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TMI Blog2025 (5) TMI 679X X X X Extracts X X X X X X X X Extracts X X X X ..... lished with an object to provide scholarship to the needy students. It is submitted that the trust has just started the activity in the financial year 2023-24 and the corpus accumulated as on 31/03/2023 was Rs. 2,34,582/-. It was submitted that assessee carries out charitable activity by giving education scholarships to students and thus imparting education. Assessee was granted provisional registration under NEC on 28/05/2021 for a period till assessment year 2024-25. 2.1 The Ld. CIT(E) issued notice dated 02/09/2024 calling upon assessee to furnish details in respect of object clause 5A(8) and 5B (4) of the trust deed that intends to apply the funds outside India. Assessee was also called upon the assessee to file details of the religious activities as per clause E of the objects of the trust deed. The said clause reads as under : "Clause 5A(8) Grants of Scholarships for Education in deserving student studying in India or abroad. Clause 5B(4) Grant of Medical help and treatment to the poor and deserving persons in India and in abroad. Clause 5(E) Setting up or helping by endowments or otherwise institutions or funds for the benefits of poor widows, blind, old and needy per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absence of satisfactory compliance by the applicant, the undersigned is unable to arrive at a satisfactory conclusion on these parameters. As such the undersigned is left with no other option but to reject the application seeking approval under section 80G of the act, as a limitation to decide the application is on 30/09/2024." Aggrieved by the order of the Ld. CIT(A)(E), assessee is on appeal before this Tribunal. 4. The Ld.AR submitted that the object clause that has been the subject matter for rejection of provisional registration under section 80G has not yet been amended by the assessee. The Ld.AR once again emphasised that the invention behind those object clause is not to carry out any charitable activity outside India. It is submitted that assessee would always make the payment in Indian rupees to the needy and deserving people either for education abroad or for any medical treatment outside India. He thus submitted that assessee has not carried out any activity in voile Asian of section 12AB of the act or any other provisions of the income tax. 4.1 On the contrary the Ld.DR emphasised that, the amended provisions under section 12AB has to be strictly construed more sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he activity is commenced then direct application for five-year registration is permissible. 4.1. In the present facts of the case, the assessee, was incorporated on 28/07/2021 and filed its application under section 10A subsequently. Thus, the assessee falls under the new regime of registration process, seeking registration/approval from 01.04.2021 to 30.09.2023, w.e.f. 01.04.2021 under section 12AB of the Act. The key features of registration under the amended scheme from 01.04.2021 to 30.09.2023 under section 12AB are as under: (i) Concept of provisional registration introduced for charity institutions is applicable to all applying for the first time, irrespective of whether they are new or existing institutions. (ii) Concept of perpetuity of registration stands withdrawn under the new scheme and provisional registration is valid for a maximum period of 3 years. The provisional registration is subsequently required to be regularized into five years regular registration within six months of commencement of activities or at least 6 months before the expiry of the provisional registration period. (iii) All the existing trusts or institutions which were registered under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. PCIT/CIT shall call for such documents or information or make such inquiries as he thinks necessary in order to satisfy himself about genuineness of the activities of the trust or institution and the compliances of other laws. The relevant provisions are as under: (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,- a) where the application is made under sub-clause (i) of the said clause, 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 subclause (iv) or sub-clause (v) 66[or item (B) of sub-clause (vi)] 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; (emphasis supplied) 4.3.1. Thus once the Ld.PCIT/CIT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise of any specified violation; (ii) pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of being heard, for such previous year and all subsequent previous years, if he is satisfied 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 inciden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made to the jurisdictional Principal Commissioner or Commissioner and such Principal Commissioner or Commissioner shall grant approval after examination of the application. Earlier such applications were required to be filed before the prescribed authority. Similarly, provisions of clause (ac) of sub-section (1) of section 12A provide that application for the trusts or institution under the second regime shall be made to the principal Commissioner or Commissioner. The provisional registrations or provisional approval orre-registrations or approvals in certain cases, under these clauses, are granted in anutomated manner and the respective rules have been amended accordingly. It is essential to ensure that non-genuine trusts or institutions do not get exemption provided by these provisions." Thus, we do not agree with the argument advanced by the Ld.AR that since provisional registration is granted to the present assessee before u/s. 12AB, final registration cannot be denied. 4.4. In the present facts, 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 rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 interpreted natural grammatical meaning of the words "to the extent to which such income is applied to such purposes in India" appearing in section 11(1)(a) of the Act. Courts have held that, the words "in India" appearing in section 11(1)(a), qualifies only the words 'such purposes', would not only be contrary to the plain grammatical meaning of section but also render the provisions of section 11(1)(c) redundant and otiose. Further the Courts have held that, if it was accepted that income of trust can be applied even outside India so long as the charitable purposes are in India, then there is no need for a trust which tends to promote international welfare in which India is interested and was created on or after 01/04/1952 to apply to the CBDT for a general or special order for exemption. Hon'ble Delhi High Court in case of DIT(E) vs. National Association of Software and Services Companies reported in (2012) 208 Taxman 178 explained that the literal interpretation of the statute was not, probably in consonance with the intent of the statute. Hon'ble Court however agreed that, it was illogical to allow expenditure paid to a student to study abroad but the same was not permissibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch and nation would not mean that the society was not existing solely for educational purposes; therefore, any additional object clauses normally should not affect the charitable status of a trust/institution/NGO. C. Similarly, Hon'ble Andhra Pradesh High Courtin CWT v. Trustees of the Nizam's Religious Endowment Trust reported (1977) 108 ITR 229 relied by the Ld.AR, it was held that, the charitable or religious expenditure incurred in India will not be affected by a provision for activities outside India or even actual expenditures abroad. Exemptions towards activities in India remain intact and in the case of a clause in the trust deed empowering the trust to have activities outside India, there is no impact. And in the case of trust having activities outside India, the exemptions will be denied to the extent of the income applied outside India. 5. Be that as it may, by insertion of sub section 4 & 5 inserted by Finance Act, 2022 widened the scope of violations by including violations specified in explanation therein. This was not the legal position u/s. 12A/12AA prior to amendment. The condition to satisfy that the objects of the trust are not in violation to compliance und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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