ELYSIUM SMILES FOUNDATION,MUMBAI V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), MUMBAI, MUMBAI

ITA 5006/MUM/2025

AI Insights

Elysium Smiles Foundation appealed against the rejection of its registration application under section 12AA of the Income Tax Act by the Commissioner of Income Tax (Exemptions), Mumbai. The primary reasons for rejection were the intention to apply funds outside India as per the trust deed and the incorrect application under section 12A. The Tribunal found that the potential to apply funds outside India does not constitute a 'specified violation' under section 12AB(4), referencing similar cases where registration was not denied on such grounds. Additionally, the Tribunal noted that the error in citing the sub-clause of section 12A was inadvertent and rectifiable, thus not a valid reason for rejection.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792071 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: misc
• Appeal Filed On: 11-08-2025
• Other Referred Cases: Dedhia Music Foundation vs CIT(E) [2025] 173 taxmann.com 394 (Mumbai - Trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HIMANSHU JOSHI
• Assessee Lawyers: DHARAN GANDHI
• Keywords: Charitable institution
• Section: 11; 12AA; 12A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP & MS PADMAVATHY S, AM I.T.A. No. 5005/Mum/2025 (Assessment Year: 2026-27) I.T.A. No. 5006/Mum/2025 (Assessment Year: 2026-27) Elysium Smiles Foundation, A-905, O2 Commercial Complex, Near Minerva Industrial Estate, Asha Nagar, Mulund, Mumbai-400080. PAN: AAATE8389A Vs. CIT (Exemptions), Room No. 601, 6th Floor, Cumballa Hill, MTNL TE Building, Pedder Road, Dr. Gopalrao Deshmukh Marg, Cumballa Hill, Mumbai-400026. Assessee) : Revenue) Assessee by : Shri Dharan Gandhi, AR Revenue by : Shri Himanshu Joshi, Sr.-DR Date of Hearing : 03.12.2025 Date of Pronouncement : 09.12.2025 O R D E R Per Padmavathy S, AM: These appeals by the assessee are against the separate orders passed by the Commissioner of Income Tax (Exemptions), Mumbai [In short 'CIT(E)'] passed under section 12AA of the Income Tax Act, 1961 (the Act) dated 16.11.2023 and Printed from counselvise.com 2 ITA No.5005-5006/Mum/2025 Elysium Smiles Foundation 24.06.2025.The only issue contended by the assessee is the rejection of registration u/s. 12AA by the CIT(E). The ld. AR submitted that the assessee has filed present appeals against both the orders of the rejection and that if the order of rejection dated 24.06.2025 is considered and allowed in favour of the assessee the appeal against the rejection of exemption dated 16.11.2023 would become infructuous. Accordingly, we will proceed to adjudicate the order rejecting registration u/s. 12AA dated 24.06.2025. 2. The assessee filed the application seeking registration which was rejected for the reason that the assessee in the Trust-deed is having a clause reflecting the intention of the assessee to apply funds outside India and that the assessee has made the application under wrong clause of section 12A i.e. instead of 12A(1)(ac)(iii) the assessee has filed application u/s. 12A(1)(ac)(iv). The relevant observations of the CIT(A) in this regard are extracted as under: “3. On verification of the application in Form 10AB filed by the applicant, it was found that the application was not complete, and all the documents required to be accompanying the application were not furnished. Hence, a notice was issued to the applicant vide DIN & Notice No. ITBA/EXM/F/EXM43/2024-25/1074680941(1) dated 19.03.2025 requesting the applicant to furnish the complete set of documents mentioned in Rule 17A. In response, the applicant trust has made submission vide letter dated26.03.2025. After a careful perusal of the submission, it is seen from the trust deed/MOA that per point no. D(1) of the objects of the trust deed/MOA, the assessee intends to apply funds outside India. This is in violation of section 11 of the Income tax Act. The objects of the trust deed/MOA is reproduced below for reference: D(1): To promote all major Indoor & outdoor Sports activities, Marshal arts by arranging competitions and distributing certificate, prizes, trophy, medals to Printed from counselvise.com 3 ITA No.5005-5006/Mum/2025 Elysium Smiles Foundation deserving sportsmen. To promote sports & Marshal arts like Volley Ball, Foot Ball, Cricket, Karate etc. To send players for playing Dist. & State level, National & International Level to play sports games. Further, it is seen from the submissions that the trust has obtained provisional registration in Form 10AC under clause (vi) of clause (ac) of section 12A(1). As the trust is provisionally registered, the application for regularization of provisional registration order ought to be filed under section 12(A)(1)(ac)(iii) of the Act. For reference, the provision of section 12A(1)(ac)(iii) is reproduced as under: \"(iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier.\". the assessee has applied under section 12A(1)(ac)(iv) of the Act which is valid only where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative. The assessee, having provisional registration for three years u/s 12A(1)(ac)(vi) (B), does not qualify to make the application under section 12A(1)(ac) (iv) of the Act. Thus, the application for registration in Form 10AB filed by the assessee is not valid. 3. We heard the parties and perused the material on record. From the perusal of the above observations of the CIT(E) we notice that reason for denial of registration is that the assessee is having the object clause which has the potential of applying funds outside India and that the assessee has made the application under wrong sub-clause of section 12A. The CIT(E) while doing so did not accept the submissions of the assessee that the funds would be utilised only in India to Printed from counselvise.com 4 ITA No.5005-5006/Mum/2025 Elysium Smiles Foundation train the players fit to participate in international sports events. The CIT(E) also did not accept the submission that mentioning of wrong sub-clause is an inadvertent error. With regard to the first reason for rejection we notice that the coordinate bench in the case of Dedhia Music Foundation vs CIT(E) [2025] 173 taxmann.com 394 (Mumbai - Trib.) where it has been held that application of income of a charitable trust or institution outside India for carrying out its objects would not fall under any categories of 'specified violation' as mentioned in Explanation to section 12AB(4) and, thus, Commissioner (Exemption) could not deny registration under section 12AB on said ground. A similar view has been held by the coordinate bench in various other case also. 4. In assessee's case from the perusal of the above extracted object clause, we notice that it specifies promotion of various sports activities and that the players would be sent to participate in national as well as international sports events. The said object in our considered view does not confirm the contention of CIT(E) that the assessee have the potential to apply funds outside India. Even otherwise, the above judicial precedence has held that having an object to the effect that the funds could be applied outside India cannot be the reason for denying the registration. In view of this discussion we hold that the CIT(E) is not correct in rejecting the application for registration on the ground that the assessee intends to apply funds outside India. With regard to mentioning of wrong sub-clause, we are of the view that the inadvertent error which is rectifiable cannot be a reason for rejection of the application if the assessee is otherwise eligible for registration u/s.12AA of the Act. Accordingly we remit the appeal back to the CIT(E) with a direction to consider the application filed by the assessee for registration on merits and grant registration in accordance with law. It is ordered accordingly. Printed from counselvise.com 5 ITA No.5005-5006/Mum/2025 Elysium Smiles Foundation 5. Since we have considered and allowed the appeal against the order dated 24.06.2025 for statistical purposes the other appeal filed by the assessee against order dated 16.11.2023 has become infructuous and dismissed accordingly. 6. In result, the appeal in ITA No. 5006/Mum/2025 is allowed for statistical purposes and the appeal in ITA No. 5005/Mum/2025 is dismissed. Order pronounced in the open court on 09-12-2025. Sd/- Sd/- (SAKTIJIT DEY) (PADMAVATHY S) Vice-President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "