GULBANU A LALANI EDUCATIONAL TRUST ,MUMBAI V. CIT (EXEMPTION), MUMBAI

ITA 1045/MUM/2025

AI Insights

The case involves the Gulbanu A. Lalani Educational Trust, which appealed against the order of the Learned Commissioner of Income-tax (Exemptions), Mumbai, rejecting their application for approval under Section 80G(5)(iii) of the Income-tax Act, 1961. The rejection was primarily based on the trust deed's clause allowing the use of funds outside India, which was seen as a violation of Section 11 of the Act. The Tribunal found that the issue of utilizing funds outside India should be examined during the assessment proceedings rather than at the stage of granting 80G approval. The Tribunal referenced the decision in Dedhia Music Foundation case, which supported the view that the existence of objects for carrying out activities outside India does not automatically disqualify a trust from receiving 80G registration.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708772 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: misc
• Other Referred Cases: Dedhia Music Foundation vs. Commissioner of Income-tax (Exemption)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN KANTI DATTA
• Keywords: Charitable institution
• Section: 11; 6; 80G

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No.1045/Mum/2025 Gulbanu A. Lalani Educational Trust, 02, Shivaji Complex, Road No.2, Anand Nagar, Dahisar East, Mumbai-400 068 PAN : AAAAG0013E vs CIT (Exemptions), Mumbai APPLICANT RESPONDENT Assessee by : None Respondent by : Shri Arun Kanti Datta – CIT DR Date of hearing : 14/07/2025 Date of pronouncement : 15/07/2025 O R D E R Per Anikesh Banerjee (JM): The instant appeal of the assesse is filed against the order of the Learned Commissioner of Income-tax (Exemptions), Mumbai [hereinafter called, ‘Ld. CIT(E)] passed under section 80G(5) of the Income-tax Act, 1961 (in short, ‘the Act’), date of order 29/12/2024. 2. When the appeal was called up for hearing, none was present on behalf of the assessee nor was there filed any adjournment application. However, we find 2 ITA 1045/Mum /2025 Gulbanu A Lalani Education Trust that the appeal could be decided even without the presence of the assesse. Therefore, the matter is proceeded exparte qua for assesse and is decided after hearing the Ld.DR and on perusal of the material available on record. 3. The assessee was granted registration under Section 12AB of the Act. Subsequent to obtaining permanent registration, the assessee submitted Form 10AB and sought approval under Section 80G(5)(iii) of the Act. In response, the Ld. CIT(E) called for certain documents, which were duly furnished by the assessee. Upon examination of the said documents, the Ld. CIT(E) observed that the assessee had contravened the provisions of Section 11 of the Act with respect to the utilization of funds outside India. The relevant portions of the impugned order, specifically paragraphs 3.1 to 5, are reproduced below: “3.1 The clause in the trust deed which is in violation of provision of section 11 is reproduced as under: \"5(h)- To make available to poor and needy persons the benefit of a sanatorium or health home or homes for rest and recuperation at any place in India or otherwise........ 3.2 Use of such words in the trust deed conveys the intention of the applicant to utilize funds outside India. Therefore, the applicant trust is in violation of provision of section 11 of the I.T. Act. 4. Since Approval 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 clauses (i) to (v) of section 80G(5) and any other provisions of the Income Tax Act relevant to charitable institutions. Thus, based on the reasons mentioned above, this application for approval u/s BOG is not allowable. As such the undersigned is left with no other option but to reject the application seeking approval under section 80G of the Act, as the limitation to decide on the application is 31.12.2024. 5. In conclusion, this application for grant of registration stands rejected.” 3 ITA 1045/Mum /2025 Gulbanu A Lalani Education Trust 4. The Ld.DR argued and fully relied on the order of the Ld. CIT(E). 5. We heard the rival submissions and considered the documents available on the record. From the perusal of the order of the Ld.CIT(E), we find that the assesse has already been granted the permanent registration under section 12AB of the Act. After getting the registration, the assesse proceeded to file application for approval under section 80G(5) of the Act. The concern of the Ld.CIT(E) has already been considered in the order of permanent registration. Secondly, the registration cannot be restricted on the basis of utilization of funds outside India. The issue was taken and considered by the ITAT in the case of Dedhia Music Foundation vs. Commissioner of Income-tax (Exemption) [2025] 173 taxmann.com 394 (Mumbai - Trib.) wherein it has been held as follows: - “12. In the present case, according to Ld CIT(E), the objects clause enables the assessee to apply its income outside India. According to Ld CIT(E), the same is not permitted under the Act and hence the registration provisionally granted to the assessee may be cancelled. We shall now examine as to whether the existence of objects for carrying out activities outside India or actual application of income outside India in accordance with its objects, would fall under any of the categories of \"specified violations\" listed out in the Explanation to sec. 12AB(4) of the Act or not. \"(i) Clause (a) would be attracted only if any income derived from the property held for charitable purpose is applied other than for the objects of the charitable trust or institution. Hence, so long as any income is applied for the objects of the charitable trust or institution, 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. 4 ITA 1045/Mum /2025 Gulbanu A Lalani Education Trust (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 carried out by the trust or institution — (i) is not genuine; or (ii) is not being carried out in accordance with all or any of the conditions subject to which it was registered. This clause would be attracted when the activities of the charitable trust or institution is not genuine or in violation of any of the conditions subject to which the registration u/s 12AB was granted. In the instant case, the Ld CIT(E) has stated the activities claimed to have been carried on is not supported by the expenses incurred. According to Ld A.R, the above said observations are against the facts available on record. Hence the above said observations of Ld CIT(E) is dealt with separately infra. (vi) Clause (f) would be attracted when there is failure to comply with the requirements of \"any other law\". Under this clause \"any other law\" would mean any law other than Income tax Act. This meaning can be understood from the Sub-clause (B) of clause (i) of sec.12AB(1)(b) of the Act, which reads as under:- 5 ITA 1045/Mum /2025 Gulbanu A Lalani Education Trust \" (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\". The Ld CIT(E) has to ensure that the charitable trust or institution has complied with the requirement of „any other law for the time being in force', as are material for the purpose of achieving its objects. Here, it is pertinent to note that the verification by Ld CIT(E) should be restricted to compliance of those laws as are material for the purpose of achieving its objects. 12.1. It may be noticed that clauses (a),(c),(d) and (e) would be attracted only when there is application of income as mentioned in those clauses. Hence \"actual application of income\" is the condition to be satisfied for attracting the above said four clauses. 13. In our view, the provisions of sec.11(1) would not fall under the category of \"any other law\", since it is only a computation provision. The provisions of sec.11(1) do not require the charitable trust or institution to comply with any requirements, which are essential to achieve the objects of the trust. Further provisions of sec.11(1) do not state that the application of income derived from property held under trust for activities carried outside India results in violation of any law. Sec. 11 only states that the exemption under that section is restricted to income 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 v. Union of India [2004] 140 Taxman 616/269 ITR 556 (Delhi) 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 6 ITA 1045/Mum /2025 Gulbanu A Lalani Education Trust 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 u/s 11 of the Act.” We observe that the utilization of funds outside India is not the core ground for rejection of the application for registration. This aspect may appropriately be examined during the course of assessment proceedings. Accordingly, we remit the matter back to the file of the Ld. CIT(E) for reconsideration of the application for registration under Section 80G of the Act, in light of the above observations and in accordance with the decision of the Tribunal in the case of Dedhia Music Foundation (supra). 6. In the result, the appeal of the assessee bearing ITA No.1045/Mum/2025 is allowed for statistical purpose. Order pronounced in the open court on 15th day of July, 2025. Sd/- sd/- (NARENDRA KUMAR BILLAIYA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 15/07/2025 Pavanan Copy of the Order forwarded to: 1. अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकर आयु\u0014 CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 5. गाड फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai "