Sarbat the Bhala Gurmat Mission Charitable Trust, Mohali V. CIT(Exemption), Chandigarh

ITA 297/CHANDI/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 7861 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2021
• Assessment Year: 2020-2021
• Appeal Filed On: 09-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Assessee Lawyers: AJAY KUMAR JAIN
• Keywords: Charitable institution; Opportunity of being heard; Earning of tax free income; Set aside
• Section: 80G; 12A; 12AA; 195; 13; 63; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH BEFORE: SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI R.L. NEGI, JUDICIAL MEMBER ITA NO. 297/CHD/2020 (ASSESSMENT YEAR: 2020-21 SARBAT THE BHALA GURMAT MISSION CHARITABLE TRUST, # 311/7, KURALI KHANPUR MOHALI. THE CIT (EXEMPTIONS), CHANDIGARH. ./PAN NO: AAPTS9191R /ASSESSEE BY: SHRI AJAY KUMAR JAIN, CA / REVENUE BY : SHRI SANDEEP DAHIYA, CIT /DATE OF HEARING: 16.03.2021 !' /DATE OF PRONOUNCEMENT: 30.03.2021 (HEARING THROUGH WEBEX) /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) [IN SHORT THE LD.CIT(E)] , CHANDIGARH DATED 18.05.2020 ,DENYING GRANT OF REGISTRATION U/S 12A OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) AS A CHARITABLE SOCIETY. ITA NO.297/CHD/2020 A.Y.2020-21 2 2. THE FACTS, AS FIND MENTION IN THE ORDER OF THE LD.CIT(E), ARE THAT THE ASSESSEE IS A TRUST IN OPERATION SINCE 30.12.2014 AND HAD APPLIED FOR GRANT OF REGISTRATIO N U/S 12AA,AS A CHARITABLE SOCIETY FOR THE PURPOSES OF CL AIMING EXEMPTION OF ITS INCOME U/S 11 & 12 OF THE ACT ,ON 02.11.2019. THE LD.CIT(E) AFTER CALLING FOR REQUISI TE INFORMATION AND MAKING DUE ENQUIRIES, DENIED REGIST RATION FOR THE REASON THAT THE OBJECTS OF THE TRUST PROVID ED FOR OPERATIONS BEING CARRIED OUT/EXTENDED OUTSIDE INDIA ALSO. THE LD.CIT(E) OBSERVED THAT THE ACT RULES OUT GRAN T OF EXEMPTIONS OF INCOMES APPLIED FOR CHARITABLE PURPOS E OUTSIDE INDIA, ALLOWING OPERATION OUTSIDE INDIA ONLY FOR LIMITED PURPOSE SUBJECT TO APPROVAL BY THE CENTRAL BOARD OF DIRECT TAXES. ACCORDINGLY, HE DERIVED FROM THE SAME AND HELD THAT THE ACTIVITIES OF A TRUST CAN BE TREATED AS CHARITABLE ONLY WHEN ITS INCOME IS APPLIED FOR THE ACTIVITIES CARRIED OUT IN INDIA ONLY. FOR THE AFORESAID REASON S HE DENIED GRANT OF REGISTRATION U/S 12A OF THE ACT TO THE ASSESSEE. THE RELEVANT FINDINGS OF THE CIT(E) AT PA RAS 5 AND 6 OF THE ORDER ARE AS UNDER: 5. IN RESPONSE TO THE FIXATION LETTER DATED 20.12. 201J, THE APPLICANT TRUST HAS NOT SUBMITTED THE REPLY. THE RE MINDER WAS ISSUED ON 15.01.2020 TO THE TRUST TO SUBMIT THE REP LY TO QUESTIONNAIRE ON OR BEFORE 24.01.2020. IN RESPONSE, THE APPLICANT TRUST HAS SUBMITTED THE RESPONSE ONLINE O N ITBA. ON PERUSAL OF THE TRUST DEED OF THE TRUST PROVIDED IN THE SUBMISSION, IT IS NOTICED THAT OPERATION WILL BE EXTENDED OUTSI DE INDIA ALSO ITA NO.297/CHD/2020 A.Y.2020-21 3 WHICH MENTIONED AT SR. NO. 7(R) OF THE OBJECTS INCI DENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS & S AME ARE REPRODUCED AS UNDER:- '7(R). TO OPEN BRANCHES OF TRUST IN INDIA AND ABR OAD. ' AS PER SECTION 11(1) (C) OF THE INCOME TAX ACT, ANY INCOME APPLIED ON ACTIVITIES OUTSIDE INDIA IS NOT ELIGIBLE FOR EXEMPTION. A CHARITABLE ORGANIZATION CANNOT HAVE ACTIVITY OUTS IDE INDIA UNLESS IT HAPPENS TO BE A TRUST/COMPANY/SOCIETY CRE ATED BEFORE 1-4-1952 OR IT IS ENGAGED IN PROMOTION OF INTERNATI ONAL WELFARE IN WHICH INDIA IS INTERESTED. IN OTHER WORDS, NGOS REGISTERED AFTER 1-4-1952 ARE NOT ALLOWED TO HAVE ANY INTERNAT IONAL ACTIVITY UNLESS SUCH ACTIVITY IS SPECIFICALLY EXEMP TED BY CBDT. PROVISIONS OF SECTION 11 (1 )(C) ARE AS UNDER:- (C) INCOME DERIVED FROM THE PROPERTY HELD UNDER TRU ST- * CREATED ON OR AFTER THE 1ST DAY OF APRIL, 1952 FO R A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFAR E IN WHICH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH IN COME IS APPLIED TO SUCH PURPOSES, OUTSIDE INDIA, AND * FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEF ORE THE 1ST DAY OF APRIL, 1952, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA: PROVIDED THAT BOARD, BY GENERAL OR SPECIAL ORDER, H AS DIRECTED IN EITHER CASE THAT ALL NOT BE INCLUDED IN THE TOTAL I NCOME OF THE PERSON IN RECEIPT OF SUCH INCOME. IT IS ALSO WORTHWHILE TO MENTION THAT THE ACTIVITIE S WILL BE TREATED AS CHARITABLE WHEN THE EXPENSES INCURRED ON SUCH ACTIVITIES WILL BE BORNE BY THE APPLICANT IN INDIA ONLY. 6. IN VIEW OF THE ABOVE, THE PRESENT APPLICATION FO R GRANT OF REGISTRATION U/S 12AA IS HEREBY REJECTED. 3. AGGRIEVED BY THE SAME THE ASSESSEE HAS COME UP I N APPEAL BEFORE US. HE HAS RAISED THE FOLLOWING GROUN DS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX EXEMPTI ONS CHANDIGARH HAS WRONGLY REJECTED THE REGISTRATION U/ S 12AA OF INCOME TAX ACT SIMPLY ON THE BASIS OF GENER AL CLAUSE AT SR NO 7 IN OBJECTS CLAUSE I.E TO OPEN BRA NCHES ITA NO.297/CHD/2020 A.Y.2020-21 4 OF TRUST IN INDIA OR ABROAD WITHOUT APPRECIATING TH E FACT THAT THE APPELLANT TRUST HAS NEITHER INCURRED ANY EXPENSES OUTSIDE INDIA NOR INTENTION TO INCUR EXPEN SES ABROAD. 2. THAT THE LD. COMMISSIONER OF INCOME EXEMPTIONS CHANDIGARH HAS WRONGLY REJECTED THE REGISTRATION U/S 12AA OF INCOME TAX ACT PARTICULARL Y IN VIEW OF FACT THAT THE APPELLANT HAD GIVEN COMPLETE DETAILS TO LD. CIT AND THERE IS NO MATERIAL POINTED OUT BY LD. CIT THAT THE APPELLANT HAD INCURRED ANY EXPENSES OUTSIDE INDIA & HE SIMPLY REJECTED REGISTR ATION ON THE BASIS OF CLAUSE FOR OPENING OF BRANCHES OUTS IDE INDIA & THERE IS NO PROVISION IN TRUST DEED THAT TH E APPELLANT SOCIETY SHALL INCUR ANY EXPENSES OUTSIDE INDIA OUT OF FUNDS COLLECTED FROM INDIA & ALSO THER E IS NO PROHIBITION UNDER INCOME TAX TO OPEN BRANCHES OUTSIDE INDIA. 3. THAT THE LD. COMMISSIONER OF INCOME EXEMPTIONS CHANDIGARH HAS WRONGLY REJECTED THE REGISTRATION U/ S 12AA OF INCOME TAX AC DURING LOCKDOWN PERIOD AND BEFORE 1-6-2020 HURRIEDLY IN ORDER TO AVOID OF BENE FIT GRANTED BY FINANCE ACT 2020 TO APPELLANT TRUST. 5. THAT THE ASSESSEE CRAVES FOR PERMISSION TO ADD, AMEND, ALTER OR WITHDRAW ANY GROUNDS OF APPEAL WITH APPROVAL OF THE HON'BLE BENCH. 4. DURING THE COURSE OF HEARING BEFORE US, THE LD.C OUNSEL FOR THE ASSESSEE CONTENDED THAT THE LD.CIT(E),WHILE DENYING GRANT OF REGISTRATION, HAD REFERRED TO THE PROVISIO NS OF SECTION 11 OF THE ACT WHICH DENIED EXEMPTION TO INC OMES APPLIED OUTSIDE INDIA FOR CHARITABLE PURPOSES, WHIC H PROVISION WAS APPLICABLE ONLY WHILE COMPUTING OR DETERMINING THE EXEMPT INCOME OF ENTITIES WHICH QUA LIFIED FOR THE SAME UNDER THE SECTION. THAT FOR THE PURPOS E OF GRANT OF REGISTRATION THE LD.CIT(E) WAS ONLY REQUIR ED TO CONSIDER THE GENUINENESS OF THE OBJECTS AND ACTIVIT IES OF THE ITA NO.297/CHD/2020 A.Y.2020-21 5 APPLICANT TRUST OR ENTITY, WHETHER THEY QUALIFY AS EXISTING FOR CHARITABLE PURPOSE AS DEFINED UNDER THE ACT I N SECTION 2(15) OF THE ACT. DRAWING OUR ATTENTION TO THE SAME , THE LD.COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE DE FINITION OF CHARITABLE PURPOSE NOWHERE RESTRICTED THE CARR YING OUT OF CHARITABLE ACTIVITIES WITHIN THE GEOGRAPHICAL B OUNDARY OF INDIA ALONE. THEREFORE, WHILE GRANTING REGISTRATION THE POSSIBILITY OF THE APPLICANT TRUST CARRYING OUT THE ACTIVITIES OUTSIDE INDIA CANNOT LEAD TO THE CONCLUSION THAT IT IS NOT IN EXISTENCE FOR CHARITABLE PURPOSE AT ALL AND, THERE FORE, REGISTRATION CANNOT BE DENIED FOR THE SAID REASON. HE CONTENDED THAT IT IS ONLY WHEN THE QUANTUM OF INCOM E EXEMPT IS TO BE DETERMINED, THAT THE FACTUM OF INCO ME APPLIED FOR CHARITABLE ACTIVITIES OUTSIDE THE INDI A WOULD BE RELEVANT FOR THE PURPOSES OF EXCLUDING THE SAME FOR EXEMPTION. HE POINTED OUT THAT THIS ISSUE HAS BEEN DEALT WITH IN VARIOUS JUDICIAL DECISIONS IN FAVOUR OF THE ASSESSEE AS UNDER: 1) MK NAMBYAR SAARC LAW CHARITABLE TRUST VS. UNION OF INDIA & OTHERS (DEL) 2) FOUNDATION FOR INDO-GERMAN STUDIES VS. DIRECTOR OF INCOME-TAX (EXEMPTIONS) (HYD) 3) NATIONAL INFORMATICS CENTRE SERVICES INC. VS. DIT(EXEMPTION) (NEW DELHI) ITA NO.297/CHD/2020 A.Y.2020-21 6 COPIES OF THE AFORESAID ORDERS WERE PLACED BEFORE US. HE FURTHER CONTENDED THAT IN ANY CASE CARRYING OUT ACT IVITIES OUTSIDE INDIA WAS NOT ITS MAIN OBJECT BUT ONLY INCI DENTAL AND THE APPLICANT PRIMARILY WOULD CARRY OUT ITS ACT IVITIES IN INDIA ONLY. 5. THE LD. DR, ON THE OTHER HAND SUPPORTED THE OR DER OF THE LD.CIT(E). 6. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE BEFORE US RELATES TO GRANT OF REGISTRATION U/S 12AA OF THE AC T, FOR THE PURPOSES OF CLAIMING EXEMPTION U/S 11 & 12 OF THE A CT OF INCOMES APPLIED FOR CHARITABLE PURPOSES. 7. THE APPLICANT ASSESSEE IN THE PRESENT CASE HAS B EEN DENIED REGISTRATION FOR THE REASON THAT ITS INCIDEN TAL AND ANCILLARY OBJECTS INCLUDED CARRYING OUT THE ACTIVIT IES OUTSIDE THE INDIA. THE LD.CIT(E) HAS HELD THAT FOR THE AFOR ESAID REASON THE ASSESSEE CANNOT BE SAID TO BE INDULGING IN CHARITABLE ACTIVITIES. AND FOR HOLDING SO HE HAS RE FERRED TO THE PROVISIONS OF SECTION 11(1)(C) OF THE ACT. 8. THE PRIMARY ARGUMENT OF THE ASSESSEE AGAINST THE ORDER OF THE LD.CIT(E) IS THAT FOR THE PURPOSES OF GRANTING REGISTRATION ONLY THE CONDITIONS MENTIONED IN SECTI ON 12AA NEED TO BE FULFILLED AND THE PROVISIONS OF SECTION 11(1)(C) ARE ITA NO.297/CHD/2020 A.Y.2020-21 7 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 CHARITABL E ACTIVITIES OUTSIDE INDIA WAS NOT THE SOLE OR MAIN O BJECT BUT ONLY INCIDENTAL/ANCILLARY OBJECT OF THE APPLICANT A SSESSEE. 9. WHAT IS THEREFORE TO BE DECIDED IS WHETHER THE L AW PROVIDES FOR ANY SUCH GEOGRAPHICAL LIMITATION IN C ARRYING OUT CHARITABLE ACTIVITIES FOR THE PURPOSES OF RECOG NISING 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 SECTION2(15) DEFINES CHARITABLE PURP OSES, SECTION 11 EXEMPTS INCOMES, DERIVED FROM PROPERTIES HELD UNDER TRUST, TO THE EXTENT APPLIED FOR CHARITABLE P URPOSES. SECTION 12A IMPOSES THE REQUIREMENT OF SEEKING REGI STRATION FOR THE PURPOSES OF AVAILING THE EXEMPTION U/S 11, AND THE PROCESS OF GRANTING REGISTRATION IS GOVERNED BY SEC TION 12AA. SINCE IN THE PRESENT CASE REGISTRATION HAS BEEN DEN IED U/S 12AA OF THE ACT, RELYING UPON PROVISIONS OF SECTION 11, IT IS RELEVANT TO REPRODUCE BOTH THE AFORESAID PROVISIONS FOR ADJUDICATING THE ISSUE. 12AA. (1) THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR ITA NO.297/CHD/2020 A.Y.2020-21 8 REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE (A) [OR CLAUSE (AA) [OR CLAUSE (AB) OF SUB-SECTION (1)] OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRU ST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE T RUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE- (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUS T OR INSTITUTION; II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTI ON, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASON ABLE OPPORTUNITY OF BEING HEARD. INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGI OUS PURPOSES. 11. (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 I NCOME (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, W HERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICA TION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEE N PER CENT OF THE INCOME FROM SUCH PROPERTY; (B) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PART ONLY FOR SUCH PURPOSES, THE TRUST HAVING BEEN CREATED BE FORE THE COMMENCEMENT OF THIS ACT, TO THE EXTENT TO WHICH SU CH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE AN Y SUCH INCOME IS FINALLY SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO SET APA RT IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY; ITA NO.297/CHD/2020 A.Y.2020-21 9 (C) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST (I) CREATED ON OR AFTER THE 1ST DAY OF APRIL, 195 2, FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATI ONAL WELFARE IN WHICH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE IND IA, AND (II) FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEFORE THE 1ST DAY OF APRIL, 1952, TO THE EXTENT TO WHICH SUCH INC OME 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 INCLUD ED 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 COMMISSIONE R, WHILE CONSIDERING THE APPLICATION OF THE TRUST/SOCI ETIES, 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 INTEREST,] AND T HE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. [ PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OF ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, ITA NO.297/CHD/2020 A.Y.2020-21 10 IRRESPECTIVE OF THE NATURE OF USE OF APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR;]] 11. AS IS EVIDENT FROM THE ABOVE, THE SECTION LISTS VARIOUS ACTIVITIES WHICH QUALIFY AS CHARITABLE PURPOSE BUT THERE IS NO RESTRICTION TO THE SCOPE OF SUCH ACTIVITIES WITH IN THE GEOGRAPHICAL BOUNDARY OF INDIA. IT IS ONLY SECTION 11,AS REPRODUCED ABOVE, WHICH PLACES A GEOGRAPHICAL REST RICTION ALLOWING EXEMPTION ONLY TO INCOMES APPLIED TO CHARI TABLE PURPOSES IN INDIA. BUT EVEN THE SAID SECTION DOES N OT COMPLETELY RULE OUT EXEMPTION TO INCOMES APPLIED OU TSIDE INDIA FOR CHARITABLE PURPOSES, GRANTING EXEMPTION TO CERTAIN SUCH APPLICATIONS, AS MENTIONED IN SECTION 11(1),S UBJECT TO BEING APPROVED BY THE BOARD. 12. AS IS EVIDENT FROM THE ABOVE, IN THE SCHEME OF THE ACT, INCOMES APPLIED OUTSIDE INDIA FOR CHARITABLE PURPOS ES ARE NOT COMPLETELY AND CATEGORICALLY RULED OUT FROM B EING ELIGIBLE FOR GRANT EXEMPTION. ITA NO.297/CHD/2020 A.Y.2020-21 11 13. THE LD.PR.CITS ORDER ,IN THE PRESENT CASE, THE REFORE DENYING REGISTRATION TO THE APPLICANT ASSESSEE MER ELY FOR THE REASON THAT ITS OBJECTS INCLUDED APPLICATION OF INCOME OUTSIDE INDIA, WE HOLD, IS NOT IN ACCORDANCE WITH L AW.MORE PARTICULARLY WHEN, ADMITTEDLY, THIS WAS NOT THE SO LE AND MAIN OBJECT OF THE APPLICANT ASSESSEE, BUT ONLY ITS ANCILLARY AND INCIDENTAL OBJECT. IT IS NOT THE CASE THEREFORE THAT THERE IS TO BE NO APPLICATION OF INCOME WITHIN INDIA AT A LL AS PER THE OBJECTS. IN FACT THE MAIN OBJECT OF THE APPLICA NT ASSESSEE INVOLVES CARRYING OUT CHARITABLE ACTIVITIES IN INDI A. IN THIS FACTUAL SITUATION, DENYING REGISTRATION U/S 12AA OF THE ACT, FOR THE REASON THAT ITS INCIDENTAL OBJECT ENTAILED APPLICATION OF INCOME OUTSIDE INDIA, WE FIND, WOULD RESULT IN T HE ASSESSEE BEING DENIED EXEMPTION TO INCOME APPLIED I N INDIA, WHICH IT WOULD OTHERWISE BE ENTITLED TO UNDER LAW. 14. FURTHER AS RIGHTLY POINTED OUT BY THE LD.COUNSE L FOR THE ASSESSEE, THE PROVISIONS OF SECTION 11(1)(C) OF THE ACT, WHICH THE LD.CIT(E) HAS RELIED UPON FOR HOLDING THA T ONLY ACTIVITIES CARRIED OUT IN INDIA WILL QUALIFY AS CHA RITABLE 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 REG ISTRATION IS GRANTED U/S 12A OF THE ACT AND THEREFORE CANNOT BE RELEVANT FOR THE PURPOSES OF GRANTING REGISTRATION U/S 12A OF ITA NO.297/CHD/2020 A.Y.2020-21 12 THE ACT. THE SCHEME OF THE ACT IS THAT ALL ENTITIE S CARRYING OUT CHARITABLE ACTIVITIES, AS DEFINED IN SECTION 2 (15) OF THE ACT, QUALIFY TO BE REGISTERED AS CHARITABLE ENTITIE S SUBJECT TO SATISFACTION OF THE CONCERNED OFFICER VIS A VIS THEIR OBJECTS AND ACTIVITIES, BUT THE EXEMPTION IS PROVIDED/RESTR ICTED ONLY TO THE EXTENT OF INCOME WHICH IS APPLIED FOR CHARIT ABLE PURPOSE IN INDIA. 15. THE ISSUE WE FIND, IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISIONS RELIED UPON BY THE LD.COU NSEL FOR THE ASSESSEE BEFORE US. IN THE CASE OF MK NAMBYAR S AARC LAW CHARITABLE TRUST (SUPRA), WE FIND, THE APPLICAT ION FOR GRANT OF REGISTRATION WAS REJECTED ON THE GROUND TH AT THE APPLICANT ITSELF HAD ADMITTED THAT THE SCHOLARSHIP COULD BE PAID TO MEMBERS EVEN OUTSIDE INDIA. THE HON'BLE HIG H COURT HELD THAT THE APPLICATION OF INCOME OUTSIDE INDIA I S NOT A RELEVANT CRITERIA FOR REJECTING THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT AND THE OFFICER HA S TO ONLY RESTRICT HIMSELF TO THE SATISFACTION ABOUT THE OBJE CTS AND GENUINENESS OF THE ACTIVITIES OF THE TRUST WHILE GR ANTING REGISTRATION WITH NO RESTRICTION ON THE ACTIVITIES BEING CARRIED OUT INSIDE OR OUTSIDE INDIA. THE RELEVANT F INDINGS OF THE HONBLE HIGH COURT IS AS UNDER: THE JUDGMENT OF THE COURT WAS DELIVERED BY ITA NO.297/CHD/2020 A.Y.2020-21 13 B.C. PATEL C.J. - M.K. NAMBYAR SAARC LAW CHARITABLE TRUST HAS FILED THIS PETITION AGAINST THE ORDER MADE BY T HE DIRECTOR OF INCOME-TAX (EXEMPTIONS) NEW DELHI, ON FEBRUARY 24, 2004. THE AFORESAID TRUST SUBMITTED TWO APPLICATIONS IN FORM NO. 10A FOR REGISTRATION UNDER SECTION 12A AND RECOGNITION UNDE R SECTION 80G OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERR ED TO AS 'THE ACT'). THE APPLICATION WAS REJECTED ON THE GRO UND THAT THE APPLICANT ITSELF HAS ADMITTED THAT THE SCHOLARSHIPS CAN BE PAID TO THE MEMBERS EVEN OUTSIDE INDIA. IT IS IN VIEW OF THIS ADMISSION THAT THE ACTIVITIES WILL BE EXTENDED OUTS IDE INDIA AS PER THE OBJECTS LAID DOWN, IT WAS HELD THAT THE REG ISTRATION CANNOT BE GRANTED UNDER SECTION 12A OF THE ACT AND THE APPROVAL OF EXEMPTION UNDER SECTION 80G ALSO CANNOT BE GRANTED. SECTION 11 OF THE ACT REFERS TO INCOME FROM PROPERT Y HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. THE RELEVANT PROV ISIONS ARE REPRODUCED HEREUNDER: '11. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 T O 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE I NCOME-FA) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, W HERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICA TION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOM E SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEE N PER CENT, OF THE INCOME FROM SUCH PROPERTY; . .. (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST- (B) (I) CREATED ON OR AFTER THE 1ST DAY OF APRIL, 1952, FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATI ONAL WELFARE IN WHICH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE IND IA, AND (C) (II) FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEFORE THE 1 ST DAY OF APRIL, 1952, TO THE EXTENT 1O WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES OUTSIDE INDIA: (D) PROVIDED THAT THE BOARD, BY GENERAL OR SPECIAL ORDE R, HAS DIRECTED IN EITHER CASE THAT IT SHALL NOT BE INCLUD ED IN THE TOTAL INCOME OF THE PERSON IN RECEIPT OF SUCH INCOM E;. ..' (E) SO FAR AS THE BENEFIT OF SECTION 11 (1 )(A) IS CONC ERNED, IT CAN BE EXTENDED ONLY TO THE EXTENT TO WHICH SUCH IN COME IS APPLIED TO SUCH PURPOSES IN INDIA. HOWEVER, IF THE INCOME IS APPLIED TO THE PURPOSES OUTSIDE INDIA, THEN CLAU SE (C) WILL BE APPLICABLE AND IF THE PERMISSION IS GRANTED BY T HE BOARD EITHER BY GENERAL OR SPECIAL ORDER THEN, BENE FIT CAN BE EXTENDED. SECTION 12AA PRESCRIBES THE PROCEDURE FOR ITA NO.297/CHD/2020 A.Y.2020-21 14 REGISTRATION. READING THE SECTION, IT BECOMES CLEAR THAT AFTER THE APPLICATION IS MADE, THE OFFICER HAS TO CALL FO R DOCUMENTS OR INFORMATION FROM THE TRUST TO SATISFY HIMSELF AB OUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, HE CAN MAKE FURTHER ENQUIRY AS HE MAY DEEM NECESSARY. IT IS ONL Y AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST A ND THE GENUINENESS OF ITS ACTIVITIES THAT HE HAS TO PASS A N ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION. AND I F HE IS NOT SATISFIED, HE CAN REJECT THE SAME. THIS SECTION DOE S NOT REFER TO THE ACTIVITIES IN INDIA OR OUTSIDE INDIA. IT REF ERS TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS P URPOSES IN INDIA AS ALSO WITH DIRECTION OR ORDER OF THE BOARD FOR APPLICATION OF INCOME AS AFORESAID OUTSIDE INDIA. R EADING THE ORDER DATED FEBRUARY 24, 2004, IT IS VERY CLEAR THAT THERE IS NON-APPLICATION OF MIND, IT WAS NECESSARY FOR THE COMMISSIONER TO EXAMINE THE PURPOSE FOR SATISFYING HIMSELF THAT THE ACTIVITIES ARE GENUINE. IT WAS OPE N FOR HIM TO MAKE NECESSARY ENQUIRIES IN THIS BEHALF AND TO P ASS AN ORDER AS PER THE PROCEDURE LAID DOWN UNDER SECTION 12AAOF THE SAID ACT. SO FAR AS INCOME WHICH IS APPLIED OUT SIDE INDIA IS CONCERNED, IT IS NOT A RELEVANT CRITERIA F OR REJECTING THE APPLICATION. IN THE ABSENCE OF AN ORDER UNDER S ECTION 11(1)(A) AND (C), ONE CANNOT SEEK BENEFIT FOR APPLI CATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES, OUTSID E INDIA. THEREFORE, THE ORDER DATED FEBRUARY 24, 2004 MADE B Y THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), ANNEXED AT PAG E 32, WHICH IS BASED ON IRRELEVANT CRITERIA IS QUASHED AN D SET ASIDE WITH A DIRECTION TO CONSIDER THE APPLICATION STRICTLY IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT EVEN THE APPLICATION UNDER SECTION 80G IS REQUIRED TO BE CON SIDERED AFRESH. IT IS DIRECTED THAT THE APPLICATIONS SHALL BE DISPOSED OF WITHIN A PERIOD OF FOUR WEEKS BY THE COMMISSIONE R. 16. THE AFORESAID DECISION OF THE HON'BLE DELHI HIG H COURT HAS BEEN FOLLOWED BY THE COORDINATE BENCHES OF THE TRIBUNAL IN THE CASE OF NATIONAL INFORMATICS CENTRE SERVICES INC. (SUPRA). 17. IN VIEW OF THE ABOVE, THE ORDER PASSED BY THE L D.CIT(E) DENYING REGISTRATION U/S 12A OF THE ACT IS SET ASID E AND THE ITA NO.297/CHD/2020 A.Y.2020-21 15 LD.CIT(E) IS DIRECTED TO GRANT REGISTRATION AS APPL IED FOR BY THE ASSESSEE. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON 30.03. 2021. SD/- SD/- (R.L. NEGI) (ANNAPURNA GUPTA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 30 TH MARCH, 2021 * * # $%&'()* '! / COPY OF THE ORDER FORWARDED TO : 1. )(+ / THE APPELLANT 2. %,+ / THE RESPONDENT 3. ## - / CIT 4. ## - ( )( )/ THE CIT(A) 5. './%0 , #)(#0' , 123/4 / DR, ITAT, CHANDIGARH 6. /35 / GUARD FILE # $ / BY ORDER, ( / ASSISTANT REGISTRAR