Registration can’t be denied if carrying out operations outside India were ancillary to main object of trust: ITAT

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Registration can’t be denied if carrying out operations outside India were ancillary to main object of trust: ITAT

Sarbat The Bhala Gurmat Mission Charitable Trust v. CIT(E) – [2021] 127 taxmann.com 816 (Chandigarh – Trib.)

 

Sort overview of the case:h

 

Assessee applied for grant of registration under Section 12AA as a charitable society for the purpose of claiming exemption under Section 11 and Section 12.

 

The CIT(E) after calling for requisite information and making due enquiries denied registration for the reason that the objects of the trust provided for operations being carried out or extended outside India also.

 

The CIT(E) observed that the Act rules out grant of exemptions of incomes applied for charitable purpose outside India, allowing operation outside India only for limited purpose subject to approval by the CBDT.

 

Accordingly, the CIT(E) 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.

 

Accordingly, he denied the grant of registration to assessee.

Assessee contended that the CIT(E) while denying grant of registration, had referred to the provisions of Section 11 which denied exemption to incomes applied outside India for charitable purposes, which provision was applicable only while computing or determining the exempt income of entities which qualified for the same under the section.

 

For the purpose of grant of registration, the CIT(E) was only required to consider the genuineness of the objects and activities of the applicant trust or entity. Whether they qualify as existing for “charitable purpose” as defined under the Act in Section 2(15).

 

Assessee pointed out that the definition of “charitable purpose” nowhere restricted the carrying out of charitable activities within the geographical boundary 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, therefore, registration cannot be denied for the said reason.

 

He contended that it is only when the quantum of income exempt is to be determined, that the factum of income applied for charitable activities outside the India would be relevant for the purposes of excluding the same for exemption.

 

On further appeal, Chandigarh ITAT held that the Section lists various activities which qualify as charitable purpose but there is no restriction to the scope of such activities within the geographical boundary of India. It is only section 11 which places a geographical restriction allowing exemption only to incomes applied to charitable purposes in India.

 

But even the said section does not completely rule out exemption to incomes applied outside India for charitable purposes, granting exemption to certain such applications, as mentioned in section 11(1)(c), subject to being approved by the Board.

 

Thus the CIT’s order denying registration to assessee merely for the reason that its objects included application of income outside India is not in accordance with law.

 

More particularly when, this was not the sole and main object of assessee, but only it’s ancillary and incidental object.

 

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