Case Law Details
Sports Unlimited Foundation Vs CIT (Exemption) (ITAT Mumbai)
Income Tax Appellate Tribunal (ITAT) Mumbai has set aside the rejection of Sports Unlimited Foundation’s applications for 12AB and 80G registration, directing the Commissioner of Income Tax (Exemption) [CIT(E)] to conduct a fresh adjudication. The rejection was based on concerns that the trust’s objectives left room for potential expenditure outside India, which could violate Section 11 of the Income Tax Act, 1961. The trust argued that it does not intend to use funds abroad and submitted an affidavit affirming this stance.
The CIT(E) found that the trust deed contained a clause allowing financial assistance to students for education in India and abroad. Citing this, the department rejected the application, stating that trusts must satisfy the conditions of Section 12AB(1)(b), which mandates that their objects and activities align with tax-exempt purposes. The trust relied on Jamsetji Tata Trust v. Joint DIT (2010) 148 ITD 388 (Mum.), where it was held that grants for higher education abroad still qualify as an application of money in India. However, the CIT(E) relied on the Sila for Change Foundation v. CIT(E) [ITA No. 4274/Mum/2024], which upheld a similar rejection.
The tribunal noted that the trust had initiated amendments to its objectives to clarify that no expenditure or benefit would accrue outside India. Given this development, the ITAT found it appropriate to remand the case for fresh adjudication, directing the trust to submit its amended objects to the CIT(E) at the earliest. The tribunal emphasized that an affidavit is legally binding, but it must align with the trust’s official objectives to be considered valid.
Following the remand of the 12AB registration, the ITAT also set aside the rejection of the 80G application, stating that both matters should be reconsidered together. This decision ensures that the trust has an opportunity to rectify its documentation and seek registration as per legal requirements. The appeal was allowed for statistical purposes, and the order was pronounced on January 7, 2025.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed the present appeals against the separate impugned orders of even date 26/09/2024 passed by the learned Commissioner of Income Tax (Exemption), Mumbai, [“learned CIT(E)”], rejecting the applications filed by the assessee seeking registration under section 12AB and section 80G of the Income Tax Act, 1961 (“the Act”).
2. In ITA No. 5582/Mum./2024, the assessee has raised the following grounds: –
“A. On the facts and circumstances of the case, and in Law, the CIT erred in rejecting the assessee’s application u/s 12AB of the Act.
B. On the facts and circumstances of the case and in law the CIT failed to appreciate that
i. The AO rejected the application under the context that the trust deed of the assessee has room for potential future endeavor of expenditure outside India.
ii. The object of the trust had a clause which allowed assistance to students to study in India and abroad, which in essence is not an expenditure outside in India.
iii. The assessee has filed an affidavit stating that it would not incur any expenditure or would undertake any activity wherein benefits are realized outside India.
iv. AO rejected the application ignoring the sworn affidavit filed by the assessee.
v. An affidavit is a legally binding document once filed with admissions, become binding unless they can be successfully challenged.”
3. While in its appeal being ITA no. 5583/Mum./2024, the assessee has raised the following grounds: –
“A. On the facts and circumstances of the case, and in Law, the CIT erred in rejecting the assessee’s application u/s 80G of the Act.
B. On the facts and circumstances of the case and in law the CIT failed to appreciate that
i. The AO rejected the application under the context that the trust deed of the assessee has room for potential future endeavor of expenditure outside India.
ii. The object of the trust had a clause which allowed assistance to students to study in India and abroad, which in essence is not an expenditure outside India.
iii. The assessee has filed an affidavit stating that it would not incur any expenditure or would undertake any activity wherein benefits are realized outside India.
iv. AO rejected the application ignoring the sworn affidavit filed by the assessee.
v. An affidavit is a legally binding document once filed with admissions, become binding unless they can be successfully challenged.”
4. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee filed an application in Form 10AB under section 12A(1)(ac)(ii) for seeking registration under section 12AB of the Act. On verification of the application, the learned CIT(E) found that the application was not complete and all the documents required to accompany the application were not furnished. Accordingly, notice was issued to the assessee to furnish the complete set of documents mentioned in Rule 17A(2) of the Income Tax Rules, 1962 (“the Rules”). In response, the assessee filed a submission. After going to the same, the learned CIT(E) noticed from the trust deed that some objects of the trust violate the provisions of section 11 of the Act as the trust intends to apply/receive funds outside India. Accordingly, a show cause notice was issued to the assessee. The learned CIT(E) after noting the objects of the trust concluded that such objects leave room for potential future endeavour which would result in expenditure outside India. The learned CIT(E) further held that the registration under section 12AB is to be granted in terms of the provisions of section 12AB(1)(b) of the Act after being satisfied with the objects of the trust or institution, the genuineness of activities, and the compliance of any other law for the time being in force as are material for the purpose of achieving its objects. Accordingly, the application filed by the assessee for registration under section 12AB of the Act was rejected.
5. During the hearing, the learned Authorised Representative (“learned AR”) by placing reliance upon the decision of the coordinate bench of the Tribunal in Jamsetji Tata Trust v/s Joint DIT, reported in (2010) 148 ITD 388 (Mum.) submitted that while considering similar object of the taxpayer trust, the coordinate bench held that education grant given to Indian students in India for education/higher education abroad fulfilled the condition of application of money for such purpose in India.
6. On the contrary, the learned Departmental Representative (“learned DR”) placed reliance upon the recent decision of the coordinate bench of the Tribunal in Sila for Change Foundation v/s CIT(E), in ITA No. 4274/Mum./2024, dated 20/12/2024 and submitted that registration under section 12AB of the Act has rightly been rejected by the learned CIT(E).
7. Before proceeding further, it is relevant to note the wordings of the object of the trust because of which registration under section 12AB of the Act was denied to the assessee and the same reads as follows: –
“To grant, pay, or give scholarships, stipends, prizes, rewards, allowances and other financial help in cash or kind to students with a view to help them in prosecuting their studies in schools, colleges, educational institutions, teaching commercial and other arts including teaching of cultural arts or other training, research and education works in India or abroad”
8. Thus, as per the learned CIT(E) the aforesaid object leaves room for potential endeavour by the assessee trust which would result in expenditure outside India. It is evident from the record that during the proceedings before the learned CIT(E), the assessee submitted an affidavit claiming that the trust is only to promote and foster sports activities within India but no benefit shall accrue to any person or anybody outside India and no such expenditure shall be incurred, the benefit of which shall accrue outside India. We find that in the decisions relied upon by the learned AR, no such claim was made by the taxpayer. Instead, it was the plea of the taxpayer that it has applied the money for charitable purposes in India and the final execution of the purpose may be outside India. During the hearing, the learned AR submitted that the assessee trust has initiated the process of amending its object. We find that in the decision relied upon by the learned DR, liberty was granted to the assessee to modify the memorandum of object and file the application before the competent authority for registration under section 12AB of the Act.
9. Therefore, having considered the facts and circumstances of the present case and decisions relied upon by both sides, we deem it appropriate to restore the application for seeking registration under section 12AB of the Act to the file of the learned CIT(E) for de novo adjudication with a direction to the assessee to file its amended object at the earliest before the learned CIT(E), which may be considered in accordance with law. With the above directions, the impugned order is set aside and grounds raised by the assessee are allowed for statistical purposes.
10. As we have remanded the issue of grant of registration under section 12AB of the Act to the file of the learned CIT(E) for de novo adjudication, therefore the order of the learned CIT(E) for rejecting the application for registration under section 80G of the Act is also set aside and the matter is restored to the file of the learned CIT(E) for deciding afresh. As a result, the grounds raised by the assessee are allowed for statistical purposes.
11. In the result, both appeals by the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 07/01/2025
Author Bio
