A Trust Deed Mentions Foreign Collaboration. Does That Cost the Trust Its Registration?

Sunanda Birla Foundation Vs CIT (ITAT Mumbai)

A Trust Deed Mentions Foreign Collaboration. Does That Cost the Trust Its Registration?

Sunanda Birla Foundation’s trust deed permitted international academic and educational collaboration. It had also incurred little expenditure on charitable activities during the period examined. The Commissioner of Income Tax (Exemptions) treated these circumstances as grounds to reject its application for registration under section 12AB and its related application for approval under section 80G.

The Mumbai Tribunal held that limited charitable expenditure does not, by itself, establish that a trust’s activities are not genuine. Nor does a clause permitting foreign collaboration prove that trust income has actually been applied outside India. It set aside both rejection orders and directed the Commissioner to grant section 12AB registration, subject to the other statutory requirements, and to consider and grant section 80G approval in accordance with law.

The Foundation’s Applications

Sunanda Birla Foundation was constituted as a charitable trust in 2007. Its objects included education, healthcare, and the promotion of Vedic philosophy and spiritual sciences. It had previously received registration under section 12A and approval under section 80G, both valid from AY 2022–23 to AY 2026–27.

On 27 June 2025, the Foundation filed Form 10AB seeking registration under section 12AB. It filed its application for approval under section 80G(5) on 13 August 2025. During examination of those applications, the Commissioner raised two concerns.

The first was the absence of substantial expenditure or activity directed towards the charitable objects during the relevant period. The second arose from clauses in the trust deed contemplating liaison with foreign entities, branches abroad and international collaboration. The Commissioner considered that those clauses could permit the application of trust income outside India.

The Foundation explained that it remained functional, received voluntary donations and retained its corpus for its charitable purposes. It said the foreign-related clauses were enabling provisions for academic and spiritual exchanges. According to the Foundation, no funds had been remitted, disbursed or applied outside India since its inception.

It also produced a trustees’ resolution dated 21 November 2025. The resolution provided that the trust’s income and funds would be used within India and that expenditure outside India would not be incurred without the requisite approval under section 11(1)(c). The Commissioner remained unconvinced and rejected both applications on 27 December 2025.

Does Low Expenditure Mean Activities Are Not Genuine?

The Tribunal distinguished the enquiry at the registration stage from the assessment of a trust’s exemption claim for a particular year. The absence of substantial expenditure in one period could be relevant to an enquiry, but it could not alone establish that the trust’s activities were not genuine.

The Foundation relied on the Supreme Court’s decision in Ananda Social & Educational Trust v. CIT, in which the Court, while considering registration under section 12AA, recognised that “activities” includes proposed activities. The Tribunal applied that reasoning to reject the Commissioner’s inference from limited expenditure.

The facts also mattered. The Foundation’s objects had not been found to be non-charitable. The department had earlier granted it registration and 80G approval on the same set of objects. Further, the rejection order identified no activity contrary to those objects and made no finding that the Foundation’s activities were sham or non-genuine.

The Tribunal accordingly held that, in this case, the lack of substantial charitable spending was not a valid ground on its own for refusing section 12AB registration.

Foreign Collaboration Is Not Foreign Application of Income

The trust deed contained clauses allowing contact and collaboration with foreign institutions and researchers. The Tribunal accepted that these provisions contemplated international activity. Its question was whether their presence established an actual breach concerning application of income outside India.

It held that permission in a trust deed to undertake an activity cannot be equated with carrying it out. The Foundation had stated that it had never applied or remitted trust funds outside India, and the Revenue had brought no contrary instance on record.

Whether particular expenditure amounts to application of income outside India, and what follows under section 11(1)(c), depends on the actual expenditure and the circumstances of the relevant assessment year. A possibility that a clause might be used in future was insufficient, without an actual violation or other material showing that the activities were not genuine, to deny registration now.

The trustees’ resolution reinforced the Foundation’s explanation. It expressly confined use of funds to India unless the requisite approval for expenditure outside India was obtained. The Tribunal also referred to coordinate bench decisions supporting the distinction between an enabling clause and the actual application of income under it.

What the Tribunal Directed

The Tribunal set aside the order rejecting section 12AB registration and directed the Commissioner to grant registration, subject to fulfilment of the other statutory requirements in accordance with law.

The section 80G rejection had followed the rejection of section 12AB registration. With that basis removed, the Tribunal set aside the 80G order as well. It directed the Commissioner to consider and grant approval under section 80G in accordance with law, consequent upon the grant of registration. Both appeals were allowed.

Author’s Comments

This decision is useful where a trust has charitable objects but relatively little spending during the period reviewed for registration. The Commissioner may examine genuineness; low expenditure alone is not a finding of non-genuine activity, particularly where there is no identified sham or activity inconsistent with the trust’s objects.

It also draws a practical line for trust deeds that contemplate work with foreign institutions. Such wording deserves scrutiny, but the tax consequence of applying income outside India must be assessed against what the trust actually did. Here, the absence of any identified foreign application, together with the trustees’ resolution, was central to the result. The ruling does not give advance approval for future overseas expenditure; that question remains governed by section 11(1)(c) and the facts when expenditure occurs.

Cases Discussed

• Ananda Social & Educational Trust v. CIT [2020] 114 taxmann.com 693 (SC) — relied upon for the principle that, at the registration stage, “activities” includes proposed activities and absence of substantial expenditure by itself does not establish non-genuineness.
• CIT v. Manekji Mota Charitable Trust [2019] 109 taxmann.com 258 (Bom) — relied upon for the proposition that questions concerning application of income are ordinarily matters for assessment and may be premature at the registration stage.
• Dedhia Music Foundation v. CIT(E) [2025] 173 taxmann.com 394 (Mum-Trib) — relied upon in support of the distinction between an enabling provision in a trust deed and actual application of income pursuant to that provision.
• Shamkris Charity Foundation v. CIT(E) [2025] 180 taxmann.com 58 (Mum-Trib) — relied upon in relation to registration under sections 12A/12AB and clauses contemplating use of funds or activities outside India.
• TIH Foundation for IOT and IOE v. CIT(E) [2025] 176 taxmann.com 561 (Mum-Trib) — relied upon in support of the distinction between clauses enabling international activity and actual application of trust income outside India.
• M.K. Nambyar SAARCLAW Charitable Trust v. UOI [2004] 140 Taxman 616 (Del) — cited by the assessee in support of its submissions concerning charitable registration and application of income outside India.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These appeals have been filed by the assessee against the orders passed by the learned Commissioner of Income Tax (Exemptions) [“Ld. CIT(E)”], vide DIN ITBA/EXM/F/EXM45/2025-26/1084137834(1) dated 27.12.2025 and DIN ITBA/EXMF/EXM45/2025-26/1084137890(1) dated 27.12.2025, for the Assessment Year 2026-27.

2. Since common facts and interconnected issues arise in both these appeals, they were heard together and are being disposed of by this consolidated order for the sake of convenience.

ITA No. 2390/MUM/2026

The Assessee has raised the following grounds of appeal:

1) The learned Commissioner of Income Tax Exemption, Ld. CIT E, has erred in law and on facts in rejecting the application for grant of registration under Section 12AB of the Income tax Act 1961, the Act.

2) On the facts and in the circumstances of the case and in law, the Ld. CIT E erred in rejecting the Appellant application for registration under section 12A of the Income tax Act 1961, the Act, on the grounds that the Appellant trust had not carried out any activity and that there was violation of section 11 of the Act.

3) The Ld. CIT E erred in rejecting the application on the ground that no expenditure was incurred towards charitable objects and equating the same with non genuineness of activities.

4) The Ld. CIT E has erred in not considering that the appellant has not carried out any activities other than those which are charitable in nature. Hence the same does not fall under any violation.

5) The Ld. CIT E erred in rejecting the application on the ground that the trust deed OR MOA contains clause regarding intention of application of income outside India without appreciating that no application has been made outside India and the clauses are merely enabling provisions and hence there stands no violation of section 11 of the Act.

6) The Ld. CIT E failed to appreciate that application outside India cannot be made without approval of CBDT. Hence mere existence of enabling clauses does not constitute violation of section 11 of the Act.

7) The Appellant craves leave to add, alter, amend OR delete any of the above grounds at OR before the time of hearing.

3. The assessee, Sunanda Birla Foundation, is a charitable trust constituted in 2007 and registered under the Maharashtra Public Trusts Act, 1950 (formerly the Bombay Public Trusts Act, 1950) vide PTR No. F-34351. Its objects, inter alia, relate to education, healthcare, and the promotion of Vedic philosophy and spiritual sciences.

4. The assessee was granted registration under section 12A of the Income-tax Act, 1961 (“the Act”) vide Form No. 10AC dated 31.08.2021 and approval under section 80G of the Act vide Form No. 10AC dated 15.10.2021, both being valid from Assessment Year 2022-23 to Assessment Year 2026-27.

5. Pursuant to the amended statutory scheme, the assessee filed an application in Form No. 10AB on 27.06.2025 under section 12A(1)(ac)(iii) of the Act seeking registration under section 12AB. It also filed an application on 13.08.2025 seeking approval under section 80G(5) of the Act.

6. During the course of consideration of the applications, the learned Commissioner of Income Tax (Exemption) [“CIT(E)”] issued a show-cause notice seeking clarification, inter alia, on two issues: first, the absence of substantial charitable expenditure or activities during the relevant period; and second, the existence of clauses III(9), III(12), III(14), III(15), III(16) and III(20) in the Trust Deed, which contemplated liaison with foreign entities, establishment of branches abroad and international collaborations, and according to the learned CIT(E), could permit application of income outside India.

7. In response, the assessee submitted that it had remained functional, continued to receive voluntary donations and had retained its corpus in furtherance of its charitable objects. It was further submitted that the impugned clauses were merely enabling provisions intended to facilitate academic, educational and spiritual exchange and collaboration and that, since inception, no funds had been applied, remitted or disbursed outside India.

8. The assessee also placed on record a resolution of its Board of Trustees dated 21.11.2025 resolving that its income and funds would be utilised within India and that no expenditure outside India would be incurred without obtaining the requisite prior approval of the CBDT under section 11(1)(c) of the Act.

9. The learned CIT(E), however, was not satisfied with the explanation and rejected the application by order dated 27.12.2025. The principal reasons recorded were the alleged absence of substantial charitable expenditure/activities and the existence of enabling clauses contemplating activities or affiliations outside India. The application for approval under section 80G was also rejected on the same date.

10. Before us, the learned Authorised Representative (“AR”) submitted that the learned CIT(E) had travelled beyond the permissible scope of enquiry while considering the application for registration under section 12AB. It was submitted that the objects of the assessee had already been accepted by the Department and that the assessee had held valid registration since 2021 on the same set of objects.

11. The learned AR placed reliance on the judgment of the Hon’ble Supreme Court in Ananda Social & Educational Trust v. CIT [2020] 114 taxmann.com 693 (SC), and submitted that the expression “activities” includes proposed activities and that the absence of substantial expenditure during the relevant period, by itself, could not establish that the activities of an otherwise genuine charitable institution were not genuine.

12. As regards the clauses relating to international activities, the learned AR submitted that the mere existence of enabling provisions in the trust deed could not, in the absence of any actual application or utilisation of income outside India, constitute a ground for refusing registration. It was submitted that the question of actual application of income is ordinarily relevant at the stage of assessment and has to be examined with reference to the facts of the relevant assessment year.

13. Reliance was placed, inter alia, on the decisions in CIT v. Manekji Mota Charitable Trust [2019] 109 taxmann.com 258 (Bom), Dedhia Music Foundation v. CIT(E) [2025] 173 taxmann.com 394 (Mum-Trib), Shamkris Charity Foundation v. CIT(E) [2025] 180 taxmann.com 58 (Mum-Trib), TIH Foundation for IOT and IOE v. CIT(E) [2025] 176 taxmann.com 561 (Mum-Trib) and M.K. Nambyar SAARCLAW Charitable Trust v. UOI [2004] 140 Taxman 616 (Del).

14. The Ld. DR, on the other hand, supported the order of the Ld. CIT(E). It was submitted that an assessee seeking registration should be able to demonstrate genuine charitable activities and that the clauses in the trust deed expressly contemplated activities outside India. According to the learned DR, such provisions were inconsistent with the statutory scheme governing application of income and, therefore, the rejection of the application was justified.

15. We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records we noticed that the rejection of the assessee’s application rests essentially on two considerations: the quantum of charitable expenditure/activities during the relevant period and the existence of clauses in the trust deed which contemplate international activities or affiliations.

16. As regards the first issue, the fact that the assessee may not have incurred substantial expenditure towards its charitable objects during the relevant period cannot, by itself, lead to the conclusion that its activities are not genuine. The scope of enquiry at the stage of registration is distinct from the exercise undertaken by the Assessing Officer while determining the assessee’s entitlement to exemption under sections 11 and 12 for a particular assessment year.

17. The Hon’ble Supreme Court in Ananda Social & Educational Trust (supra) has held, in the context of registration under section 12AA, that the expression “activities” includes proposed activities. The decision recognises that registration concerns the charitable character of the objects and the genuineness of the activities in the context of the statutory requirements and cannot be equated with an assessment of the income and expenditure of the trust for a particular year.

18. In the present case, the charitable objects of the assessee have not been found to be non-charitable. On the contrary, the assessee had already been granted registration under section 12A and approval under section 80G on the same set of objects. There is also no finding in the impugned order that the assessee has undertaken any activity contrary to its stated charitable objects or that the activities carried out by it are sham or non-genuine.

19. The decision of the Hon’ble Bombay High Court in CIT v. Manekji Mota Charitable Trust (supra) also supports the proposition that issues concerning application of income are ordinarily matters to be examined at the stage of assessment and are premature while considering registration.

20. We, therefore, find that the mere fact that the assessee did not incur substantial charitable expenditure during the relevant period could not, in the facts of the present case, constitute a valid ground for refusing registration under section 12AB.

21. The second issue concerns clauses III(9), III(12), III(14), III(15), III(16) and III(20) of the trust deed. On perusal of the material placed before us, it is evident that these clauses contemplate, inter alia, liaison and collaboration with foreign institutions/researchers and other forms of international academic or educational interaction.

22. However, the existence of an enabling provision in the trust deed cannot, by itself, be equated with actual application of the income of the trust outside India. The assessee has categorically stated that, since its inception, no income or funds have been remitted, disbursed or applied outside India. No contrary instance of actual application of income outside India has been brought on record by the Revenue.

23. The issue whether any particular expenditure constitutes application of income outside India, and the consequences thereof under section 11(1)(c), have to be examined with reference to the actual facts and circumstances in the relevant assessment year. The mere possibility that an enabling clause may be acted upon in the future cannot, in the absence of any actual violation or other material establishing that the activities of the assessee are not genuine, be treated as sufficient ground to deny registration.

24. The decisions of the coordinate Benches cited by the learned AR, including Dedhia Music Foundation, Shamkris Charity Foundation and TIH Foundation for IOT and IOE (supra), also support the distinction between a provision enabling a particular activity and the actual application of income pursuant thereto.

25. In the present case, the assessee has, in addition, placed on record the resolution dated 21.11.2025 of its Board of Trustees expressly providing that its income and funds shall be utilised within India and that no expenditure outside India shall be incurred without obtaining the requisite approval under section 11(1)(c). This resolution further supports the assessee’s explanation regarding the nature of the clauses contained in its trust deed.

26. In these circumstances, we are of the considered view that the learned CIT(E) was not justified in rejecting the application for registration merely on the basis of the absence of substantial expenditure during the relevant period or on the basis of the existence of enabling clauses contemplating international collaboration, particularly when there is no finding of actual application of income outside India or of any activity contrary to the charitable objects of the assessee.

27. Accordingly, the order of the learned CIT(E) dated 27.12.2025 rejecting the assessee’s application for registration under section 12AB is set aside. The learned CIT(E) is directed to grant registration to the assessee under section 12AB of the Act, subject to fulfilment of the other statutory requirements in accordance with law.

28. In the result, ITA No. 2390/MUM/2026 is allowed with no order as to costs.

ITA No. 2398/MUM/2026

29. This appeal concerns the rejection of the assessee’s application for approval under section 80G(5) of the Act.

30. It is evident from the impugned order that the rejection of approval under section 80G was consequential to the rejection of the assessee’s application for registration under section 12AB.

31. Since, for the reasons stated above, we have set aside the order rejecting registration under section 12AB and directed the learned CIT(E) to grant registration to the assessee, the very basis on which the approval under section 80G was rejected no longer survives.

32. Accordingly, the order dated 27.12.2025 rejecting the assessee’s application for approval under section 80G(5) is also set aside. The learned CIT(E) is directed to consider and grant approval under section 80G of the Act in accordance with law, consequent upon the grant of registration under section 12AB.

33. In the result, ITA No. 2398/MUM/2026 is also allowed with no order as to costs.

34. In the result, both appeals filed by the assessee are allowed.

Order pronounced in the open court on 24.09.2026. :chatgpt-content-reference{index=”0″}