Application for registration of trust u/s 12AB merits rejection if trust is involved in activities outside India

Hearing an appeal against an order rejecting the application for fresh registration under Section 12AB of the Income Tax Act, 1961, the Income Tax Appellate Tribunal bench at Bengaluru observed that the application for registration of trust u/s 12AB was rightly rejected where the trust had been involved in activities outside India without obtaining necessary approval from the Board as per Section 11(1)(c)

A Division Bench of Mr. George George K, Vice President, and Mr. Laxmi Prasad Sahu, Accountant Member clarified that taking permission from the Central Board of Direct Taxes (CBDT) as per provisions of Section 11(1)(c) of the Act, was a necessary pre-requisite for engaging in international projects and activities, whereas the Assesee had omitted to obtain the requisite clearance.

The Appellant-Assessee was represented by Mr. Madhusudhan K, Cost Accountant, whereas the Respondent-Revenue was represented by Mr. D K Mishra, CIT(DR).

The Assessee, a trust, filed application in Form 10A along with documents for obtaining registration under Section 12AA. A provisional registration was granted. Thereafter the Assessee filed application in Form 10AB for registration under Section 12AB of the Act. The CIT(Exemptions) issued notice and the assessee filed certain details. The assessee was provided opportunity to provide a copy of the Special Order of the Board for conducting activities outside India.

The assessee submitted that the trust has undertaken many projects relating to general public utility. Since some of the activities were conducted outside India, it has been filing returns as Association of Persons and paying taxes regularly. The trust had not undertaken any activities outside India during those years and therefore trust had not sought permission u/s 11(1)(c). The trust undertakes to seek permission for spending for trust activities in India during next two years.

The CIT(E) observed, however, in order to carry out activities outside India, permission is required from the Board as per Section 11(1)(c) of the Act. Since the assessee failed to produce the permission from the Board and other documents regarding genuineness of the activities of the trust and compliance in terms of section 12AB(1)(b)(i & ii) of the Act, the application for registration u/s 12AB was rejected by the CIT(E).

On hearing the contentions of both parties, the Tribunal examined the Activities of the Assessee, both in India and abroad and observed it to be mandatory mandatory to obtain necessary approval as per section 11(1)(c) of the Act, which had not been complied with by the Assessee.

The Bench further noted from the order passed by the CIT(E), that the Assessee had not submitted documents to prove the genuineness of the charitable activities undertaken by it.

Keeping these facts in consideration, the Bench upheld the order of the CIT(E) in rejecting the Assessee’s application for registration under Section 12AB of the Act.

Cause Title: Sampark Livelihoods Promotion Trust vs. CIT (Exemptions), Bengaluru [ITA No. 465/Bang/2023 / 2023-Enterslice-29-ITAT-Bang]

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