JUDGMENT B.C. Patel, C.J.
1. M.K. Nambyar SAARC Law Charitable Trust has filed this petition against the order made by the Director of Income-Tax (Exemptions), New Delhi on 24.02.2004. The aforesaid Trust submitted two applications in Form No. 10A for registration under Section 12A and recognition under Section 80G of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act'). The application was rejected on the ground 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 outside India as per objects laid down. It was held that the registration cannot be granted under Section 12A of the Act and approval of exemption under Section 80G also cannot be granted.
2. Section 11 of the Act refers to income from property held for charitable or religious purposes. The relevant provisions are reproduced hereunder:-
(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, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;
(b) xxxx xxxx xxxx xxxx xxxx
(c) income derived from property held under trust-
(i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income 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 included in the total income of the person in receipt of such income;
3. So far as the benefit of Section 11(1)(a)(1)(a) is concerned, it can be extended only to the extent to which such income is applied to such purposes in India. However, if the income is applied to the purposes outside India, then clause (c) will be applicable and if the permission is granted by the Board either by general or special order then, benefit can be extended. Section 12AA prescribes the procedure for registration. Reading the Section, it becomes clear that after the application is made, the officer has to call for documents or information from the Trust to satisfy himself about the genuineness of the activities of the Trust. He can make further enquiry as he may deem necessary. It is only after satisfying himself about the objects of the Trust and the genuineness of its activities that he has to pass an order in writing registering the Trust or institution. And if he is not satisfied, he can reject the same. This Section does not refer to the activities in India or outside India. It refers to application of income for charitable or religious purposes in India as also with direction or order of the Board for application of income as aforesaid outside India. Reading the order dated 24.02.2004, 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 open for him to make necessary enquiries in this behalf and to pass an order as per the procedure laid down under Section 12AA of the said Act. So far as income which is applied outside India is concerned, is not a relevant criteria for rejecting the application. In absence of order u/s 11(1)(a)(c), one can not seek benefit for application of income for charitable or religious purposes, outside India. Therefore, the order dated 24.2.2004 made by the Director of Income-Tax (Exemptions), Annexed at page 32 which is based on irrelevant criteria is quashed and set aside with a direction to consider the application strictly in accordance with law. It is made clear that even application under Section 80G is required to be considered afresh. It is directed that the application shall be disposed of within a period of four weeks by the Commissioner.
Direct Service (dusty).