Section 2(15), read with sections 12A and 11 – If activities of an assessee trust are charitable and property is held wholly and exclusively under trust for charitable and religious purposes, then such a trust cannot be denied registration merely because its activities are extended outside India. Also the income applied outside India is also eligible for exemption, subject to the provisions of section 11(1)(c), if the activities of the assessee trust tend to promote the international welfare in which India is interested and the approval has been granted by the Board for such application of income.
FACTS
The Ld. DIT(E) had rejected the application of the appellant trust observing that the trust deed of the appellant trust reveals that the appellant trust has charitable as well as non charitable objects such as hosting of artists-inresidence programmes for international artists and raising funds for organising trips, seminars and conferences within and outside the country etc.
The Ld. DIT(E) had further observed that objects of the applicant trust were not merely confined to the territories comprising in India but also extended to and encompassed the whole world and consequently concluded that any activities carried out by the applicant trust in pursuit of aforesaid objects would involve application of funds of the trust outside India which renders it ineligible for exemption. He had therefore held that the objects of the trust contravene the provisions of section 11 of the Act, wherein it has been specifically provided that the application of income of the trust has to be within India, and consequently held that the applicant trust would not be entitled to registration u/s. 12AA of the Act.
On appeal:
HELD THAT
A careful reading of the twin conditions mentioned in section 11(1) reveals that these conditions can be differentiated on the point that the requirement of the first condition is that the property should be held under trust for ‘charitable purposes’ and whether the property is held in India or outside India is not relevant. As per second condition, it is not restricted that the whole of the income should be applied to charitable purposes in India only. The second condition suggests that ‘the income to the extent to which it is applied in India’ for charitable purposes is not to be included in the total income. The interpretation that can be drawn from the above provision is that even if the income is applied for charitable purposes outside India, then, it cannot be said that the purpose or activity of the trust is not charitable. However, the exemption from inclusion in the total income will not be given to such an expenditure incurred by the trust. The exemption as per the second condition has been restricted to the extent up to which such income is applied for charitable activities in India. Hence, if a charitable trust applies some of its income for charitable activities outside India and some of its income for charitable activities in India then it will be entitled to exemption up to the extent such income is applied in India and not otherwise and subject to the other conditions laid down in other provisions of the Act.
A careful reading of the main provision reveals that for a purpose or activity to be charitable in nature, there is no condition that such an activity should be performed ‘in India’ only. Such a condition of activities to be performed in India only is missing in the wording of the section 2(15) defining charitable purposes. Hence, the charity as per the provisions of the Act is not confined or limited to the boundaries of India only. If the activities of a trust fall within the domain of above definition e.g. relief to the poor, education, medical relief or advancement of any other object of general public utility etc. as mentioned above, then it is to be treated as a charitable trust.
The definition of ‘charity’ in no manner can be restricted to the activities done in India only, the ‘charity’ remains the ‘charity’, whether it is done in India or whether elsewhere in any part of the world irrespective of the territorial boundaries. However, so far as the computation of income or the relief under the Income-tax Act is concerned, the Act has restricted the exemption from inclusion in total income to the extent such an income is applied in India. So in the given example, if an institution offers help and support not only in India but also outside India for charitable purposes, such an institution will get benefit of exemption from tax of the income to the extent it is applied in India and not in relation to the income which is applied outside India. But, the fact remains that such an institution will be called a charitable institution only and not a commercial institution.
If the activities of the trust fall in the definition of ‘charitable purposes’ as defined u/s. 2(15) and the property is held under the trust wholly and exclusively for charitable and religious purposes as provided u/s. 11, and the Commissioner is satisfied about the genuineness of such activities, the trust is to be granted registration. For the purpose of grant of registration, the application of income in India is not a pre-condition, if its activities otherwise fall in the definition of ‘charitable activities’. However, so far as the computation of the income is concerned, such an institution will get exemption of income to the extent it is applied in India and not in relation to the income, even if applied for charitable purposes, outside India.
Further, as per the provisions of clause (c) of section 11(1), if the activities upon which the income is applied outside India tend to promote international welfare in which India is interested, such an income is also exempt but subject to approval of the Board.
In the present case, the objects of the trust suggest that the trust has been formed to promote art and culture of India within India and globally which fall in the definition of ‘any other object of general public utility’ and, hence, included in the definition of ‘charitable purposes’. So far as the application of income outside India is concerned, the assessee has vehemently stressed that the projects, conferences and seminars had been carried out by the trust to promote Indian culture and art at international level, further that the activities such as to host artists-inresidence programmes for national as well as international artists for the benefit of society are the objects that promote international welfare in which India is interested. He has further stressed that the trust has received permission from the Home Ministry, Government of India, to carry out such activities outside India. Considering the overall discussion it is to be held that the activities of the trust would fall in the definition of ‘charitable purposes’. However, so far as the application of income outside India, as claimed to have been applied to promote international welfare in which India is interested is concerned, it is to be proved with necessary evidences and also subject to approval of the Board for entitlement of exemption from tax on such income. However, the registration cannot be refused on the ground that the income is applied for charitable purposes outside India.
In result, the appeal of the assessee-trust is allowed.
