Section 12A: Trusts Registered Before April 1, 2021, Exempt from Seeking Final Registration – ITAT Kolkata

CIT (Exemptions) Vs Indira Trust (ITAT Kolkata)

Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that provisional registration granted under Section 12A of the Income Tax Act, 1961, should be considered as final for trusts registered before April 1, 2021. The case, CIT (Exemptions) vs Indira Trust, arose when the assessee, an already registered charitable trust, applied for final registration, believing its existing registration to be provisional. The CIT (Exemptions) rejected the application, leading to an appeal before ITAT. The Tribunal initially ruled in favor of the assessee, directing the CIT (Exemptions) to reconsider the application. However, the Revenue later moved a Miscellaneous Application, arguing that the Tribunal’s order contained an apparent mistake, as the trust’s registration was already final.

The ITAT acknowledged that both the assessee and the CIT (Exemptions) had misinterpreted the provisions of Section 12A. The confusion arose from Form 10AC, issued to the trust on April 6, 2022, which mistakenly labeled the registration as provisional. The Tribunal referred to CBDT Circular No. 11 of 2022, which clarified that registrations granted to existing trusts should be deemed final, even if mistakenly categorized as provisional due to technical errors. Consequently, ITAT ruled that there was no requirement for the trust to reapply for final registration and recalled its earlier order, allowing the Revenue’s application.

Judicial precedents indicate that procedural errors should not disadvantage taxpayers. ITAT has previously ruled in similar cases that there is no statutory bar preventing an assessee from applying for final registration at any time. However, in light of the CBDT circular, such applications become redundant when the registration is already valid. The ruling reinforces that the procedural changes introduced after April 1, 2021, apply differently to new trusts and pre-existing ones, ensuring clarity in compliance requirements.

With this decision, ITAT Kolkata has provided much-needed clarity on the procedural aspects of Section 12A registrations. The ruling confirms that trusts already registered before April 1, 2021, do not need to seek final registration separately, preventing unnecessary litigation and procedural hurdles.

FULL TEXT OF THE ORDER OF ITAT KOLKATA

MA No. 35/Kol/2024:

The present Miscellaneous Application has been moved by the Revenue pleading that a mistake apparent on record has occurred in the order of the Tribunal dated 09.01.2024 passed in ITA No. 1018/KOL/2023. The present appeal has also been moved by the assessee against the order of Ld. Commissioner of Income-tax (Exemption) dated 28.07.2023.

1.1. It has been pleaded in the present Miscellaneous Application that the assessee Trust was an existing charitable Trust u/s 12A of the Income Tax Act, 1961 (in short the ‘Act’) before 01.04.2021 and the assessee had applied for fresh registration u/s 12A(1)(ac)(i) of the Act and fresh registration was granted vide Form no. 10AC issued on 06.04.2022 which was valid up to AY 2026-27. However, the assessee again applied for registration u/s 12A(1)(ac)(iii) of the Act, which was rejected by the CIT (Exemptions), Kolkata observing that the registration of the assessee was valid till AY 2026-27 and there was no need to apply again. However, the assessee filed appeal before this Tribunal and the Tribunal set aside the order of ld. CIT (Exemption) and held that there was no bar in moving the application for final registration and restored the matter to ld. CIT (Exemption) to consider the application of the assessee for final registration. It has been pleaded that the registration granted to the assessee vide order dated 06.04.2022 was already a final registration and not a provisional registration. That the provisional registration has to be granted to new Trusts and not to those Trusts which were already registered before 01.04.2021. It has, therefore, been pleaded that a mistake apparent on record has occurred in the order of the Tribunal.

1.2. Ld. Counsel for the respondent has also agreed that the assessee had applied for final registration u/s 12A(1)(ac)(iii) of the Act under a mistaken belief that the earlier was a provisional registration and that the assessee was supposed to apply for final registration u/s 12A(1)(ac)(iii) of the Act.

2. We have considered the rival submission and gone through the record.

We find from the record that in this case, the assessee was already registered u/s 12A of the Act as a charitable institution vide order dated 03.07.2020 of ld. CIT (Exemption). An amendment was brought into the relevant provisions, whereby, the institution which stood already registered u/s 12A of the Act on or before 01.04.2021, had to apply for fresh registration under the provisions of Section 12A(1)(ac)(i) of the Act. The assessee accordingly applied for registration u/s 12A(1)(ac)(i) of the Act the said application of the assessee was allowed on 06.04.2022. However, both the assessee as well as the ld. CIT (Exemption) have misconstrued the provisions and were of the view that the said registration was a provisional registration and that the assessee was supposed to apply for final registration. A perusal of the certificate granted in Form no. 10AC by the ld. CIT (Exemption) dated 06.04.2022 reveals that ld. CIT (Exemption) mentioned in the title “Order for provisional registration” and even in column 9 of the said registration the ld. CIT (Exemption) has expressly mentioned that it was an order of provisional registration. The assessee/appellant under the circumstances applied for final registration u/s 12A(1)(ac)(iii) of the Act. Thereafter, ld. CIT (Exemption) also carried out certain enquiries and investigations and called upon the assessee to furnish certain replies and evidences, which were duly furnished by the assessee. Thereafter, ld. CIT (Exemption) vide a small and cryptic order rejected the application of the assessee stating therein that the earlier order in Form no. 10AC was still valid till AY 2026-27 and the application of the assessee was premature. Being aggrieved by the said order of the ld. CIT (Exemption), the assessee preferred appeal before us.

2.1. It is to be noted at this stage that in many other cases, wherein, the Trusts or institutions have been provisionally registered under Item ‘A’, sub-Clause (vi) of Section 12A(1)(ac) of the Act read with Section 12AB(1)(c) of the Act and such institutions had applied for final registration u/s 12A(1)(ac)(iii) of the Act read with Section 12AB(1)(b) of the Act, in such cases also, the ld. CIT (Exemption) has rejected the application for final registration alleging that the same was premature and this Tribunal in many cases has held that there was no bar to the applicant/assessee society to make an application for final registration even at the earliest possible event and it was not required to wait in the expiry of the provisional registration.

2.2. Since in this case also the ld. CIT (Exemption), in his order dated 06.04.2022, has mentioned that the registration granted to the assessee was provisional and further in the impugned order dated 09.01.2024 has rejected the application of the assessee for final/regular registration stating the same as to be premature, hence, under the circumstances, the assessee had come in appeal before us against the said rejection. This Tribunal under the circumstances as narrated above, directed the ld. CIT (Exemption) to consider the application of the assessee for final registration.

2.3. However, Ld. CIT, DR pointed out that this issue has been resolved by the Board by issuance of a Circular bearing No. 11 of 2022 on 3^rd June, 2022. The Board has clarified as under:-

“5. In view of the above, it is hereby clarified that,-

(i) the conditions contained in Form No. 10AC, issued between 01.04.2021 till the date of issuance of this Circular, shall be read as if the said conditions had been substituted with the conditions as provided in the Table 1 with effect from 1st April, 2022;

Table 1

(ii) where due to technical glitches, Form No. 10AC has been issued during FY 2021- 2022 with the heading “Order for provisional registration” or “ Order for provisional approval” instead of “Order for registration” or “ Order for approval”, then all such Form No. 10AC shall be considered as an “Order for registration or approval” and, in such cases where Form No. 10AC has been issued, –

(a) under section code 01 (applications seeking re-registration),-

(i) in the heading and in rows 6, 7, 9 and 10 the words ,“ provisional registration” shall be read as “registration”;

(ii) in row 8 the word “ provisionally registered” shall be read as “registered”;

(b) under section codes 03, 04, 05, 06 or 11 (applications seeking re-approval),-

(i) in the heading and in rows 6, 7, 9 and 10 the words ,“ provisional approval” shall be read as “approval”;

(ii)in row 8 the word “provisionally approved” shall be read as “approved”;

(iii) row no 5 of Form No. 10AC (issued for all section codes) shall be read as “Unique Registration Number” instead of “Provisional Approval/ Approval Number” or “Provisional Registration/ Registration Number”, as the case maybe”.

He pointed out that under sub-clause (ii) of clause 5 of this Circular, it has been contemplated that where due to technical glitches, Form No. 10AC has been issued during FY 2021- 2022 with the heading “Order for provisional registration” or “ Order for provisional approval” instead of “Order for registration” or “ Order for approval”, then all such Form No. 10AC shall be considered as an “Order for registration or approval” and, in such cases where Form No. 10AC has been issued. Therefore, all registrations issued by CPC, Bengaluru under sub-clause (i) of section 12AC(1) would be construed as if granted for regular purposes.

2.4. Now, the Department has come with Miscellaneous Application stating therein that the observation of this Tribunal is based on incorrect assumption of facts and that the Tribunal has assumed that the assessee has been granted provisional registration whereas, the registration granted to the assessee earlier vide order dated 03.07.2020 was a regular/final registration. As noted above, the aforesaid observation of the Tribunal was on account of the aforesaid confusion created on account of incorrect mention in the relevant columns of Form 10AC stating the said order to be a provisional order. However, the said confusion stood clarified by the CBDT under circular No. 11 of l2022 (supra), vide which it has been clarified that the provisional registration will be construed as regular registration u/s 12A(1)(ac)(i) read with Section 12AB(1)(a) of the Act. Therefore, there was no requirement of setting aside this matter to the file of the ld. CIT (Exemption). Therefore, under these circumstances, an inadvertent error apparent on record has occurred in the order of the Tribunal because of not bringing the aforesaid developments before this Tribunal. Therefore, the impugned order of the Tribunal dated 09.01.2024 passed in ITA No. 1018/KOL/2023 is hereby recalled.

ITA No. 1018/Kol/2023

3. In view of the above facts and circumstances of the case as narrated above while adjudicating M.A. No.: 35/KOL/2024, the present appeal of the assessee is not maintainable as the assessee has already been granted final/regular registration u/s 12A(1)(ac)(i) read with Section 12AB(1)(a) of the Act which is valid up to AY 2026-27. Therefore, there is no requirement of applying for final registration. The present appeal of the assessee, thus, is infructuous and not maintainable and the same is accordingly dismissed. However, it is made clear that the dismissal of the above appeal of the assessee will not in any manner affect the registration granted to the assessee vide order dated 06.04.2022 which is valid up to AY 2026-27.

4. In the result, the Miscellaneous Application filed by the Department is hereby allowed and the appeal of the assessee is dismissed.

Order pronounced in the open Court on 10th January, 2025.