ITAT quashes order rejecting Section 80G registration application (Form 10AB)

Earth Trust Vs CIT (Exemptions) (ITAT Chennai)

The case of Earth Trust vs. CIT (Exemptions) revolves around the rejection of an application by Earth Trust seeking approval under section 80G of the Income Tax Act, 1961 (the Act). Here’s a detailed summary of the case based on the ITAT Chennai order dated 1st May, 2024:

Background and Facts:

• Application for Approval: Earth Trust, a newly incorporated trust starting its activities on 1st January 2005, applied for registration under section 80G(5)(iii) of the Act via Form No. 10AB on 2nd June 2023.
• Provisional Approval: Previously, Earth Trust had obtained provisional approval under section 80G(5)(iv) from 8th December 2022 to Assessment Year (AY) 2024-25.
• Rejection of Application: The Commissioner of Income Tax (Exemptions) [CIT(E)] rejected Earth Trust’s application on the grounds that it was filed beyond the mandatory timeline stipulated by law. According to section 80G(5)(iii), such applications must be submitted either six months prior to the expiry of provisional approval or within six months from the commencement of activities, whichever is earlier. Earth Trust filed its application well beyond these timelines.
• Legal Context – CBDT Circulars: The rejection was based on the understanding that no further extensions were granted beyond the stipulated dates for filing Form No. 10AB under CBDT Circular No.6/2023 24.05.2023. This circular extended the due date for filing in specific contexts but not for trusts seeking approval under section 80G.

Judicial Proceedings:

• ITAT Chennai’s Decision: Earth Trust appealed against the rejection before the Income Tax Appellate Tribunal (ITAT) Chennai. The ITAT noted that a coordinate bench had recently ruled in favor of extending the filing deadline for Form No. 10AB in similar cases, citing CBDT Circulars and judicial precedents.
• High Court Decision: The ITAT also referenced a decision by the Madras High Court in Sri Nrisimha Priya Charitable Trust case, where the court declared certain clauses of CBDT Circular No.6/2023 as unconstitutional. This included provisions that restricted the filing window for Form No. 10AB beyond the extended dates.
• Circular No. 07/2024: Additionally, the ITAT considered Circular No. 07/2024 issued by the CBDT on 25th April 2024, which further extended the deadline for all relevant applications to 30th June 2024. This circular effectively nullified the grounds on which Earth Trust’s application was earlier rejected.

ITAT Chennai’s Ruling:

• Setting Aside Rejection: After considering all relevant legal interpretations, circulars, and precedents, the ITAT Chennai set aside the CIT(E)’s order rejecting Earth Trust’s application. It directed the CIT(E) to re-examine the application on its merits without the constraint of timelines that had previously been deemed mandatory.
• Legal Implications: The ITAT’s decision rested on the principle that the CBDT circulars and subsequent judicial interpretations had effectively extended the filing deadline for Form No. 10AB, thereby making Earth Trust’s application timely under the revised legal framework.
• Statistical Allowance: The appeal was allowed for statistical purposes, indicating that while the ITAT ruled in favor of Earth Trust, the decision did not set a broad precedent but applied to the specific circumstances of the case.

Conclusion: The case of Earth Trust vs. CIT (Exemptions) underscores the complexities surrounding the interpretation of timelines for filing applications under section 80G of the Income Tax Act. It highlights the interplay between statutory provisions, CBDT circulars, and judicial pronouncements in determining compliance with legal requirements.