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.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

1. Aggrieved by rejection of an application filed in Form No. 10AB on 02.06.2023 for seeking approval under clause (iii) of first proviso to sub-section (5) of Sec.80G vide impugned order dated 27.12.2023, the assessee is in further appeal before us.

2. From the record, it emerges that the assessee trust filed an application in Form No.10AB on 02.06.2023 seeking registration under clause (iii) of first proviso to sub-section (5) of Sec.80G. It transpired that the assessee trust was incorporated on 30.12.2004 and it commenced its activities on 01.01.2005. The assessee was granted provisional approval in Form No.10AC u/s 80G(5)(iv) for the period commencing from 08.12.2022 to AY 2024-25. The first proviso to Sec. 80G (5), provided timeline for an application to be filed under clause (iii) of first proviso to sub-section (5) of Sec.80G. As per sub-clause (iii) of this proviso, the assessee was required to file this application at least before 6 months prior to expiry of provisional approval or within 6 months from the date of commencement of its activities, whichever is earlier. The said timeline was mandatory in nature. As against this, the assessee filed application on 02.06.2023 which was much after expiry of 6 months from commencement of its activities. Accordingly, it was held by Ld. CIT(E) that the application was time barred and liable to be rejected.

3. The Ld. CIT(E) also noted that under the new regime, CBDT, on multiple occasions, extended time limit for filing the application in Form No.10A and / or 10AB. The latest Circular No.08 of 2022 dated 31.03.2022 extended the time limit to 30.09.2022 beyond which there was no further extension. This was evident from subsequent CBDT Circular No.22/2022 dated 01.11.2022 through which CBDT extended time limit for filing application in Form No.10A under various Sections, up-to 25.11.2022. However no further extension was granted for filing of Form No.10AB. Also, CBDT issued another Circular No.6/2023 on 24.05.2023 extending due date for filing application in Form No.10AB from 30.09.2022 to 30.09.2023 only in respect of trusts / institutions registered u/s 10(23C) and 12AB. The said Circular did not mention any such extension of due date for filing Form No.10AB to get approval u/s 80G. Therefore, the application was treated as time barred and rejected as non-maintainable. Aggrieved, the assessee is in further appeal before us.

4. It is admitted fact that the assessee is a new trust having commenced its activities on 01.01.2005. It could further be noted that the assessee has already received provisional approval u/s 80G(5)(iv) for a period commencing from 08.12.2022 to AY 2024-25. It sought approval u/s 80G(5)(iii) by filing Form No.10AB on 02.06.2023 which has been rejected by Ld. CIT(E) on the ground that the assessee had violated the mandatory time lines as statutorily provided. However, we find that this issue has been decided favorably by co-ordinate bench in bunch of appeals titled as M/s CIT-1982 Charitable Trust & Ors, ITA No.827/Chny/2023 order dated 08.03.2024. In this decision, the bench held that the extended time limit of 30.09.2023 as per CBDT Circular would apply to Form No.10AB as well. The bench also takes note of the latest decision of Hon’ble High Court of Madras in the case of Sri Nrisimha Priya Charitable Trust in WP Nos.27030 & ors. of 2024 order dated 02.04.2024 wherein Hon’ble Court has held that clause 5(ii) of Circular No.6 of 2023 dated 24.05.2023 is illegitimate, arbitrary and ultra vires the constitution of India. It has been held as under: –

7. In the result, these Writ Petitions are allowed on the following terms: –

(i) The clause 5(ii) of Circular No.6/2023 bearing F.No.370133/06/2023-TPL, dated 24.05.2023 of the first respondent is declared as illegitimate, arbitrary, and ultra vires the Constitution of India;

(ii) The respondents are directed to consider the applications submitted by the petitioners as to the recognition/approval in respect of clause (i) of the first proviso to sub-section (5) of section 80G of the Act as within time and consider the same and pass orders thereon on merits, in accordance with law within six months from the date of receipt of a copy of this order;

5. The bench also takes note of recent Circular No.07/24 issued by CBDT on 25.04.2024 extending time limit for all such applications to 30.06.2024. Therefore, there remain no grounds for rejection of application by raising the issue of timeline.

6. Considering the facts and circumstances of the case, we set aside the impugned order and direct Ld. CIT(E) to consider the application on merits without raising the issue of timeline.

7. The appeal stand allowed for statistical purposes in terms of our above order.

Order pronounced on 1^st May, 2024