Trust gets 5-year registration under Section 12AB(1)(a) despite application error, appeal allowed for fresh processing

The ITAT Chennai held that the assessee Trust was entitled to registration under section 12AB(1)(a) for five years despite an inadvertent error in selecting sub-clause (vi) instead of sub-clause (i) in the application. The Tribunal directed that the application be treated as if filed under clause (i) and granted registration for five assessment years from AY 2022-23. The impugned order of the PCIT(E) granting only three years was set aside, and the matter was remanded for fresh processing of the application under the correct provision. The appeal was allowed for statistical purposes.

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ISSUES:

Whether a trust previously registered under section 12AA of the Income Tax Act, 1961, is entitled to re-registration under section 12AB for five years when it inadvertently applied under sub-clause (vi) instead of sub-clause (i) of section 12A(1)(ac)?Whether the delay in filing the appeal against the order granting provisional registration for three years instead of five years is liable to be condoned'Whether the tax authorities are empowered to refuse or limit registration based on the specific sub-clause selected in the application form, despite the trust's eligibility under the law?

RULINGS / HOLDINGS:

The delay of 374 days in filing the appeal was condoned as reasonable, considering the hardship faced by the trust and the inadvertent mistake in the application process.The trust, being eligible for re-registration under section 12AB(1)(a) for five years from AY 2022-23 onwards, cannot be denied such registration due to the inadvertent selection of sub-clause (vi) instead of sub-clause (i) in Form 10A; the application under sub-clause (vi) is to be treated as if made under sub-clause (i).The impugned order granting provisional registration for three years is set aside, and the matter is remitted to the Principal Commissioner of Income Tax (Exemptions) to process the application as per section 12A(1)(ac)(i) and grant registration under section 12AB(1)(a) for five years, with opportunity of hearing to the trust.

RATIONALE:

The Court applied the amended provisions of sections 12A(1)(ac) and 12AB of the Income Tax Act, 1961, as introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, effective from 01.04.2021.The statutory framework mandates that trusts registered under the old regime had to apply for re-registration within prescribed timelines to continue enjoying exemption under section 11.The Court recognized the genuine hardship caused by the COVID-19 pandemic and digital procedural complexities, noting CBDT circulars extending the application deadline to 25.11.2022.The Court emphasized that the inadvertent procedural error in selecting the wrong sub-clause on the application form should not prejudice the substantive right of the trust to re-registration for five years, consistent with the legislative intent and the purpose of CBDT's relief measures.This decision reflects an interpretation favoring substance over form, allowing rectification of procedural mistakes to uphold the trust's entitlement under the law.

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