2025 (9) TMI 1694 - AT - Income Tax

Trust registration cancellation under section 12A/12AA effective from date trust formally acquiesced to first show-cause notice

ITAT MUMBAI held that cancellation of the trust's registration under section 12A/12AA takes effect from the date the trust formally acquiesced to the ... Date of cancellation of registration u/s 12A/12AA - addition made by the AO on account of dividend income ignoring the fact that dividend income was claimed exempt u/s 10(34)/10(35) - HELD THAT:- On identical set of facts in Jamsetji Tata Trust [2025 (8) TMI 1714 - ITAT MUMBAI] had considered a similar grievance to hold that the impugned order cancelling registration granted to the assessee trust will have effect from the date on which hearing, on the first show cause notice requiring the assessee to show cause as to why registration under section 12A not be cancelled, and the assessee formally acquiesced to the said notice 10.03.2015, i.e on 20th March 2015 Disallowance of deduction u/s 80GGA - as in the computation the assessee claimed deduction u/s 80GGA of the Act but in the return of income, only deduction u/s 80G of the Act was claimed - AO accordingly rejected the claim of deduction u/s 80GGA - CIT(A) was of the opinion that since there is no column in the return in ITR-V for claiming deduction u/s 80GGA of the Act, therefore such deduction could not be claimed by the assessee due to this technical reason - HELD THAT:- We find that similar difficulty arose and was considered by the Coordinate Bench in the case of RD Tata Trust [2024 (5) TMI 1095 - ITAT MUMBAI] as held deduction under Section 80G of the Act was made by the assessee as it donated to Tata Institute of Social Sciences, Deonar, Bombay which is approved university or educational Institution by prescribed authority as per notification dated 15th December, 1993. Therefore, the deduction u/s 80G of the Act was not restricted to 10% of the gross total income as deduction granted to the specified entities and therefore, 50% of the above amount was allowed. CIT (A) has restored the matter back to the file of the AO to grant deduction to the assessee under Section 80G of the Act to the entities registered under Section 80G(3)(a)(iiif) of the Act after verification. Thus, according to him on perusal of Section 80G(4) of the Act, it does not restrict the donation given to such entity by restricting it to the 10% of the total income. 1. ISSUES PRESENTED AND CONSIDERED * Whether the cancellation of registration under section 12A/12AA takes effect from the date the assessee formally acquiesced to the show-cause notice/hearing, and whether a suo-moto surrender of registration takes effect so as to take the assessee out of registration granted under section 12AA in perpetuity. * Whether a claim for deduction under section 80GGA, not specifically populated in the ITR form but shown in the computation of income, can be allowed when raised for the first time in appellate proceedings, without a revised return. * Whether deduction under section 80G (including donations to institutions specified under section 80G(3)(a)(iiif)) is subject to the aggregate 10% ceiling in section 80G(4), i.e., whether the statutory 10% cap restricts donations to such specified entities. * Whether related grounds (admission of additional grounds, interplay of surrender vs. cancellation) require separate adjudication in view of the above questions. 2. ISSUE-WISE DETAILED ANALYSIS Issue A - Effective date and effect of cancellation/surrender of registration under section 12A/12AA Legal framework: Registration under section 12A (and registration regime subsequently governed by section 12AA) is a statutory benefit whose availability and effective withdrawal/cancellation are governed by the provisions and the applicable show-cause/cancellation process. The question is when cancellation takes effect relative to show-cause hearings and whether an assessee's suo-moto surrender relieves it from a registration that had been granted 'in perpetuity' under section 12AA. Precedent treatment: The Tribunal followed the reasoning of co-ordinate benches in earlier decisions (including Navajbai Ratan Tata Trust) which held that where a show-cause notice was issued and the assessee formally acquiesced at the hearing, the order of cancellation must be treated as effective from the date of conclusion/acquiescence of that hearing; further, where registration was 'obtained' earlier and the assessee elects not to avail the benefit it cannot be compelled to continue with it and cancellation cannot be given effect prior to the completion of the show-cause process by the revenue. Interpretation and reasoning: The Court accepted the co-ordinate bench view that the registration obtained under section 12A is a benefit at the option of the assessee, and an assessee unwilling to avail itself of that benefit cannot be compelled to continue with it. Consequently, the cancellation order where it arose from proceedings initiated by the Commissioner can be effective only from the date on which the hearing on the first show-cause notice was concluded and the assessee formally acquiesced. The Tribunal found facts to be mutatis mutandis identical to those in the precedent and, absent any distinguishing decision, followed the coordinate bench conclusions. Ratio vs. Obiter: Ratio - cancellation of registration under section 12A is effective from the date of formal acquiescence to the show-cause hearing; an assessee's choice not to avail the statutory benefit affects effective date determination. Obiter - peripheral issues about conduct under sections 11-13 and collateral procedural aspects were left open for later adjudication and were not decided. Conclusion: The Tribunal upheld the appellate authority's deletion of additions based on the effective-date principle and held that the impugned cancellation of registration is effective from the date of the hearing/acquiescence (so surrender/technicalities do not automatically alter that effective date unless the competent authority withdraws registration in accordance with law). Issue B - Allowability of deduction under section 80GGA when not specifically shown in ITR columns and first raised in appellate proceedings Legal framework: Deductions under Chapter VIA (including sections 80G and 80GGA) are governed by statutory provisions and by the manner in which claims are reflected in the return of income and supporting computation. Procedural compliance (correctly claiming in return/ITR) affects acceptance by the Assessing Officer, subject to the principles regarding substantive entitlement vs. technical omissions in return form fields. Precedent treatment: The Tribunal relied on a coordinate bench decision (RD Tata Trust) which dealt with the absence of a discrete ITR column for section 80GGA and permitted allowance where the deduction was shown in the computation and verifiable on record; the coordinate bench directed restoration to the AO for verification and allowance consistent with statutory conditions. Interpretation and reasoning: The Tribunal accepted that the absence of a specific column in the ITR for section 80GGA is a technical/formal defect and does not, by itself, preclude substantive entitlement. The appellate authority's direction to the AO to allow the claim subject to verification of conditions was regarded as appropriate. The Tribunal did not treat the first-time raising of the claim in appellate proceedings as fatal in the circumstances, relying on parity with the co-ordinate bench approach where the substantive claim appeared in the computation and could be verified. Ratio vs. Obiter: Ratio - where a deduction under section 80GGA is reflected in the computation and supported by verifiable evidence, a technical absence of a separate ITR column does not by itself disentitle the assessee; the matter may be remitted to the AO for satisfaction of statutory conditions. Obiter - broader questions about amended/revised returns and admission of new grounds were not finally resolved beyond application to the facts. Conclusion: The Tribunal dismissed the revenue's objection and sustained the CIT(A)'s direction to allow the section 80GGA claim (subject to verification), following coordinate bench precedent. Issue C - Interaction of section 80G(4) ceiling with donations to specified entities (section 80G(3)(a)(iiif)) Legal framework: Section 80G(4) prescribes an aggregate ceiling (10% of gross total income) for deduction under section 80G in specified circumstances; certain donations to prescribed or specified institutions attract different treatment under section 80G(3) categories, raising the question whether section 80G(4) limits deductions to those specified entities. Precedent treatment: The coordinate bench decision relied upon treated donations to certain approved educational institutions (e.g., colleges/universities notified) as not being restricted by the 10% cap in section 80G(4) where the statutory scheme permits a broader allowance for specified entities; the Tribunal followed that reasoning. Interpretation and reasoning: The Tribunal examined the computation and facts where donations to entities approved under the relevant notification were shown and concluded that the statutory provision in section 80G(4) does not restrict donations to entities specified under section 80G(3)(a)(iiif) in the manner contended by the Revenue. The appellate direction was to allow deductions to such entities after verification, recognizing the statutory distinctions in treatment. Ratio vs. Obiter: Ratio - the statutory 10% aggregate restriction in section 80G(4) does not operate to curtail entitlement where the statutory scheme and notifications accord different treatment to specified institutions; allowance should follow verification. Obiter - detailed quantification and verification were remitted to the AO and not conclusively determined by the Tribunal. Conclusion: The Tribunal upheld the appellate direction to allow deduction under section 80G to donations made to specified institutions, and dismissed the revenue's contention that section 80G(4)'s 10% aggregate cap mandated a different result. Interrelation and disposition of related grounds Legal framework and reasoning: Grounds relating to admission of additional grounds, other peripheral statutory compliance issues under sections 11-13, and the interplay between surrender and cancellation were considered ancillary. The Tribunal, following co-ordinate bench precedents, refrained from adjudicating peripheral matters where the short core issues (effective date of cancellation; allowability of deductions under sections 80G/80GGA) dispossessed the revenue's principal grievances. Ratio vs. Obiter: The decision not to delve into peripheral issues was treated as judicial economy; such matters remain open for adjudication in appropriate proceedings (assessment or related proceedings) and therefore are obiter in the present context. Final disposition: All revenue grounds were dismissed; the Tribunal followed coordinate bench precedents on (i) effective date of cancellation under section 12A/12AA, (ii) allowance of section 80GGA claims shown in computation despite ITR form limitations, and (iii) non-application of an absolute 10% cap under section 80G(4) to donations to certain specified entities, remitting verification to the AO where appropriate.