Section 80G(5)(iii) timeline for charitable trust approval treated as directory, not mandatory

ITAT Chennai allowed the appeal of a charitable trust whose Form 10AB application for section 80G(5)(iii) approval was rejected by CIT(Exemptions) solely on technical grounds regarding timeline non-compliance. The tribunal held that the timeline prescribed under clause (iii) of first proviso to section 80G(5) should be treated as directory, not mandatory, considering the transitional nature of amendments. Following precedent in Shri Ramajayam Charitable Trust case, the tribunal remanded the matter back to CIT(Exemptions) to decide on merits rather than technical timeline issues, setting aside the rejection order dated 30.08.2023.

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Issues involved:
The rejection of Form No. 10AB under clause (iii) of first proviso to section 80G(5) of the Income Tax Act, 1961 and the appeal against the provisional approval granted u/s. 80G(5)(iv) of the Act.

Issue 1: Rejection of Form No. 10AB under clause (iii) of first proviso to section 80G(5) of the Act

The appeal arose from the rejection of the assessee's application in Form No. 10AB under clause (iii) of first proviso to section 80G(5) of the Act by the Commissioner of Income Tax (Exemption). The assessee, a charitable trust, had filed necessary applications for registration and approval under relevant sections of the Act. The Commissioner rejected the application as not maintainable due to being filed beyond the stipulated timeline. The Tribunal considered the extension of the filing deadline by the CBDT and held that the rejection based on a technical reason was not justified. The Tribunal found that the intention of the CBDT, as reflected in its circular, was to provide relief in genuine hardship cases. Therefore, the Tribunal set aside the Commissioner's order and remanded the matter for reconsideration on merits.

Issue 2: Appeal against provisional approval granted u/s. 80G(5)(iv) of the Act

Since the first issue regarding the rejection of Form No. 10AB was adjudicated in favor of the assessee, the appeal against the provisional approval granted u/s. 80G(5)(iv) of the Act became academic and was dismissed. The Tribunal directed the Commissioner to re-consider the assessee's application for approval u/s. 80G(5)(iii) of the Act on merits. Consequently, the appeal in this regard was allowed for statistical purposes.

Conclusion:
The Tribunal allowed the appeal against the rejection of Form No. 10AB under clause (iii) of first proviso to section 80G(5) of the Act, setting aside the Commissioner's order and remanding the matter for re-consideration on merits. The appeal against the provisional approval granted u/s. 80G(5)(iv) of the Act was dismissed as it became academic post the decision on the first issue.

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