2024 (6) TMI 803 - AT - Income Tax

Trust wins appeal against registration denial under Section 80G(5)(iii) despite missing timeline requirements

ITAT Chennai allowed the appeal of a trust challenging denial of registration under Section 80G(5)(iii). The CIT(E) had rejected the application filed in ... Denial of registration u/s. 80G(5)(iii) - timeline for an application to be filed under clause (iii) of first proviso to sub-section (5) of Sec.80G exceeded - 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, and as assessee filed application much after expiry of 6 months from commencement of its activities, application was time barred and liable to be rejected - HELD THAT:- It is admitted fact that the assessee is an old trust and it has already commenced its activities on 05.07.2020. Therefore, under new regime of registration u/s 80(G)(iii) as effective from 01.04.2021, it could not have made an application for registration within 6 months of commencement of its activities. It could further be noted that the assessee has already received provisional approval u/s 80G(5)(iv) for a period commencing from 10.02.2022 to AY 2024-25. It sought approval u/s 80G(5)(iii) by filing Form No.10AB on 25.09.2022. However, in the application, the assessee mentioned wrong sub-clause (ii) instead of sub-clause (iii). When being brought to notice, the assessee filed revised Form No.10AB under correct sub-clause (iii) on 19.01.2023 which has been rejected by Ld. CIT(E) on the ground that the assessee had violated the mandatory time lines as statutorily provided. However, it could very well be seen that the earlier application filed on 25.09.2022 is well within the extended time line. Secondly, even if assuming the date of application as 19.01.2023, we find that this issue has been decided in M/s CIT-1982 Charitable Trust & Ors, 2024 (3) TMI 1201 - ITAT CHENNAI] wherein held timeline prescribed under clause (iii) of first proviso to section 80G(5) of the Act should be treated as directory and not mandatory especially considering the transitional nature of the amendment as brought out by the taxation of other laws (relaxation and amendment of certain provisions) act 2020 for bringing new regime. Hence, in our view, the CIT(Exemptions) should not have rejected the assessee’s application in Form No.10AB only for this technical reason. We are of the view that the intention of CBDT in its circular clearly reflects their mind that once the timeline prescribed for filing Form No.10AB for recognition u/s.12A of the Act has been extended up to 30.09.2023, the same may be treated as extended for forms namely Form No.10AB for renewal of approval/recognition/registration under clause (iii) of first proviso to section 80G of the Act also. Thus we set aside the impugned order and direct Ld. CIT(E) to consider the application on merits without raising the issue of timeline. Assessee appeal stand allowed for statistical purposes. Issues involved: Denial of registration u/s. 80G(5)(iii) by CIT(E), Delay in filing appeal, Timeliness of application for registration u/s 80G(5)(iii), Interpretation of CBDT Circulars regarding time limits for filing Form No.10AB.Summary:Issue 1: Denial of registration u/s. 80G(5)(iii) by CIT(E):The assessee, an old trust, sought registration under clause (iii) of first proviso to sub-section (5) of Sec.80G. However, the application was filed after the mandatory timeline prescribed by law, leading to rejection by CIT(E). The tribunal noted that the earlier application was within the extended time limit, and following a similar case, held that the timeline should be treated as directory, not mandatory. The appeal was allowed, and the matter remanded for re-decision on merits.Issue 2: Delay in filing appeal:The appeal noted a delay of 31 days, which was condoned by the tribunal based on a condonation petition and affidavit submitted by the authorized signatory of the assessee trust. The appeal was admitted for adjudication after condoning the delay.Issue 3: Timeliness of application for registration u/s 80G(5)(iii):The assessee, an old trust, filed an application for registration under the wrong sub-clause initially, and later filed a revised application under the correct sub-clause. The tribunal held that the extended time limit as per CBDT Circulars should apply to Form No.10AB as well, setting aside the rejection by CIT(E) and directing a reconsideration on merits.Issue 4: Interpretation of CBDT Circulars regarding time limits for filing Form No.10AB:The tribunal emphasized that the extended time limit granted by CBDT Circulars for other forms should also be applicable to Form No.10AB for renewal of recognition u/s 80G(5)(iii). The tribunal considered this a genuine hardship case and deemed the timeline as directory, not mandatory. The order of CIT(E) was set aside, and the matter was remanded for re-decision on merits.In conclusion, the tribunal allowed the appeal for statistical purposes, directing CIT(E) to reconsider the application on merits without raising the issue of timeline, following the interpretation of CBDT Circulars and the principle of genuine hardship.