Trust entitled to section 80G(5)(iii) deduction reconsideration after CBDT extended Form 10AB deadline to September 2023

ITAT Chennai held that a trust's application for deduction under section 80G(5)(iii) filed in Form 10AB, which was rejected by CIT(E) for violating mandatory timelines, should be reconsidered. The bench applied the extended deadline of 30.09.2023 per CBDT Circular to Form 10AB applications. Relying on Madras HC's decision in Sri Nrisimha Priya Charitable Trust case, the tribunal noted that clause 5(ii) of CBDT Circular No.6/2023 was declared ultra vires the Constitution. The trust, which commenced activities in 2020 and already held provisional approval under section 80G(5)(iv) until AY 2024-25, was entitled to have its application considered on merits within the extended timeframe.

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Issues:
1. Rejection of application for seeking approval under clause (iii) of first proviso to sub-section (5) of Sec. 80G.
2. Interpretation of the timeline for filing Form No.10AB for approval under Sec. 80G.
3. Impact of CBDT circulars on the timeline extension for filing applications.
4. Judicial interpretation of the mandatory nature of the timeline for filing Form No.10AB.
5. Legitimacy of Circular No.6 of 2023 and its impact on applications for approval under Sec. 80G.

Analysis:
1. The appellant, a trust, filed an application seeking approval under clause (iii) of the first proviso to sub-section (5) of Sec. 80G in Form No.10AB. The application was rejected by the Ld. CIT(E) due to non-compliance with the mandatory timeline for filing the application as prescribed by law.

2. The timeline for filing Form No.10AB was a crucial issue in this case. The first proviso to Sec. 80G(5) mandated that the application be filed at least six months before the expiry of provisional approval or within six months from the commencement of activities, whichever is earlier. The appellant's application was filed after the prescribed timeline, leading to its rejection.

3. The impact of CBDT circulars on timeline extensions was also considered. While various circulars extended the time limit for filing certain forms, no specific extension was granted for filing Form No.10AB for approval under Sec. 80G. The absence of an extension for Form No.10AB led to the rejection of the appellant's application.

4. A significant aspect of the judgment was the judicial interpretation of the mandatory nature of the timeline for filing Form No.10AB. A co-ordinate bench decision in a similar case recognized the genuine hardship faced by charitable institutions and held that the timeline should be treated as directory rather than mandatory. This interpretation favored the appellant and led to the setting aside of the rejection based on the timeline issue.

5. Furthermore, the legitimacy of Circular No.6 of 2023 was challenged in light of a High Court decision declaring a specific clause of the circular as illegitimate and ultra vires the Constitution. Following this decision, the impugned order rejecting the appellant's application was set aside, directing the Ld. CIT(E) to consider the application on its merits without raising the timeline issue.

In conclusion, the judgment highlighted the importance of adhering to statutory timelines, the impact of CBDT circulars on such timelines, and the judicial interpretation regarding the mandatory nature of filing deadlines. The decision ultimately favored the appellant, emphasizing the need to consider genuine hardships faced by charitable institutions in the application process for approval under Sec. 80G.

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