CIT(E) cannot reject Form 10AB application under section 80G(5)(iii) for timeline violations alone

ITAT Chennai-AT allowed assessee's appeal regarding rejection of Form 10AB application for approval under section 80G(5)(iii). The CIT(E) had rejected the application citing violation of mandatory timelines. The tribunal held that the timeline prescribed under clause (iii) of first proviso to section 80G(5) should be treated as directory rather than mandatory, considering the transitional nature of amendments brought by the Taxation Laws (Relaxation and Amendment of Certain Provisions) Act 2020. Following precedent from coordinate bench decision, the tribunal ruled that rejection based solely on technical timeline violations was improper.

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Issues:
1. Rejection of application for seeking approval under clause (iii) of first proviso to subsection (5) of Sec.80G of the Income Tax Act, 1961.
2. Interpretation of the timeline for filing Form No.10AB for renewal of recognition under clause (iii) of first proviso to section 80G(5) of the Act.
3. Legitimacy and impact of CBDT Circulars extending time limits for filing applications.

Analysis:
1. The appellant trust sought approval under clause (iii) of first proviso to subsection (5) of Sec.80G but faced rejection due to filing the application after the statutory timeline. The application was considered time-barred and rejected by the Ld. CIT(E).
2. The co-ordinate bench decision in M/s CIT-1982 Charitable Trust & Ors clarified that the timeline for filing Form No.10AB was extended up to 30.09.2023 by CBDT Circulars, including Circular No.6/2023. The bench held that the timeline should be treated as directory, not mandatory, considering the transitional nature of the amendment.
3. The Hon'ble High Court of Madras declared a clause in Circular No.6 of 2023 as illegitimate and ultra vires the Constitution. Subsequently, CBDT issued Circular No.7/2024 extending the due date for filing Form No.10AB until 30.06.2024, allowing fresh applications for trusts facing rejection due to late filing.
4. The appellant filed a fresh application in Form 10AB in compliance with Circular No.7/2024. The appeal was deemed infructuous, and the Tribunal directed the CIT(E) to treat the fresh application as originally filed and expedite the process.

This detailed analysis highlights the legal nuances surrounding the rejection of the application, the interpretation of statutory timelines, the impact of CBDT Circulars, and the subsequent compliance with the extended due dates.

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