2025 (1) TMI 1280 - AT - Income Tax

Trust wins appeal after selecting wrong sub-clause in section 12AB registration renewal application

Arreds Trust Versus CIT (Exemption), Chennai.

The ITAT Chennai allowed the appeal filed by a trust against rejection of registration under section 12AB. The trust had inadvertently selected incorrect ... Rejection of registration u/s. 12AB - rejecting application filed online by the assessee in Form 10AB u/s. 12A(1)(ac)(iii) - selecting the incorrect sub-clause during the online application process - HELD THAT:- In this case, the assessee by virtue of order of Ld.CIT(E) albeit dated 08.11.2023 was enjoying registration u/s. 12AA of the Act after enquiry from AY 2020-21 onwards until it was rejected by Ld.CIT(E) vide the impugned order dated 17.05.2024, which action of Ld CIT(E) cannot be countenanced, being not in consonance with the new scheme of registration after TOLA-2020. Assessee-Trust being an old trust (before TOLA came into force) was legally entitled for registration u/s. 12AB(1)(a) for five (5) years; and because of inadvertent mistake of filling up for renewal under sub-clause (iii) instead of sub clause (i), the assessee’s right for re-registration u/s. 12AB of the Act for AY 2022-23 onwards cannot be denied, which action would offend Article 14 of the Constitution of India, which guarantees inter-alia that equals to be treated equally and therefore, a different treatment cannot be given to assessee-Trust, which will tantamount to discrimination. Inadvertent mistake of the assessee clicking online for fresh registration under clause (iii) of sec.12(1)(ac) needs to be intervened and rectified; therefore, the assessee’s application for registration under sub-clause (iii) needs to be treated as if assessee has applied under clause (i) of sec.12A(1)(ac) and granted registration u/s. 12AB(a) for five assessment years from AY 2022-23 onwards. Restore the assessee’s application for registration back to the file of the Ld.CIT(E) and direct him to process the application filed by assessee on 08-11-2023 in Form 10 as if filed u/s. 12A(1)(ac)(i). Appeal filed by the assessee is allowed for statistical purposes. ISSUES PRESENTED and CONSIDEREDThe core legal issue in this case revolves around the rejection of the assessee-Trust's application for registration under Section 12AB of the Income Tax Act, 1961. The Tribunal considered whether the rejection by the Commissioner of Income Tax (Exemption) [CIT(E)] was justified, given the circumstances surrounding the application, including the inadvertent error in selecting the incorrect sub-clause during the online application process.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework primarily involves the provisions of Sections 12A and 12AB of the Income Tax Act, which govern the registration of charitable trusts and institutions for tax exemptions. The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA, 2020) introduced amendments requiring trusts to reapply for registration under the new regime. The Central Board of Direct Taxes (CBDT) issued circulars extending the deadline for such applications due to the COVID-19 pandemic.Court's Interpretation and ReasoningThe Tribunal noted that the assessee-Trust had been enjoying registration under Section 12AA since 2005 and was granted registration again from AY 2020-21. However, due to the amendments introduced by TOLA, 2020, the Trust was required to apply for re-registration. The Tribunal acknowledged the inadvertent error made by the Trust in selecting the wrong sub-clause during the online application process and considered the genuine hardships faced by trusts during the transition to the new regime.Key Evidence and FindingsThe Tribunal found that the Trust had been granted registration under Section 12AA by the CIT(E) with retrospective effect from AY 2020-21. The application for registration under Section 12AB was filed within the extended deadline set by the CBDT, but the Trust mistakenly applied under sub-clause (iii) instead of sub-clause (i) of Section 12A(1)(ac).Application of Law to FactsThe Tribunal applied the principles of fairness and non-discrimination, emphasizing that the inadvertent mistake should not deprive the Trust of its rightful registration under the new regime. The Tribunal highlighted that the Trust was entitled to registration under Section 12AB(1)(a) for five years, and the error in the application process should not lead to a denial of this right.Treatment of Competing ArgumentsThe Tribunal considered the arguments of the Department Representative (DR), who opposed the Trust's plea, citing the incorrect application process. However, the Tribunal prioritized the principles of equity and the intent behind the CBDT's circulars to mitigate hardships during the transition to the new regime.ConclusionsThe Tribunal concluded that the Trust's application should be treated as if it had been correctly filed under sub-clause (i) of Section 12A(1)(ac). It set aside the CIT(E)'s order rejecting the application and directed the CIT(E) to process the application accordingly, granting registration under Section 12AB for five years from AY 2022-23.SIGNIFICANT HOLDINGSThe Tribunal emphasized the principle that inadvertent mistakes in the application process, particularly during the transition to a new legal regime, should not result in the denial of rights that the applicant is otherwise entitled to. The Tribunal's decision underscores the importance of fair treatment and the avoidance of discrimination, aligning with Article 14 of the Constitution of India.The Tribunal directed the CIT(E) to process the application as if filed correctly under the appropriate sub-clause, ensuring the Trust's registration under Section 12AB for the specified period. This decision reflects the Tribunal's commitment to upholding the intent of legislative amendments and the remedial measures provided by the CBDT to address transitional challenges.