2025 (8) TMI 1183 - AT - Income Tax

Final approval request under section 80G(5)(iv)(B) held maintainable; prior 11/10(23C) claims don't bar 80G approval

Akshat Education And Charitable Trust Versus The Commissioner of Income Tax, (Exemption), Ahmedabad

Akshat Education And Charitable Trust Versus The Commissioner of Income Tax, (Exemption), Ahmedabad - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether delay in filing the appeal should be condoned where the impugned order was communicated to a resigned trustee's personal email and the trust discovered the order belatedly while reviewing tax demand status. 2. Whether an application in Form No. 10AB for final approval under section 80G(5) is maintainable where the applicant trust had previously claimed exemption under section 11 and/or section 10(23C) in earlier assessment years. 3. If such prior claims of exemption disqualify an application, whether the proviso (clause (iv)(B) of the first proviso to section 80G(5)) must be interpreted strictly to bar maintenance or whether legislative amendments and administrative circulars require a purposive/retrospective reading permitting examination on merits. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of Delay Legal framework: Principles governing condonation of delay require sufficient cause to be shown for missing statutory timelines; Supreme Court authority endorses a liberal approach to condoning delay to advance substantial justice where no negligence or lack of bona fides is attributable to the applicant. Precedent treatment: The Court applied established precedent favoring liberal exercise of discretion in condoning delays caused by bona fide circumstances beyond the applicant's control. Interpretation and reasoning: The Court examined the factual explanation supported by affidavit - email notice sent to an address of a resigned trustee, inadvertent non-checking of a general-purpose email, and discovery of the order only when reviewing tax demand status - and found these circumstances to constitute sufficient cause. The Revenue's representative raised no serious objection. Ratio vs. Obiter: Ratio - where delay is caused by bona fide circumstances beyond control and supported by affidavit, condonation is appropriate to further substantial justice; Obiter - none additional. Conclusion: Delay of filing the appeal is condoned and appeal admitted for adjudication on merits. Issue 2 - Maintainability of Form 10AB Application Where Prior Exemptions Were Claimed Legal framework: First proviso to section 80G(5) (as substituted by Finance Act, 2023, effective 01.10.2023) contains clause (iv) with sub-clauses addressing cases where activities had commenced and the route for seeking final approval; section 11 and section 10(23C) relate to claims of exemption/exclusion of income in earlier years. Precedent treatment: The Court relied on a Coordinate Bench decision (West Bengal Welfare Society) which held that rejecting an application as non-maintainable in similar circumstances was misconceived and remitted for fresh consideration; that view was affirmed by the relevant High Court. The Court also considered administrative guidance in CBDT Circular No. 1/2024. Interpretation and reasoning: The Court rejected the Ld. CIT(E)'s strict reading that prior claims of exemption under section 11/10(23C) automatically render an application under clause (iv)(B) non-maintainable. It examined (a) the amendments effected by Finance Act, 2023; (b) CBDT Circular No. 1/2024 para 15.5.3(f) which clarifies that institutions already in operation seeking regular approval under sub-clause (B) should be examined on merits and that prior claims do not per se bar approval; and (c) the Memorandum to the Finance Bill, 2024 which removes the restrictive condition with effect from 01.10.2024. The Court treated the 2024 amendment as remedial/clarificatory and having retrospective effect to cure an anomaly and remove hardship. Applying purposive interpretation, the Court held that legislative intent is to enable bona fide charitable institutions to obtain approval and that hyper-technical exclusion based solely on earlier exemption claims defeats that purpose. Ratio vs. Obiter: Ratio - prior claims of exemption under section 11/10(23C) do not, by themselves, render an application under clause (iv)(B) of the first proviso to section 80G(5) non-maintainable; such applications must be examined on merits. Obiter - commentary that the 2024 amendment is remedial/clarificatory and should be read retrospectively to remove anomaly and encourage donations. Conclusion: The Ld. CIT(E)'s rejection of the Form 10AB application as non-maintainable on the sole ground of earlier exemption claims is unsustainable; the application is maintainable and must be remitted for fresh adjudication on merits after affording the applicant opportunity of hearing. Issue 3 - Scope of Administrative Circular and Legislative Amendments; Retrospective/Declaratory Effect Legal framework: Interaction between statutory text, subsequent amendment, and administrative circulars; principles for interpreting remedial/clarificatory amendments as having retrospective effect to cure defects and remove hardship. Precedent treatment: The Court relied on established interpretive principles that remedial/clarificatory amendments intended to remove anomalies can be read retrospectively; the Court also relied on administrative clarification (CBDT Circular) explaining Legislative intent. Interpretation and reasoning: The Court read the Finance Act, 2023 substitution together with CBDT Circular No. 1/2024 and the Finance Bill, 2024 Memorandum. It found that (a) the Circular explicitly directs that institutions which have commenced activities should be examined on merits under sub-clause (B) and that prior exemption claims alone do not disqualify them; (b) the subsequent legislative clarification in 2024 removed the restrictive phrase and is remedial/clarificatory; and (c) purposive interpretation aligned with promoting donations and not defeating substantive rights supports retrospective application of the clarification. Consequently, the Court concluded that a hyper-technical reading adopted by the Ld. CIT(E) was incorrect. Ratio vs. Obiter: Ratio - administrative circulars elucidating legislative intent and remedial clarificatory amendments can be given retrospective effect to cure anomalies and should inform proper, purposive interpretation at the adjudicatory stage; Obiter - policy observation that legislative intent is to encourage donations and avoid hyper-technical denials. Conclusion: CBDT circular and remedial legislative amendment support treating the application as maintainable and require merits-based consideration; the proviso must be interpreted purposively rather than restrictively. Final Disposition Having condoned delay and found the Ld. CIT(E)'s non-maintainability ruling untenable in law, the Court quashed the impugned order, directed that the Form 10AB application be treated as maintainable, and restored the matter to the adjudicating authority for fresh adjudication on merits after affording due opportunity of hearing. The appeal is allowed for statistical purposes.