Clerical Error in Form 10AB Treated as Curable; Old Trust Deemed Compliant Under Section 80G(5)

ITAT Kolkata held that the assessee trust, being an old entity, should have filed its application under clause (i) of the proviso to section 80G(5), and that the mention of clause (iii) in Form 10AB was a mere clerical error. Since Form 10AB had been filed within the prescribed time, the incorrect clause selection was treated as a curable defect, and the application was deemed to have been filed under the correct clause. The order of the CIT(E), which rejected the application as time-barred and misappreciated the facts, was set aside, and the matter was remanded for fresh adjudication. The assessee's appeal was allowed for statistical purposes.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether rejection of the application for approval under section 80G(5)(iii) as non-maintainable on the ground of delay in filing Form No. 10AB, without examining merits, was legally sustainable.

1.2 Whether incorrect mentioning of clause (iii) instead of clause (i) of the first proviso to section 80G(5) in Form No. 10AB by an existing trust constitutes a curable defect, permitting the application to be treated as filed under the correct clause within time.

1.3 Consequentially, whether the matter required remand to the Commissioner (Exemption) for fresh consideration of the application for approval under section 80G in accordance with law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Rejection of time-barred application under section 80G(5)(iii) and effect of incorrect clause in Form No. 10AB

Legal framework (as discussed)

2.1 The judgment proceeds on the basis of section 80G(5), its first and second provisos, and the scheme of approval for existing and new trusts. Reference is made to the extended due date for filing Form No. 10AB as per CBDT Circular No. 07/2024 dated 25.04.2024, and to the classification of applications under clauses (i) and (iii) of the first proviso to section 80G(5).

2.2 The Tribunal relies on an earlier decision where it was held that an existing trust, already enjoying approval under sections 12AA and 80G, ought to apply under clause (i) of the first proviso to section 80G(5), and that provisional approval under clause (iii) is meant for new trusts.

Interpretation and reasoning

2.3 The Commissioner (Exemption) treated the assessee's Form No. 10AB as one under clause (iii) of the first proviso to section 80G(5), found that the trust had commenced activities in financial year 2021-22, and that, considering the extended due date up to 30.06.2024 per CBDT Circular No. 07/2024, the application was not filed within time. On this basis, the application was rejected as non-maintainable without entering into the merits.

2.4 The Tribunal notes that the assessee was an existing entity, already carrying out charitable activities, and that the entire controversy arose from incorrect mention of the relevant clause in Form No. 10AB. As an existing trust, it ought to have applied under clause (i) of the first proviso to section 80G(5), not under clause (iii) applicable to new trusts.

2.5 Relying on the earlier decision in an analogous fact situation, the Tribunal adopts the reasoning that wrong mention of clause (iii) instead of clause (i) in column 6 of Form No. 10AB, when the form itself is filed within the prescribed time, is a curable defect. In such circumstances, the application is deemed to have been made under the correct clause, namely clause (i) of the first proviso to section 80G(5).

2.6 The Tribunal observes that, had the assessee applied under clause (i), there would have been no requirement for provisional approval and the Commissioner would have been obliged, under the second proviso to section 80G(5), to pass an order granting approval for a period of five years. Therefore, treating the application as time-barred under clause (iii) due to the commencement of activities and the extended deadline was based on an incorrect appreciation of the nature of the assessee and the applicable clause.

Conclusions

2.7 The rejection of the application as non-maintainable on the ground of delay, without examining merits, is unsustainable where the assessee is an existing trust and the incorrect mention of clause (iii) instead of clause (i) in Form No. 10AB is only a curable defect.

2.8 Form No. 10AB having been filed within time, the error in mentioning the wrong clause is deemed curable, and the application is to be treated as filed under clause (i) of the first proviso to section 80G(5).

Issue 3: Necessity of remand for fresh consideration

Interpretation and reasoning

2.9 The Tribunal finds that the Commissioner (Exemption) rejected the application solely on the perceived delay, without addressing the merits of the claim for approval under section 80G(5), and without treating the defect in clause selection in Form No. 10AB as curable.

2.10 In view of the adopted reasoning that the application is to be considered under clause (i) of the first proviso to section 80G(5), the Tribunal holds that the Commissioner (Exemption) must reconsider the matter in accordance with law, having due regard to the precedent relied upon.

Conclusions

2.11 The order of the Commissioner (Exemption) rejecting the application as non-maintainable on account of delay is set aside.

2.12 The matter is remanded to the Commissioner (Exemption) with a direction to treat the Form No. 10AB application as filed under clause (i) of the first proviso to section 80G(5), and to decide afresh on the grant of approval under section 80G after examining the merits in accordance with law.

2.13 The appeal is allowed for statistical purposes in view of the remand.

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