2024 (4) TMI 499 - HC - Income Tax

Regular Approval u/s 80G(5) - application for approval denied as even within the extended time the petitioner did not file Form No.10AB and applied belatedly - hardship faced by the trusts in digital filing of the respective forms - genuine hardship faced by new v/s old/existing trust - petitioner was granted provisional approval on 06.10.2021 and petitioner commenced its activities from 09.09.2021 and therefore had to apply for regular approval/registration in Form No.10AB within six months from the date of commencement i.e. within six months from 09.09.2021 by it applied only on 22.03.2023 Whether or not the classification made by the respondents in the matter of grant of extension of time between the existing and new trusts and to apply for approval in respect of clause (i) of the first proviso to subsection (5) of section 80G of the Act is reasonable? HELD THAT - Petitioner trusts do not have any vested right to claim an extension of time. When the statute prescribes a time limit the petitioner trusts are expected to apply within the said date to avail the benefits. The first respondent Board issues circulars enlarging the time limit even beyond the prescribed limit to mitigate the rigours of the statute and the hardship faced by the assessees. The same is in exercise of its powers under Section 119(2)(b) of the Act . No discrimination or differentiation was made between the existing trusts and the new trusts at the first instance when Circular No.8 of 2022 was issued. When the impugned Circular No.6 of 2023 was issued the reason stated by the first respondent was to mitigate genuine hardship Thus on a combined reading of the earlier Circular No.8 of 2022 and the impugned Circular No.6 of 2023 it can be clear that the only reason which is shown for the exercise of the powers is that these trusts faced hardship since they could not apply on time. No reason whatsoever is mentioned to omit the clause (i) of the first proviso to sub-section (5) of Section 80G of the Act in respect of the new trusts applying under Form No.10AB alone. Except for reiterating that the petitioner trusts do not have any vested right there is no other ground that is put forth by the first respondent. Even though the new trusts as well as the existing trusts have no right to demand for extension of time as a matter of right when the respondents have thought it fit to extend the time considering the hardship there is no material which is placed before this Court nor any reasoning is contained in the impugned order that the new trusts did not face the hardship in respect of filing of the application under Section 80G5 of the Act alone. Therefore leaving out the clause in respect of Section 80G5 of the Act alone that too only in respect of the new trusts does not in any manner relate to the object sought to be achieved by the impugned circular nor does it provide any basis for the discrimination/classification. In the instant case the differential treatment is not based on any substantial distinction that is real and pertinent to the object of the circular. The discrimination is artificial. The respondents are evasive and could not provide any rationale for such a classification. Accordingly we hold that the impugned clause (ii) of the Circular dated 24.05.2023 is arbitrary and violative of Article 14 of the Constitution of India and accordingly would be ultra vires the Constitution. Because we find that clause (ii) of the impugned circular is unconstitutional we direct the first respondent to consider the applications of the petitioners as to the recognition/approval in respect of clause (i) of the first proviso to sub-section (5) of section 80G of the Act as within time and consider the same and pass orders thereon on merits as per law. Writ Petitions are allowed on the following terms - (i) The clause 5(ii) of Circular No.6 of 2023 bearing F.No.370133/06/2023-TPL dated 24.05.2023 of the first respondent is declared as illegitimate arbitrary and ultra vires the Constitution of India; (ii) The respondents are directed to consider the applications submitted by the petitioners as to the recognition/approval in respect of clause (i) of the first proviso to sub-section (5) of section 80G of the Act as within time and consider the same and pass orders thereon on merits in accordance with law within six months from the date of receipt of a copy of this order.

Summary

Issues Involved:
1. Legitimacy of the classification made by the respondents in granting an extension of time for approval under Section 80G(5) between existing and new trusts.
2. Whether the impugned clause (ii) of Circular No.6 of 2023 is arbitrary and ultra vires the Constitution of India.

Summary:

A. The Writ Petition:

These writ petitioners are trustees representing their respective charitable trusts. Since the reliefs claimed by them are identical and common, these Writ Petitions were heard together and disposed of by this common order.

B. The Factual Matrix:

The petitioner trust was established on 09.09.2021 and applied for provisional registration/approval u/s 80G of the Income-Tax Act, 1961. The petitioner was granted provisional approval on 06.10.2021 and had to apply for regular approval/registration in Form No.10AB within six months from 09.09.2021. Due to difficulties in electronically filing Form No.10AB, the Central Board of Direct Taxes extended the filing deadline to 30.09.2022 via Circular No.8 of 2022. The petitioner failed to file within this extended period and applied only on 22.03.2023. Responding to representations from various trusts, the Board issued Circular No.6 of 2023, extending the deadline further to 30.09.2023, but this extension did not apply to new trusts seeking approval u/s 80G(5). The petitioners challenged this exclusion as arbitrary and ultra vires the Constitution of India.

C. The Counter:

The respondents argued that the petitioners should have applied within the original or extended deadlines and that the further extension was granted only for existing trusts, not new trusts. They justified the distinction by stating that existing trusts had different filing requirements and that the amendments to Section 115TD of the Finance Act, 2023 did not impact new trusts. The respondents contended that the classification was reasonable and had a rational nexus with the object sought to be achieved.

D. The Submissions:

The petitioners argued that the exclusion of new trusts from the extension under Section 80G(5) was irrational and violated Article 14 of the Constitution. They cited the Supreme Court's judgment in Association of Old Settlers of Sikkim to support their claim of unreasonable classification. The respondents maintained that the extension was a benevolent act and did not create any vested rights for the petitioners. They cited various judgments to argue that the classification was reasonable and that the petitioners had no right to demand further extensions.

E. The Point for Consideration:

Whether or not the classification made by the respondents in the matter of grant of extension of time between the existing and new trusts and to apply for approval in respect of clause (i) of the first proviso to subsection (5) of section 80G of the Act is reasonable?

F. The Discussion and Findings:

The court agreed with the respondents that the petitioners had no vested right to claim an extension of time. However, it found that the respondents failed to provide any reason for excluding new trusts from the extension under Section 80G(5). The court noted that the impugned circular did not contain any rationale for the classification, making it arbitrary and violative of Article 14 of the Constitution. The court held that the differential treatment was not based on any substantial distinction that was real and pertinent to the object of the circular.

G. The Result:

The Writ Petitions were allowed on the following terms:

(i) The clause 5(ii) of Circular No.6 of 2023 bearing F.No.370133/06/2023-TPL, dated 24.05.2023 of the first respondent is declared as illegitimate, arbitrary, and ultra vires the Constitution of India;

(ii) The respondents are directed to consider the applications submitted by the petitioners as to the recognition/approval in respect of clause (i) of the first proviso to sub-section (5) of section 80G of the Act as within time and consider the same and pass orders thereon on merits, in accordance with law within six months from the date of receipt of a copy of this order;

(iii) There shall be no order as to costs. Consequently, W.M.P.Nos.26465, 26492, 26470, 26479, 26481, 26482, 26491, 26467, 26490 of 2023; 3517 and 3518 of 2024 are closed.