2024 (5) TMI 1201 - AT - Income Tax

Denial of registration u/s. 80G(5) - application was filed after the mandatory timeline prescribed by the statute - as noted assessee trust was an old trust continuing to exist much before commencement of new regime of registration effective from 01.04.2021 and therefore, it could seek registration under new regime in Form No. 10A u/s 80G(5)(i) itself under which it would have got registration for five years - Instead, the assessee wrongly made an application in Form No. 10A u/s 80G(5)(iv) and received provisional approval for 3 years.. HELD THAT - It is admitted fact that the assessee is an old trust and it has already commenced its activities on 17.01.1992. It could further be noted that the assessee has already received provisional approval u/s 80G(5)(iv) for a period commencing from 21.10.2022 to AY 2025-26. It sought approval u/s 80G(5)(iii) by filing Form No. 10AB on 30.03.2023 which has been rejected by CIT(E) on the ground that the assessee had violated the mandatory time lines as statutorily provided. We find that this issue has been decided by co-ordinate bench in bunch of appeals titled as M/s CIT-1982 Charitable Trust Ors 2024 (3) TMI 1201 - ITAT CHENNAI held that the extended time limit of 30.09.2023 as per CBDT Circular would apply to Form No. 10AB as well. 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:
1. Denial of registration u/s. 80G(5) of the Act by CIT(E).
2. Violation of mandatory timelines for filing application.
3. Application filed in incorrect form under the new regime.
4. Extension of time limit for filing Form No. 10AB.
5. Interpretation of the timeline prescribed under clause (iii) of the first proviso to section 80G(5) of the Act.
6. Legitimacy of Circular No. 6 of 2023 dated 24.05.2023.

The judgment deals with an appeal against the denial of registration under section 80G(5) of the Income Tax Act by the Commissioner of Income Tax (Exemption). The assessee trust had applied for registration under clause (iii) of the first proviso to sub-section (5) of section 80G, but the application was deemed time-barred as it was filed after the prescribed timeline. The Commissioner noted that the trust, an old entity, could have applied under the new regime in Form No. 10A for a longer registration period but instead applied in Form No. 10A under section 80G(5)(iv) erroneously. The issue revolved around the mandatory timeline for filing the application and the rejection based on the same. The Commissioner relied on Circulars issued by the CBDT, specifying the deadline for filing various forms, including Form No. 10AB. The rejection was based on the non-extension of the deadline for Form No. 10AB beyond 30.09.2022, as per Circulars issued. The assessee appealed, arguing that the timeline should be considered directory, not mandatory, given the transitional nature of the amendment. The Coordinate Bench in a related case held that the timeline for Form No. 10AB had been extended until 30.09.2023, and this extension should apply to all relevant forms, including Form No. 10AB. The Tribunal accepted the assessee's argument, setting aside the Commissioner's order and remanding the matter for reconsideration on merits.

Furthermore, the Tribunal considered the decision of the High Court of Madras in a related case where the Court declared a specific clause of Circular No. 6 of 2023 as illegitimate, arbitrary, and ultra vires the Constitution of India. The Court directed the authorities to consider applications submitted within the prescribed timeline and pass orders on merits within six months, disregarding the issue of timelines. Following this precedent, the Tribunal set aside the Commissioner's order and directed a reconsideration of the application on its merits without considering the timeline issue. The appeal was allowed for statistical purposes based on the above orders.

In conclusion, the Tribunal's decision revolved around the interpretation of the timeline for filing Form No. 10AB under section 80G(5) of the Act, considering it as directory rather than mandatory due to the transitional nature of the amendment. The Tribunal also took into account the High Court's ruling on the legitimacy of a specific clause in a CBDT Circular, emphasizing the need to consider applications on their merits without being restricted by timelines. This judgment highlights the importance of interpreting statutory timelines in light of the overall legislative intent and ensuring fairness in the application process for tax exemptions.