2025 (3) TMI 701 - AT - Income Tax

Denial of approval u/s. 80G(5) - assessee is carrying a valid registration certificate u/s. 12AB(1)(ii)(B) - Whether the cancellation of the provisional registration granted under section 80G(5) was lawful and in accordance with the principles of natural justice? HELD THAT - As far as status of application filed on 30.09.2023 is concerned same can t be treated as delayed the assessee was already enjoying approval on provisional basis vide order dated 10.03.2022 and the only issue in the assessee s case was regularization of the same. This application of regularization was filed well in time but the same was rejected on a wrong notion by the CIT (E) Jaipur by applying wrong principles of law as the same can be observed through his order under challenge. Rather the provisions as contained in section 12AB and 80G of the Act are overlapping in nature and section 12AB of the Act is the main driving and guiding provision. Once an assessee fulfilled the technical requirements of section 12AB it has to be assumed that the technical compliances of section 80G(5) are also fulfilled to that extent the order of the Ld. CIT (E) Jaipur is absurd. As the same is being passed with a preconceived notion i.e. keeping in mind the provisions of section 12AB whereas the present matter is not for registration u/s. 12AB of the Act. Appeal of the assessee is allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the denial of approval under section 80G(5) of the Income Tax Act, 1961, by the CIT (Exemption), Jaipur, was justified given the circumstances of the case.

2. Whether the cancellation of the provisional registration granted under section 80G(5) was lawful and in accordance with the principles of natural justice.

3. Whether the procedural and technical grounds cited by the CIT (Exemption) for rejecting the application were valid and consistent with the relevant legal framework.

4. Whether the overlapping provisions of sections 12AB and 80G of the Act were correctly interpreted and applied by the CIT (Exemption).

ISSUE-WISE DETAILED ANALYSIS

1. Denial of Approval under Section 80G(5)

Relevant Legal Framework and Precedents:

Section 80G(5) of the Income Tax Act, 1961, outlines the conditions under which donations to an institution or fund are eligible for tax deductions. The institution must be established for charitable purposes and meet specific criteria, including maintaining separate accounts, not benefiting any particular religious community, and being approved by the Commissioner.

Court's Interpretation and Reasoning:

The Tribunal observed that the CIT (Exemption) failed to demonstrate any unfulfilled conditions under section 80G(5) by the assessee trust. The Tribunal emphasized the need for a clear rationale when denying such approvals, especially when the trust holds valid registration under section 12AB.

Key Evidence and Findings:

The Tribunal noted that the assessee trust had a valid registration under section 12AB and had been granted provisional approval under section 80G(5). The trust's activities were deemed genuine, and it had complied with notices and procedural requirements.

Application of Law to Facts:

The Tribunal applied the provisions of section 80G(5) and found that the CIT (Exemption) had erred in denying approval based on procedural grounds without substantive justification. The Tribunal highlighted the overlapping nature of sections 12AB and 80G, suggesting that compliance with section 12AB implies compliance with section 80G(5).

Treatment of Competing Arguments:

The Tribunal dismissed the CIT (Exemption)'s arguments regarding procedural delays and technical non-compliance, citing the Board's circulars that extended filing deadlines and provided relief for procedural lapses.

Conclusions:

The Tribunal concluded that the denial of approval was unjustified and directed the CIT (Exemption) to grant the approval under section 80G(5) to the assessee trust.

2. Cancellation of Provisional Registration

Relevant Legal Framework and Precedents:

Provisional registration under section 80G(5) is subject to regularization upon fulfillment of conditions. The cancellation of such registration must be based on substantive non-compliance with the Act's provisions.

Court's Interpretation and Reasoning:

The Tribunal found that the CIT (Exemption) acted on a preconceived notion and misapplied the provisions of section 12AB, which were not relevant to the issue of provisional registration under section 80G(5).

Key Evidence and Findings:

The Tribunal noted that the trust had been granted provisional registration and had applied for regularization within the stipulated time. The cancellation was based on an incorrect interpretation of legal provisions.

Application of Law to Facts:

By examining the relevant provisions and the Board's circulars, the Tribunal determined that the cancellation was unwarranted and that the trust had complied with the necessary requirements for regularization.

Treatment of Competing Arguments:

The Tribunal rejected the CIT (Exemption)'s arguments regarding non-compliance and procedural delays, emphasizing the Board's circulars that extended deadlines and allowed for rectification of procedural errors.

Conclusions:

The Tribunal concluded that the cancellation of provisional registration was unlawful and directed the CIT (Exemption) to restore the registration and proceed with regularization.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"Once an assessee fulfilled the technical requirements of section 12AB, it has to be assumed that the technical compliances of section 80G(5) are also fulfilled, to that extent the order of the Ld. CIT (E), Jaipur is absurd."

Core Principles Established:

The Tribunal established that procedural and technical grounds must not overshadow substantive compliance with the Act's provisions. The overlapping nature of sections 12AB and 80G should be interpreted to facilitate charitable institutions' compliance.

Final Determinations on Each Issue:

The Tribunal determined that the denial of approval under section 80G(5) and the cancellation of provisional registration were both unjustified. It directed the CIT (Exemption) to grant approval and restore the provisional registration, emphasizing adherence to the Board's circulars and the principles of natural justice.