2025 (3) TMI 1215 - AT - Income Tax

Registration u/s 80G - revenue rejected the application filed by the assessee on the basis that the application is filed under wrong section - HELD THAT - We find merits in the submissions of the assessee as the application filed by the assessee in Form No.10AB under clause (ii) of first proviso to section 80G(5) of the Act was for renewal of the registration already available with the assessee. In the present case since the assessee was already an approved trust we are of the considered view that the application was rightly made by the assessee under clause (ii) of first proviso to section 80G(5) of the Act and grant of provisional approval cannot be sole basis for rejecting the same. Accordingly in the interest of justice and fair play we restore the application filed by the assessee for renewal of regular approval u/s 80G(5) of the Act to the file of the learned CIT(E) for de novo adjudication - Assessee ground allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the Commissioner of Income Tax (Exemptions) erred in rejecting the application for revalidation under Section 80G of the Income Tax Act, 1961, on the grounds of incorrect filing under the wrong clause.

2. Whether the Appellant Trust was denied a reasonable opportunity to correct the error in the application process, thereby breaching principles of natural justice.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Application under Section 80G

Relevant legal framework and precedents:

Section 80G of the Income Tax Act, 1961, provides for deductions in respect of donations to certain funds, charitable institutions, etc. The relevant provisions for registration and approval under this section are detailed in the first proviso to Section 80G(5), which outlines the conditions and timelines for application for approval and renewal.

Court's interpretation and reasoning:

The Tribunal examined the provisions of Section 80G(5) and noted the distinction between applications for provisional approval and those for renewal of regular approval. The Court observed that the Appellant Trust, having been previously approved, was eligible to apply for renewal under clause (ii) of the first proviso, contrary to the CIT(E)'s interpretation that the application should have been under clause (iii) due to provisional status.

Key evidence and findings:

The Tribunal found that the Appellant Trust had been granted provisional approval valid from 21/03/2022 to the assessment year 2024-25. The application for renewal was filed under clause (ii) of the first proviso, which is appropriate for trusts seeking renewal of existing approval.

Application of law to facts:

The Tribunal applied the relevant provisions of Section 80G(5) to the facts, determining that the Appellant Trust's application for renewal was indeed filed correctly under clause (ii), as the Trust had an existing approval that was due for renewal.

Treatment of competing arguments:

The Tribunal considered the Departmental Representative's reliance on the impugned order, which was based on the assumption that the Trust was only provisionally approved. However, the Tribunal found merit in the Appellant's argument that the application was for renewal of an existing approval, not a new provisional approval.

Issue 2: Denial of Opportunity and Natural Justice

Relevant legal framework and precedents:

The principles of natural justice require that parties be given a fair opportunity to present their case and rectify any procedural errors. This includes the opportunity to correct mistakes in the application process.

Court's interpretation and reasoning:

The Tribunal acknowledged the Appellant Trust's contention that it was not given a reasonable opportunity to correct the error in its application, which amounted to a breach of natural justice. The Tribunal emphasized the importance of procedural fairness and the need for the CIT(E) to consider the application in its entirety.

Key evidence and findings:

The Tribunal noted the Appellant Trust's efforts to comply with the procedural requirements and its subsequent inquiry into the rejection, which highlighted the procedural oversight.

Application of law to facts:

The Tribunal applied the principles of natural justice to the facts, finding that the Trust should have been allowed to rectify its application to reflect the correct clause for renewal.

Treatment of competing arguments:

The Tribunal considered the Department's position but found that the procedural oversight did not justify the rejection of the application without allowing the Trust an opportunity to correct it.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"In the interest of justice and fair play, we restore the application filed by the assessee for renewal of regular approval under section 80G(5) of the Act to the file of the learned CIT(E) for de novo adjudication in accordance with law and after consideration of the facts in entirety."

Core principles established:

The Tribunal established that procedural fairness and adherence to natural justice principles are paramount, especially where procedural errors can be rectified. The Tribunal also clarified the correct application process under Section 80G(5) for trusts with existing approvals seeking renewal.

Final determinations on each issue:

The Tribunal set aside the impugned order and allowed the grounds raised by the Appellant Trust for statistical purposes, directing the CIT(E) to re-evaluate the application for renewal of approval under Section 80G(5) in accordance with the law.