CLOUDNINE FOUNDATION ,BANGALORE vs. COMMISSIONER OF INCOME TAX(EXEMPTIONS), BANGALORE

In this appeal, the assessee has raised the following grounds: -

The brief facts of the case are that the assessee was granted provisional registration under section 80G(5)(iv) of the Act vide order dated 24.09.2021 for the period from the date of the order till the assessment year 2024-25. In terms of the provisions inserted by the Finance Act, 2020, the assessee filed an application in Form 10AB for the regularisation of approval under section 80G for a period of 5 years. The application filed by the assessee in Form 10AB seeking the regularisation of provisional registration was rejected by the learned CIT(E) vide impugned order, observing as follows:- “7. Also as per office records and your filings, provisional registration for 12A under the new regime was generated on 24.09.2021 in clause (i) of section 12A(1)(ac), effective for AY 2022-23 to AY 2026-27 but proceedings under section 12AA dated 27.04.2021 (DIN: as per office record) had earlier resulted in rejection for grant of approval u/s 12AA and 80G due to non-compliance with mandatory income-tax clauses vide order dated 27.03.2021(Reference to corrigendum to the orders dated 27.04.2021) 8. Under the Finance Act, 2020, clause (i) of section 12A(1)(ac) is applicable to “trusts or institutions which are already registered under section 12A/12AA” and are required to apply for revalidation within the prescribed time. In your case, records show that there was no subsisting valid registration under old regime under section 12AA as on 24.09.2021 owing to the rejection, and yet, a registration order was generated under section 12A(1)(ac)(i) meant for existing registered entities. 9. In view of these discrepancies, an enquiry was initiated after a note sheet entry dated 18.08.2025, and Subsequently a show cause notice dated 26.08.2025 was issued to the assessee, requiring it to explain the basis on which registration was obtained in clause(i) of section 12A(1)(ac) without having a valid old-regime registration under section 12A/12AA. In response, the assessee submitted a letter dated 01.09.2025. However, the explanation furnished was not satisfactory and failed to address the fundamental defect in the grant of registration. 10. Crucial provisions for obtaining and maintaining approval under section 80G:  Section 80G(5)(i) of the Act stipulates that approval for donations to an institution or fund under this section applies only if its income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10.  Section 12A(1) of the Act explicitly states that the provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless […] such trust or institution is registered under section 12AA or section 12AB.  Without registration under Section 12AB (or 12AA), the exemptions provided under Section 11 and Section 12 of the Act for income from property held for charitable or religious purposes and voluntary contributions, respectively, are not applicable to your institution.  Consequently, your institution’s income would be liable to inclusion in its total income, thereby failing to meet the fundamental condition specified in Section 80G(5)(i) for receiving approval. 11. In view of the above facts, it is held that the application in Form No. 10AB dated 21.03.2025 is defective, filed under the wrong code, and not maintainable for want of valid registration under section 12AB. Accordingly, the application for approval under section 80G is hereby rejected.” Being aggrieved, the assessee is in appeal before us.

We have considered the submissions of both sides and perused the materials available on record. In the present case, it is an admitted fact that the assessee was previously granted provisional registration under section 80G. From the record, it is further evident that the assessee, within the prescribed limitation period, filed the relevant application in Form 10AB for the regularisation of the provisional registration. However, learned CIT(E) on the basis that the registration under section 12A(1)(ac)(i) of the Act was erroneously granted to the assessee, as the earlier request for registration under section 12AA of the Act was rejected, held that the application now filed by the assessee in form 10AB is defective as the same has been filed under the wrong code and thus not maintainable for want of valid registration under section 12AB of the Act.

Taking into consideration the facts and circumstances of the present case, we deem it appropriate to grant another opportunity to the assessee to set out its case for renewal of registration under section 80G of the Act. Accordingly, we set aside the impugned order passed by the learned CIT(E) and restore the matter to the file of the learned CIT(E) for de novo adjudication after granting reasonable and adequate opportunity of hearing to the assessee. We further direct the learned CIT(E) to grant sufficient opportunity to the assessee to take necessary steps for rectification of the application for registration under section 80G of the Act. Thus, the learned CIT(E) is directed to decide the application filed by the assessee, as per law, after taking into consideration the relevant documents/details. With the above directions, the impugned order is set aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes. Order pronounced in the open court on 12th June, 2026