PCL CHARITABLE TRUST,MADURAI vs. CIT EXEMPTIONS, CHENNAI

The assessee raised the following grounds of appeal:

The brief facts of the case emanating from the records are that the assessee is a newly constituted charitable trust and admittedly did not possess registration u/s.12AA of the Act prior to 01.04.2021. It had initially filed an application under the then existing provisions of section 12A of the Act before 01.04.2021. Consequent to the substitution of the registration provisions by the Finance Act, 2020, the pending application stood migrated by operation of

Subsequently, instead of filing an application u/s.12A(1)(ac)(iii) seeking regular registration upon expiry of the provisional registration, the assessee inadvertently filed another application u/s.12A(1)(ac)(vi)(A) for fresh provisional registration. The ld.CIT(E), without noticing that provisional registration had already been granted earlier and despite the disclosure made by the assessee regarding the earlier registration, granted another provisional registration dated 05.04.2025 for the assessment years 2025-26 to 2027-28.

Thereafter, the assessee filed an application u/s.12A(1)(ac)(vi)(B) dated 28.09.2025, which came to be rejected by the ld.CIT(E) vide order dated 26.03.2026 solely on the ground that the application for continuation of registration ought to have been filed within six months from the expiry of the original provisional registration and that the application was filed belatedly.

Aggrieved by the said order, the assessee is in appeal before us. The ld.AR submitted that the rejection by the ld.CIT(E) is purely on technical grounds without appreciating the peculiar sequence of events that occurred due to the transition from the erstwhile registration regime u/s.12AA to the new scheme u/s.12AB of the Act. It was submitted that the assessee's first application filed prior to 01.04.2021 was automatically treated as an application u/s.12A(1)(ac)(vi) by virtue of section 12AB(2), pursuant to which provisional registration was granted.

The ld.AR submitted that the correct statutory course thereafter was to file an application u/s.12A(1)(ac)(iii) for regular registration. However, owing to the complexity of the newly introduced provisions, the assessee inadvertently filed a second application for provisional registration u/s.12A(1)(ac)(vi)(A), which was also erroneously entertained and allowed by the Department itself.

The ld.AR further submitted that the transition provisions u/s.12AB of the Act generated widespread confusion amongst charitable institutions throughout the country, which is evident from the repeated extensions granted by the CBDT from time to time, including CBDT Circular No.7 of 2024 extending the time limit up to 30.06.2024.

It was argued that the delay was neither deliberate nor intentional but arose solely due to the complexity of the new statutory framework and the procedural difficulties experienced on the Income-tax portal.

The ld.AR therefore pleaded that the application filed under the incorrect provision deserves to be treated as one filed u/s.12A(1)(ac)(iii) and the matter be restored to the file of the ld.CIT(E) for adjudication on merits.

With regard to approval u/s.80G of the Act, the ld.AR submitted that similar issues have repeatedly come before the Chennai Benches of the Tribunal, wherein applications filed under incorrect clauses were directed to be treated as applications filed under the correct statutory provisions. Reliance was placed on the decisions of Aalayam v. CIT(E) in ITA No.1012/Chny/2025, Our Shoulders Foundation v. CIT(E) [2025] 180 taxmann.com 648 (Chennai-Trib.), Foundation for Friendly Environment and Medical Awareness v. CIT(E) [2025] 179 taxmann.com 287 (Chennai-Trib.), Mother Leela Trust v. CIT(E) [2025] 179 taxmann.com 274 (Chennai-Trib.) and Arulcheyal Kainkarrya Sabha v. CIT(E) [2026] 183 taxmann.com 394 (Chennai-Trib.). Arguments of the Revenue

The ld.DR supported the impugned order of the ld.CIT(E). It was submitted that the statutory provisions prescribe specific timelines for filing

We have heard the rival submissions, carefully perused the orders of the ld.CIT(E) and the material available on record. There is no dispute regarding the factual chronology of events. It is an admitted position that the assessee was a newly constituted trust which had no registration u/s.12AA of the Act prior to 01.04.2021. The application initially filed by the assessee before the introduction of section 12AB stood migrated by operation of law and was treated as an application u/s.12A(1)(ac)(vi), pursuant to which provisional registration was granted for the assessment years 2021-22 to 2023-24. It is equally undisputed that thereafter, instead of filing an application u/s.12A(1)(ac)(iii), the assessee inadvertently filed another application seeking provisional registration u/s.12A(1)(ac)(vi)(A), which was entertained and allowed by the ld.CIT(E) himself for another block of three years.

In our considered opinion, the subsequent grant of provisional registration by the Department itself clearly demonstrates that even the tax authorities were faced with practical difficulties in implementing the newly introduced registration mechanism. Once the second provisional registration was granted notwithstanding the existence of the earlier provisional registration, it cannot be said that the entire lapse was attributable solely to the assessee.

We also find considerable force in the submissions of the ld.AR that the transition from section 12AA to section 12AB resulted in substantial confusion among charitable institutions throughout the country. The repeated extensions granted by the Central Board of Direct Taxes, particularly through CBDT

The object behind the introduction of section 12AB was to streamline the registration process and not to deny substantive charitable benefits merely because an assessee, acting under a bona fide misunderstanding, invoked an incorrect statutory clause. Procedural provisions are intended to facilitate justice and cannot be permitted to defeat substantive rights where no mala fides are attributable to the assessee.

In the facts and circumstances of the present case, we are of the considered opinion that the assessee cannot be deprived of an opportunity to seek regular registration merely on account of a procedural lapse, particularly when the Department itself had entertained and granted the second provisional registration u/s.12A(1)(ac)(vi)(A) of the Act. Having once granted such provisional registration, the Revenue cannot subsequently contend that the assessee had no valid provisional registration for the purpose of seeking regular registration. The subsequent provisional registration issued by the ld.CIT(E) continued to remain valid unless cancelled or withdrawn in accordance with law, and the rights flowing therefrom cannot be ignored while considering the assessee's application for regular registration.

The provisions governing registration of charitable institutions are beneficial in nature and are intended to ensure that genuine charitable institutions are granted exemption in accordance with law. It is a settled principle that procedural prescriptions should not override substantive rights, particularly where the assessee has acted bona fide and no prejudice has been caused to the Revenue. In the present case, there is nothing on record to suggest that the assessee has acted with any mala fide intention or that its charitable objects or activities are not genuine. The rejection of the application solely on the technical ground of limitation, without examining the statutory conditions prescribed u/s.12AB of the Act, is therefore not justified.

We further notice that this Tribunal, in a series of decisions including Aalayam v. CIT(E) (ITA No.1012/Chny/2025), Our Shoulders Foundation v. CIT(E), Foundation for Friendly Environment and Medical Awareness v. CIT(E), Mother Leela Trust v. CIT(E) and Arulcheyal Kainkarrya Sabha v. CIT(E), has consistently taken the view that where charitable institutions, owing to confusion arising out of the amended statutory provisions, have filed applications under incorrect clauses, such applications deserve to be treated as applications filed under the appropriate provisions of law so that the claims can be examined on merits instead of being rejected on technical grounds.

Considering the peculiar facts of the case, the transition from the erstwhile registration regime to the new provisions of section 12AB, the confusion prevailing during the relevant period, the repeated extensions granted by the CBDT, and more importantly, the issuance of the second provisional registration by the Department itself, we are of the view that the ends of justice would be met by restoring the matter to the file of the ld.CIT(E).

Accordingly, we set aside the impugned order passed by the ld.CIT(E) and direct him to treat the assessee's application for regular registration as one to be filed pursuant to the second provisional registration certificate granted under section 12A(1)(ac)(vi)(A) of the Act for the AYs 2025-26 to 2027-28. The ld.CIT(E) shall examine the assessee's application for permanent registration on its own merits in accordance with the provisions of section 12AB, after affording the assessee a reasonable opportunity of being heard and of producing such documents and evidence as may be required. We make it clear that we have expressed no opinion on the merits of the assessee's entitlement to registration, and all issues relating thereto are left open for consideration by the ld.CIT(E) in accordance with law.

Likewise, insofar as the application u/s.80G is concerned, we find that identical directions have consistently been issued by the Coordinate Benches of this Tribunal by directing the ld.CIT(E) to treat applications erroneously filed

Accordingly, we set aside the impugned order passed by the ld.CIT(E) and restore the matter to his file with a direction to treat the application filed u/s.80G(5)(ii) as one filed under section 80G(5)(iv)(B), and thereafter examine the assessee's claim afresh on merits in accordance with law after affording a reasonable opportunity of being heard to the assessee.

In the result, the appeals of the assessee are allowed for statistical purposes.