BHAKTI TRUST,MUMBAI-400088 vs. PRINCIPAL COMMISSIONER OF INCOME TAX, BANGALORE

Appellant by : Shri N.B. Gandhi Respondent by : Dr. Mahesh Akhade, Date of Hearing 08.08.2022 Date of Pronouncement 22.08.2022 आदेश / O R D E R Per Amarjit Singh (AM): Both the appeals filed by the assessee are interconnected and based on similar issue and facts on the issue of issuing of provisional registration u/s 12A(1)(ac)(i) and provisional approval given u/s 80G(5)(1) r.w.Rule 17A/11AA/2C of the IT. Rules. Therefore, for the sake of convenience both these appeals are adjudicated together by taking as lead case and its finding will be applied as mutatis mutandis to the other case. The assessee has raised the following grounds before us:

“Ground No. 1 a. Your Appellant was prevented from filing the Appeal in time before your honor and prays to condone the delay of 326 days. Ground No. 2 a. The Hon Principal Commissioner of Income Tax / Commissioner erred in passing "order for provisional registration in Form 10AC Order for Provisional registration in Form 10AC under Sub clause (1) of clause (ac) of sub-section (1) of section 12A r/w rule 17A/11AA/2C, where the appellant had applied for the re-registration of the existing trust under the provisions of section 12A(1)(a)(i) of the Act. Relief claimed: To issue of "Order for registration" in Form 10AC under Sub clause (i) of clause (ac) of sub-section (1) of section 12A r/r.w. rule 17A/11AA/2C. Ground No. 3 a. The Hon Principal Commissioner of Income Tax / Commissioner erred in not taking cognizance of letter dated 19 January 2022, requesting to issue the "order of registration" instead of "order for registration", followed by grievance raised regarding the same on the income tax portal on 04 of May, 2022 Relief Claimed In view of the above facts, the appellant humbly requests you to issue "Order for Registration" u/s 12A of the Act. Ground No. 4: The appellant prays for your leave to add, alter, amend or modify any of the above grounds.”

2. There was a delay in filing both these appeals by 326 days. The assessee vide its petition dated 19.05.2022 submitted that Pr. CIT has issued a provisional registration order on email dated 25.05.2021. It is submitted that assessee was issued order for provisional registration only. Therefore, not receiving the order for registration the assessee had pursue the various authorities of the income tax to obtain the non- provisional order of registration. The assessee has also enclosed copies of application dated 19.01.2022 issued to the ITO, ward 1(2), Mumbai and copies of grievance acknowledgment as per annexure E for providing order for registration u/s 12A and order for approval u/s 80G of the Act. The assessee has also submitted that ld. CIT(A) attributed the reason for issuing a provisional registration certification because of issuing such certificate by the CPC. Therefore, the assessee has requested that condonation of delay in filing these appeal because of issuing of provisional registration order by the concerned authority without giving any clarification and modification in spite of number of steps taken by the assessee before the different I.T. authorities. In the light of the above facts we consider that there is a bonafide reason for delay in filing these appeal by the assessee because of not receiving any clarification for issuing of provisional certificate by the authorities in the case of the assessee. We have also considered the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition MSD Katijir Ors. Civil appeal No. 460 of 1987 dated 19.02.1987, wherein held that sufficient cause for the purpose of condonation of delay should be interpreted with a view to do even handed justice on merit in preference to the approach which scuttles decision on merit. Therefore, we condone the delay in both the appeals filed by the assessee.

3. The fact in brief is that the assessee trust was registered u/s 12A of the Act vide registration no. DIT(E)/12A/37348/2002-03, dated 07.04.2003. Thereafter, the assessee submitted application u/s 12A, dated 12.05.2021 for re-registration in form 10AC under sub clause (i) of clause (ac) of subsection (1) of Sec. 12A r.w.rule 17A/11AA/2C along with documents. The DIT/CPC has issued order for provisional registration in form no. 10C on 28.05.2021 u/s 12A(1)(ac)(i). The assessee submitted that it had tried to submit letter dated 18.02.2002 for necessary correction but the office of the CIT not accepted the same by attributing the reason for issuing such certificate to the CPC.

On the other hand the ld. D.R supported the order of lower authorities.

5. Heard both the sides and perused the material on record.

―8. We have considered the rival submissions and perused the material available on record. In order to decide the issue, it is relevant to analyse the relevant provisions of the Act applicable to the present case. Section 12A deals with conditions for applicability of section 11 and 12. Section 12A(1)(ac) of the Act reads as under: ―12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— (a) .. (aa) … (ab) … (ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,— (i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020)], within three months from the first day of April, 2021; (ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to expire, at least six months prior to expiry of the said period; (iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; (iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative; (v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification; (vi) in any other case, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought, and such trust or institution is registered under section 12AB;‖ 9. From the aforesaid provision, it is clear that for claiming the benefit under section 11 and section 12 of the Act, the trust or institution has to make an application for registration and such trust or institution should be registered under section 12AB of the Act. Section 12A(1)(ac)(i) of the Act specifically deals with the cases where trust or institution was registered under section 12A or under section 12AA.

―12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub-clause (iii) or sub- clause (iv) or sub-clause (v) of the said clause,— (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects; (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),— (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard; (c) where the application is made under sub-clause (vi) of the said clause, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought, and send a copy of such order to the trust or institution.‖ 11. In the present case, it has not been disputed that the assessee trust was duly registered under section 12AA of the Act. Thus, the only provision applicable to the assessee trust for the purpose of applying for registration is section 12A(1)(ac)(i) of the Act. Further, section 12AB(1)(a) of the Act provides that where an application is made under section 12A(1)(ac)(i) the Principal Commissioner or Commissioner shall pass an order in writing registering the trust or institution for a period of 5 years. However, in the present case, the assessee trust being registered under section 12AA and thus rightly made an application under section 12A(1)(ac)(i) of the Act, was granted Provisional Registration in Form 10 AC subject to certain conditions. It is pertinent to note that section 12AB(1)(c) deals with granting of Provisional Registration to the trust or institution for a period of 3 years from the assessment year from which registration is sought. However, the said section is applicable in cases where application is made under section 12A(1)(ac)(iv) of the Act. It is also not disputed that the Provisional Registration would be granted for a period of 3 years to the charitable institutions which are yet to start their activities. However, in the present case, the assessee trust was already holding certificate dated 30.10.2009 issued under section 12AA of the Act. We noticed that section 12AB(1)(a) of the Act, which deals with grant of Regular Registration for a period of 5 years does not authorise the Principal Commissioner or Commissioner to impose any conditions for grant of such registration. We further noticed that though the impugned order granted Provisional Registration subject to certain conditions, however, same was granted for a period of 5 assessment years i.e. from assessment year 2022–23 to assessment year 2026–27. We also noticed that the impugned order for provisional registration in Form 10AC was issued under section 12A(1)(ac)(i) of the Act, which provision merely deals with making an application for registration.

by the assessee are allowed for statistical purpose.‖

7. During the course of appellate proceedings before the ld. Counsel has also referred the CBDT Circular F. No.370142/4/2021 TPL, the relevant para of this circular is reproduced as under:

Circular No. 11 of 2022 F. No.370142/4/2021-TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Dated: 3rd June, 2022 Sub: Clarification regarding Form No 10AC issued till the date of this Circular - reg. Finance Act, 2022 has inserted sub-section (4) in section 12AB of the Income-tax Act, 1961 (the Act) allowing the Principal Commissioner or Commissioner of Income-tax to examine if there is any ―specified violation‖ by the trust or institution registered or provisionally registered under the relevant clauses of sub-section (1) of section 12AB or subsection (1) of section 12AA. Subsequent to examination by the Principal Commissioner or Commissioner of Income-tax, an order is required to be passed for either cancellation of the registration or refusal to cancel the registration. Similar provisions have also been introduced in clause (23C) of section 10 of the Act by substituting the fifteenth proviso of the said clause with respect to fund or institution trust or institution or any university or other educational institution or any hospital or other medical institution referred under sub-clauses (iv), (v), (vi), (via) of this clause and which have been approved or provisionally approved under the second proviso to the said clause. These amendments are effective from 1st April, 2022. In addition to the specified violations referred above, the power of cancellation has also been granted under sub-rule (5) of rule 17A and sub-rule (5) of rule 2C of the Income- tax Rules, 1962 ( the Rules) to the Principal Commissioner or Commissioner authorised by the Board. This Circular only relates to cancellation of registration/approval or provisional registration/approval in the case of ―specified violation‖.

4. In view of the amendments made vide Finance Act, 2022, the conditions subject to which the registration/approval or provisional registration/ provisional approval was granted to trusts and institutions need to be revised to align the same with the amendments made by Finance Act, 2022.

Sr. Section Section under which order is Conditions No. Code passed 1. 01 Clause (a) of Sub-section (1) of Sec. As per Annexure A 12AB 2. 02 Clause (c) of sub-section (1) of Sec. As per Annexure B 12AB 3. 03 to Clause (i) of second proviso to As per Annexure C 06 clause (23C) of section 10 4. 07 to Clause (iii) of second proviso to As per Annexure D 10 clause (23C) of section 10 5. 11 Clause (i) of second proviso to sub- As per Annexure E section (5) of section 80G 6. 12 Clause (iii) of second proviso to As per Annexure F sub-section (5) of section 80G

(ii) where due to technical glitches, Form No. 10AC has been issued during FY 2021- 2022 with the heading ―Order for provisional registration‖ or ― Order for provisional approval‖ instead of ―Order for registration‖ or ― Order for approval‖, then all such Form No. 10AC shall be considered as an ―Order for registration or approval‖ and, in such cases where Form No. 10AC has been issued, - (a) under section code 01 (applications seeking re-registration),- (i) in the heading and in rows 6, 7, 9 and 10 the words ,― provisional registration‖ shall be read as ―registration‖; (ii in row 8 the word ― provisionally registered‖ shall be read as ―registered‖; (b) under section codes 03, 04, 05, 06 or 11 (applications seeking re- approval),- (i) in the heading and in rows 6, 7, 9 and 10 the words ,― provisional approval‖ shall be read as ―approval‖; (ii) in row 8 the word ― provisionally approved‖ shall be read as ―approved‖; (iii) row no 5 of Form No. 10AC ( issued for all section codes) shall be read as ―Unique Registration Number‖ instead of ―Provisional Approval/ Approval Number‖ or ― Provisional Registration/ Registration Number‖, as the case maybe. (Neha Sahay) Under Secretary TPL Division” In view of the above facts and findings and after taking into consideration the decision of coordinate bench and the contents of circular issued by the CBDT as supra, we restore the matter to the ld. DIT(E) for deciding afresh after taking into consideration the CBDT circular and the direction laid down in the decision of the coordinate bench as discussed supra in this order. Therefore this appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 22.08.2022

Sd/- Sd/- (AMIT SHUKLA) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 22.08.2022 PS: Rohit आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//

(Asst. Registrar) ITAT, Mumbai