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Facts
The assessee, a charitable trust engaged in education, applied for approval under section 80G. The CIT(E) rejected the application, stating it was filed under the wrong clause as the trust had claimed deduction under section 11 in previous years, making clause (B) of section 80G(5)(iv) inapplicable.
Held
The Tribunal held that the rejection based on filing under the wrong clause was a procedural error, especially when the assessee claimed it was inadvertent. The Tribunal set aside the order and restored the issue to the CIT(E) to decide afresh, treating the application as filed under the correct section and allowing the assessee an opportunity to file a fresh application if needed.
Key Issues
Whether rejection of an application for 80G approval solely due to filing under a wrong clause, when the error is claimed to be inadvertent, constitutes a procedural irregularity that warrants a remand for fresh consideration.
Sections Cited
80G, 80G(5), 80G(5)(iv)(B), 11, 12A, 12A(1)(ac)(i), 12AB(1)(b)(i), 13(3), 10, 17A(2)(α), 17A(2)(b), 17A(2)(k), 11AA(2)(h), 36A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI R.K. PANDA & MS. ASTHA CHANDRA
The appeal filed by the assessee is directed against the order dated 18.11.2024 of the Ld. Commissioner of Income Tax (Exemption), Pune [“CIT(E)”] whereby he rejected the application of the assessee filed before him on 18.05.2024 in Form No. 10AB under sub clause (B) of (iv) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 (the “Act”).
Briefly stated, the facts of the case are that the assessee is a Charitable Trust registered under Bombay Public Trusts Act, 1950. The assessee trust is engaged in imparting education. On receipt of assessee’s application for regular approval along with annexures thereto, with a view to verify the genuineness of activities of the assessee and fulfillment of conditions laid down in clauses (i) to (v) of section 80G(5) of the Act, the Ld. CIT(E) issued a notice through ITBA portal on 24.06.2024 which was duly served on the assessee through e-portal and email, requesting the assessee to upload certain information/clarification contained therein. Compliance to the said notice was due by 08.07.2024. On verification of the details submitted by the assessee in response thereto, various discrepancies were noticed by the Ld. CIT(E) which were communicated to the assessee by issue of another notice on 15.10.2024 seeking compliance by 22.10.2024 which was extended till 04.11.2024 on assessee’s request for additional time. The said discrepancies are as under: "(i) As per financial statements and ITRs furnished by you, it is seen that the trust has claimed deduction u/s 11. Therefore, said provisions of sec. 80G(5)(iv)(B) of the Act are not applicable to your case. As such, your present application is liable to be rejected. Please clarify with supporting documents. (ii) It is seen that you have obtained the regular registration under section 12A(1)(ac)(i) of the Act but it seems that you have not submitted a copy of registration u/s 12A/12AA prior to 01/04/2021. Kindly provide copy of 12A/12AA registration granted prior to 01/04/2021. (iii) Since you have claimed to be engaged in running of educational institution(s), please furnish the following: (1) Details of various institutes / schools / colleges run by the trust with granted/non-granted status. (ii) Copies of affiliation certificates. (iii) Details of institute wise fee structure, admission policy in respect of each of the institute. (iv) Institute-wise Income & Expenditure and Receipt & Payment account for the last 3 years. (v) Complete Financial statements for the last 3 years with all Schedules/Annexures. (vi) Copies of Audit report for the last 3 years. (vii) Details of admissions given to students from financially weaker sections of the society with evidence and RTE norms followed with evidence. (viii) Institute wise details of ownership of land and building for with evidence. If rented, copy of rent agreement and proof of ownership of the owner. (ix) Furnish details as to whether the land is owned by the persons covered u/s 13(3) of the Act. (x) Institute wise details of immovable properties and building constructions appearing in balance sheet. (xi) Detailed list of salary payments to teaching and non-teaching staff along with TDS made, PF deducted, Profession Tax Deducted and copies of TDS returns & Profession Tax Returns filed for the last 3 years. (xii) Year-wise details of addition to building fund and other funds with evidence of its source. (xiii) Complete details of loans raised for the last 3 years and its utilization for each of the institution / project along with copy of permission under section 36A of the Maharashtra Public Trust Act, 1950 from the Charity Commissioner. (iv) You ought to be submit the copy of instrument creating the trust or establishing the institution / document evidencing the creation of the trust or establishment of the institution (trust deed / MoA). The trust deed/MOA were required to be submitted alongwith the application itself. However, it is seen that you have not furnished the same. You have failed to comply the provisions of Rule 17A(2)(a) / 17A(2) (b) of the Income Tax Rules, 1962. Kindly furnish copy of authentic trust deed alongwith copy of BPT / Society registration certified by the Asst. Charity Commissioner. (v) Kindly furnish evidences claiming expenses on charitable activities such as bills/vouchers/invoices alongwith photographs of charitable activities actually carried out by your trust. (vi) You have not furnished point-wise reply to the initial notice. The basic details such as date of commencement of activities, details of religious objects, details of business undertakings, donors list, details of relevant Laws for achievement of objectives with proof of compliance, and other related details were called for vide the said notice. But you have not furnished the same till date. Thus, you have failed to comply with the provisions of section 12AB(1)(b)(i) of the Income Tax Act, 1961. (vii) It is seen from your submission that you have not furnished note on activity giving details viz. dates and places of each activities carried out by you, details of beneficiaries, how they were identified, etc. As per the provisions of Rule 17A(2)(k) / 11AA(2)(h) of the Income Tax Rules, 1962, the application in Form No. 10AB shall be accompanied by note on activities giving details of activities actually carried out but you have failed to comply with those provisions. You ought to be submit the details of actual activities carried out in the last 3 years or since inception, whichever is later. Further, the supporting evidence of the activities in the form bills and photographs are also not submitted by you. In absence of any such tangible material in respect of details and proof of activities being carried out, it is not possible to ascertain as to whether the activities are charitable and in line with the objects of the trust /institution. (viii) You were specifically requested to furnish year-wise list of all donations received (including corpus donations etc.) during the last 3 years / since inception, whichever is later viz. name of donor, address of donor, amount of donation, mode of donation / receipts etc. PAN nos. vide initial notice. You have not furnished the details as required in above format. Please furnish the same. (ix) Complete Financial statements and audit reports for the last 3 years with all Schedules / Annexures."
2.1 The assessee furnished its reply to the above notice on 13.11.2024, however, the Ld. CIT(E) observing that the provisions of section 80G(5)(iv)(B) of the Act are not applicable to the assessee’s case and since the assessee has not furnished any explanation to the said discrepancy listed out in point 2(i) of the show cause notice dated 15.10.2023, rejected the application of the assessee the application of the assessee on the ground that the impugned application has been filed under the wrong clause by observing as under : 6. …."80G(5)(iv)- in any other case, where activities of the trust or institution have- (A) ...... (B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities," 6.1 It can be thus seen that the provisions of said section applies to a case where activities of the trust or institution have 'commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at any time after the commencement of such activities. In the light of said provision, the submission of the assessee trust has been verified. It is seen that the assessee trust has claimed deduction u/s 11 in its past AYs. For e.g. it has claimed deduction of Rs. 39.36 Lakhs u/s 11 in the A.Y. 2024-25. Thus, the assessee's income pertaining to previous years has been excluded from the total income on account of applicability of section 11 which occurs after the commencement of such activities.
7. Considering the above, and since the assessee's activities were already commenced at the time of filing the present application and it has claimed deduction under section 11 for previous year before the date of the present application, the assessee trust is not eligible to file application under clause (B) of clause (iv) of first proviso to sub-section (5) of section 80G of the Income-tax Act, 1961. Therefore, the application dated 18/05/2024 filed under sub clause (B) of (iv) of first proviso to sub-section (5) of section 80G of the Income Tax Act, 1961 filed by the assessee is hereby rejected.”
Aggrieved with such order of Ld. CIT(E), the assessee is in appeal before the Tribunal by raising the following solitary ground of appeal :
“1. On the basis of facts and in the circumstances of the case and as per law, the Commissioner of Income-Tax (Exemption), Pune is not justified in rejecting the application of the appellant for registration u/s 80G(5) of the Act. 2. The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.”
The Ld. Counsel for the assessee at the outset submitted that the application filed for grant of approval under section 80G of the Act was rejected by the Ld. CIT(E) solely on the ground that the assessee has filed the impugned application under the wrong clause. He submitted that this mistake has happened inadvertently by the assessee and the same is not fatal denying the registration of a charitable trust. This is merely a procedural error and therefore the assessee’s application should not be rejected when otherwise all the conditions are fulfilled by the assessee for grant of approval under section 80G of the Act. Relying on the decisions of the Tribunal in the case of – (i) Workers Education Society, Mumbai vs. CIT (Exemption) (I.T.A. No2051/Mum/2025); (ii) Connecting Trust (Pune) vs. CIT(E) (ITA No.2437/PUN/2024; (iii) Mhalsakant Deosthan Mandir vs CIT (E) 172 Taxmann.com 284 (Pune -Trib); and (iv) Rotary Charity trust vs CIT(E) 170 Taxmann.com 797 (Mumbai-Trib), the Ld. AR submitted that the Tribunal in all these cases (supra) involving the identical set of facts as that of the assessee, has remanded the matter back to the file of the Ld. CIT(E) to decide the same afresh with a direction to treat the application already filed by the assessee as filed under the correct section code. He, accordingly prayed that the impugned matter may also be set aside to the Ld. CIT(E) for adjudication afresh after affording an opportunity of hearing to the assessee.
The Ld. DR, on the other hand, supported the order of the Ld. CIT(E). He, however, brought to our attention that there is a technical difficulty on the part of the Ld. CIT(E) to treat and dispose off the assessee’s application as filed under the correct section code as per the directions of the Tribunal and hence the assessee may be directed to file the fresh application with the correct clause.
We have heard the rival arguments made by both the sides and perused the material available on records. The Ld. CIT(E) has rejected the application filed by the assessee solely for the reason that the same has been filed under the wrong section code. It is the submission of the Ld. Counsel for the assessee it was an inadvertent mistake on the part of the assessee. It is also his submission that given an opportunity, the assessee is in a position to substantiate its case by filing the requisite details before the Ld. CIT(E) to his satisfaction. We find that the Coordinate Bench of the Pune Tribunal in the decisions (supra) relied upon by the Ld. AR, has set aside the matter to the file of the Ld. CIT(E) with a direction to decide the application of the assessee afresh considering the same as filed by the assessee under the correct section code. It is, however worthwhile to note the concern of the Ld. DR that there are certain technical difficulties faced by the Ld. CIT(E) in treating and disposing off the assessee’s application as filed under the correct section code.
Considering the totality of the facts and in the circumstances of the case and legal position enumerated above, we deem it fit and proper, to set aside the impugned order of the Ld. CIT(E) and restore the issue to his file with a direction to treat the application for grant of approval under section 80G of the Act as filed under the correct section code and decide the same afresh as per fact and law after granting reasonable opportunity of hearing to the assessee. Having said so, in the light of the above concern of the Ld. DR, we also direct that the Ld. CIT(E) shall give an opportunity to the assessee to file the correct application if needed and condone the delay/ limitation, if any in filing of the fresh application or allow the assessee to rectify the application and then decide the same on merits denovo. The assessee is also hereby directed to remain vigilant and make his submissions on the appointed date without seeking any adjournment under any pretext unless required for the sufficient cause, failing which the Ld. CIT(E) shall be at liberty to pass appropriate order(s) as per law. We direct and order accordingly. The solitary ground raised by the assessee is accordingly allowed for statistical purposes.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 31st July, 2025.