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Facts
The assessee, a charitable trust, applied for registration under section 12A(1)(ac)(vi)(B) of the Income Tax Act. The CIT(E) rejected the application, stating a condition was not fulfilled as the assessee had claimed exemption under Section 11 in prior years.
Held
The Tribunal held that the assessee's case did not strictly fall under the cited sub-clause, but being provisionally registered, it could apply under section 12A(1)(ac)(iii). The Tribunal also noted that the provision should be interpreted liberally.
Key Issues
Whether the assessee fulfilled the conditions for registration under section 12A(1)(ac)(vi)(B) and if the application could be considered under another sub-clause, particularly 12A(1)(ac)(iii), given the provisional registration.
Sections Cited
12A(1)(ac)(vi), 80G(5)(iii), 12A, 12AB, 12A(1)(ac), 11, 12A(1)(ac)(iii)
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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: MS. SUCHITRA R. KAMBLE & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: These two appeals are filed by the assessee against the orders, both dated 18.12.2024, passed by the Commissioner of Income-tax (Exemption), Ahmedabad (in short “CIT(E)”) in the proceeding under section 12A(1)(ac)(vi) of the Income Tax Act, 1961 (“the Act” for short) and in respect of the approval under section 80G(5)(iii) of the Act, respectively.
Brief facts of the case are that the assessee had filed an application in form No.10AB for approval of the Trust under section 12A(1)(ac)(vi) of the Act. The ld. CIT(E) had made certain inquiries and found that the eligibility condition for approval of the trust under and 455/Ahd/2025 2 section 12A(1)(ac)(vi) of the Act was not fulfilled. Therefore, he had rejected the application of the assessee for registration u/s 12A(1)(ac)(vi)(B) of the Act. Further, since the registration under section 12A of the Act was a mandatory condition for approval under section 80G(5)(iii) of the Act, the application filed by the assessee under section 80G(5) was also rejected.
Aggrieved by the orders of the ld. CIT(E) the assessee has filed the present appeals, wherein the following grounds were raised:
“The CIT (Exemptions), Ahmedabad, erred in rejecting the appellant's application for registration under Section 12AB on the ground that the appellant is not eligible to get registered under section 12A(l}(ac)(vi)- ITEM(B) of the Act. The CIT (Exemptions] ought to have registered the appellant under some other clause of Section 12A of the Act.”
The Ld. CIT-Exemption, Ahmedabad, has erred in law in rejecting the application for registration of the trust u/s 80G(5)(iii) of the Income Tax Act on the ground that the appellant does not have any valid registration u/s 12A/12AB of the Act either in form No.10AD or in Form No.10AC.
Shri Mehul Thakkar, ld. AR of the assessee explained that the assessee is a charitable trust registered under the Bombay Public Trust Act, vide registration certificate dated 9.8.2017. The assessee trust was never registered under the Income Tax Act, and had obtained its first provisional registration under section 12AB of the Act on 7.4.2022 for the period Asst. Year 2022-23 to 2024-25. Thereafter, the assessee had moved an application seeking final registration under section 12A(1)(ac)(vi) of the Act. The ld. AR fairly admitted that one of the conditions, as stipulated under section 12A(1)(ac)(vi)-ITEM (B) was not fulfilled as the assessee had claimed exemption under section 11 of the Act in the Asst. Years 2019-20 to and 455/Ahd/2025 3 2024-25. He, however, submitted that the case of the assessee was not covered in any of the other sub-clauses of section 12A(1)(ac) of the Act. He, therefore, requested that the matter may be remanded to the ld. CIT(E) with a direction to allow registration of the Trust under the suitable sub-clause.
Per contra, Shri R.P. Rastogi, CIT-DR submitted that the ld. CIT(E) had rightly rejected the application of the assessee made under section 12A(1)(ac)(vi)(B) of the Act, as the condition stipulated therein was not fulfilled.
We have considered the rival submissions. It will be relevant to reproduce the provisions of section 12A(1)(ac) of the Act for the sake of clarity on the issue.
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:— …… (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 87[or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10] and the period of the said registration 87[or approval, as the case may be,] 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 87[or provisionally approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10], at least six months prior to expiry of period of the provisional registration 87[or provisional approval, as the case may be,] and 455/Ahd/2025 4 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; 88[(vi) in any other case, where activities of the trust or institution have— (A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought; (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 sub-clause (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,] and such trust or institution is registered under section 12AB: 89[Provided that where the application is filed beyond the time allowed in sub-clauses (i) to (vi), the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in filing the application, condone such delay and such application shall be deemed to have been filed within time;]
In the present case, the assessee had made application under section 12A(1)(ac)(vi)(B) of the Act. As rightly held by the ld. CIT(E), the condition under that sub-clause was not fulfilled by the assessee as it has claimed exemption under section 11 of the Act in different years. The contention of the assessee is that it did not fulfill the condition as stipulated in clauses (i) to (vi) of section 12A(1)(ac) of the Act. It is true that apparently the case of the assessee does not fall in any of the sub-clauses (i) to (vi). Since the assessee has been provisionally registered under section 12AB of the Act, it is eligible to make an application under section 12A(1)(ac)(iii) of the Act. But the application under this sub-clause is required to be made within the period of six months prior to the expiry of period of provisional and 455/Ahd/2025 5 registration or within six months from the commencement of the activities, whichever is earlier. The contention of the assessee is that the period of six months from the commencement of activities had already expired, which was earlier than grant of provisional registration, and, therefore, it was not eligible for making application under this sub-clause as well. In fact, this sub-clause makes the grant of registration to entities, who have commenced their activities and thereafter apply for provisional registration, very restrictive. An assessee trust might have commenced its activities much prior to the grant of provisional registration. The new trust or institution are required to apply for the provisional registration/approval at least one month prior to the previous year relevant to the assessment year from which the said registration/approval is sought. In the present case the provisional registration was granted to the assessee on 07.04.2022 for the A.Ys. 2022-23 to 2024-24. This was in spite of the fact that the commencement of activities of the trust was much earlier in the A.Y.2019-20 wherein exemption u/s 11 was claimed for the first time. The intention of the Legislature would not be that a trust will be precluded from applying for final registration, even after the grant of provisional registration, particularly in a case, where the provisional registration was granted after six months from the commencement of its activities. Therefore, the provision of section 12A(1)(ac)(iii) has to be liberally interpreted in order to make such trust or institution eligible for registration, where they have been allowed provisional registration after six months from the commencement of their activities.
In view of the above facts, the matter is set aside to the file of the ld. CIT(E) with a direction to consider the application of the assessee for registration under the provisions of section 12A(1)(ac)(iii) of the Act. If necessary, the assessee may be directed to file a fresh and 455/Ahd/2025 6 application under this provision. The appeal of the assessee is allowed for statistical purpose.
The application of the assessee under section 80G(5) of the Act should be decided after adjudicating the issue of registration under section 12A(1)(ac) of the Act. Therefore, the appeal of the assessee in is also set aside for statistical purpose.
In the result, both the appeals of the assessee are allowed for statistical purpose. Order pronounced in the Court on 29th July, 2025 at Ahmedabad.