Incorrect Section Code No Grounds for Rejection: Mumbai ITAT Orders CIT(E) to Grant Final Approval u/s 80G [Read Order]

In a landmark ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai Bench has directed the Commissioner of Income Tax (Exemption) CIT(E), to reconsider the application of a Trust for final registration under Section 80G of the Income-tax Act, 1961. The tribunal ruled that the rejection of the application based solely on an incorrect section code was unjustified and remanded the matter back to the CIT(E) for fresh adjudication.

Rotary Charity Trust, a registered charitable trust incorporated in 1996, had applied for final approval under Section 80G after obtaining provisional registration in April 2022, which was valid until the assessment year 2024-25. The trust is engaged in various public charitable activities, including providing education to underprivileged and specially-abled children.

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During the proceedings, the trust’s counsel,  Sashank Mehta, argued that while filing Form 10AB for final registration, the trust had mistakenly selected sub-clause (B) of clause (iv) of the first proviso to subsection (5) of Section 80G instead of clause (iii). The CIT(E) rejected the application on the grounds that the trust had already claimed exemption under Sections 11 and 12 in previous assessment years, making it ineligible for approval under the selected sub-clause. However, the ITAT noted that this was a clerical error and should not have been a basis for rejection.

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The ITAT observed that the trust had been consistently granted tax exemptions in prior years and had complied with all statutory requirements. It further noted that the CIT(E) failed to provide the trust with an opportunity to rectify the error or present its case adequately. The tribunal emphasized that procedural errors should not result in the denial of substantive relief, particularly when the applicant is otherwise eligible.

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The case was heard by a bench comprising Saktijit Dey (Vice President) and Girish Agrawal (Accountant Member). Referring to the Kolkata ITAT decision in North Eastern Social Research Centre vs. CIT(E), which dealt with a similar issue, the ITAT held that the CIT(E) must evaluate the trust’s eligibility based on merits rather than a mere procedural lapse. The tribunal directed the CIT(E) to grant final approval under Clause (iii) of the first proviso to Section 80G(5) if the trust meets all other conditions.

In conclusion, the appeal was allowed for statistical purposes.

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