400 Days Delay in Filing 10AB Held Bona Fide: ITAT Restores Rotary Club Trust’s 12AB & 80G Applications [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that a 400-day delay in filing Form 10AB as bonafide and has thus restored the Rotary Club Trust’s application for registration under sections 12AB and 80G of the Income Tax Act.

The present appeal has been filed by the assessee, Rotary Club of Mumbai Sobo Charitable Trust, against the separate orders passed by the CIT(E) whereby the assessee’s applications seeking regular registration under section 12AB of the Income-tax Act, 1961 and approval under section 80G of the Act were rejected.

The assessee is a public charitable trust duly registered under the Bombay Public Trusts Act, 1950. It is an undisputed fact on record that the assessee was granted provisional registration under section 12A of the Act in Form No.10AC on 19.01.2022, which was valid up to the assessment year 2024-25.

In order to seek conversion of the provisional registration into a regular registration, the assessee applied Form No.10AB on 04.11.2024. But there was a delay of approximately 400 days in filing the said application in Form No.10AB.

The CIT(E), on verification of the application in Form No.10AB, initially observed that the application was incomplete and that all documents required under Rule 17A(2) of the Income-tax Rules, 1962, had not been furnished.

Upon further examination of the trust deed and the memorandum of objects, the CIT(E) noted that one of the ancillary clauses empowered the trust to apply its funds outside India.

According to the CIT(E), such a clause violated the provisions of section 11 of the Act. He further held that since the assessee had commenced its activities during the financial year 2022-23, it was statutorily required, in terms of section 12A(1)(ac)(iii) of the Act, to file its application in Form No.10AB within six months from the commencement of such activities, which, according to him, had not been complied with

The assessee contended that such delay was under a bona fide belief that the registration granted under section 12A was valid for a period of five years and actually arose from the clarifications issued by the Central Board of Direct Taxes, particularly Circular No.6 of 2023 dated 24.03.2023 and other subsequent circulars clarifying the transition to the new registration regime for charitable institutions.

In the matter as to the objection relating to the object clause permitting utilisation of funds, the assessee submitted that it had already moved an application before the Charity Commissioner for deletion of the said clause and had furnished a categorical undertaking that no activity involving utilisation of funds outside India has been carried out or is proposed to be carried out.

It was further submitted that, if granted an opportunity, the amended trust deed would be placed before the learned Commissioner (Exemptions) for verification.

The DR supported the impugned orders and submitted that the timelines prescribed under section 12A(1)(ac) are mandatory in nature and that, unless the trust deed is formally amended, the assessee cannot be said to be eligible for registration under section 12AB.

The two-member bench comprising Arun Khopdia (Accountant Member) and Amit Shukla( Judicial Member) observed that in the present case, the explanation offered by the assessee demonstrates a reasonable and bona fide cause for the delay in filing Form No.10AB.

It was held that when such bona fides are established, the authority was expected to exercise discretion judiciously and to advance the cause of justice by condoning the delay and examining the application on merits, particularly when the assessee was already enjoying provisional registration under the Act.

Coming to the objection relating to the object clause permitting utilisation of funds outside India, the tribunal observed that the assessee had taken initiatives to rectify the same. An unequivocal undertaking had also been furnished.

It was held that in such circumstances, denial of registration without allowing the assessee to place the amended trust deed on record would be contrary to the principles of natural justice and the settled jurisprudence governing the grant of registration under section 12AB.

Thus, the tribunal set aside the impugned order and condoned the delay in filing Form 10AB. Both the application under section 12AB and approval under section 80G were restored for fresh adjudication