Application for 80G approval (Form 10AB) rejection reversed and remanded

By | June 3, 2025
0 Comment

Application for 80G approval (Form 10AB) rejection reversed and remanded; Commissioner to process under correct clause as assessee made a bona fide error in section selection.

Issue:

Whether the Commissioner (Exemption) is justified in rejecting an assessee-trust’s application for approval under Section 80G(5) on the ground that the specific sub-clause chosen (Section 80G(5)(iv)(B)) requires activities to have commenced and no prior income exemption claimed, when the assessee actually intended to apply under a different sub-clause (Section 80G(5)(ii)) due to a bona fide error in selection, and the assessee had already claimed exemption/excluded its income under Sections 10(23C), 11, or 12.

Facts:

  • The assessee-trust filed an application for approval under Section 80G(5) by filing Form 10AB.
  • The assessee had selected sub-clause (iv)(B) of the first proviso to Section 80G(5) in its application.
  • The Commissioner (Exemption) rejected the application, stating that to avail benefit under the selected sub-clause (iv)(B), it was necessary that:
    1. Activities of the institution or fund shall have commenced.
    2. No income or part thereof had been excluded from total income on account of applicability of Section 10(23C) or Section 11 or Section 12 (i.e., no prior exemption claimed).
  • Since the assessee admitted to having claimed exemption/excluded its income (under Sections 10(23C), 11, or 12), the Commissioner (Exemption) held that the assessee was not eligible under Section 80G(5)(iv)(B) and rejected the application as non-maintainable.
  • The assessee submitted that while submitting the application, it had made a bona fide error in selecting sub-clause (iv) instead of sub-clause (ii) of the first proviso to Section 80G(5).

Decision:

The court held in favor of the assessee (by remanding the matter). It ruled that since the assessee had selected the wrong section code inadvertently while filing the application for approval in Form 10AB, the matter was to be remitted back to the Commissioner (Exemption). The Commissioner was directed to consider the application as if it were filed under clause (ii) of the first proviso to Section 80G(5), and thereafter grant approval accordingly, if the assessee was otherwise found eligible.

Key Takeaways:

  • Purpose of Section 80G(5) Proviso and Sub-clauses:
    • Clause (iv): This clause (specifically (iv)(B) as per the facts) generally deals with applications for provisional approval by new trusts/institutions that have not yet commenced their activities or claimed prior exemptions.
    • Clause (ii): This clause typically deals with applications for final approval by trusts/institutions that have already been provisionally approved (often under clause (iv) or similar previous provisions) and have commenced their activities and are claiming exemptions under Sections 10(23C), 11, or 12.
  • Bona Fide Procedural Error: The court recognized that the assessee’s selection of the wrong sub-clause was a “bona fide error.” Such inadvertent procedural mistakes should not lead to outright rejection if the assessee’s true intent and eligibility under a different, applicable provision are apparent.
  • Substance Over Form: This judgment strongly emphasizes the principle of “substance over form” in administrative proceedings. The revenue authority should look at the true nature of the application and the assessee’s eligibility under the correct provision, rather than rejecting it on a mere technicality.
  • Duty of Commissioner (Exemption): The Commissioner, being a quasi-judicial authority, is expected to adopt a facilitative approach, especially for charitable organizations seeking approvals. If a simple error in form selection is detected, a show-cause notice should be issued to allow correction, rather than outright rejection.
  • Remand for Correct Adjudication: The remedy of remanding the matter is appropriate. It directs the Commissioner to treat the application as if filed under the correct clause and then to adjudicate it on its merits (i.e., whether the trust fulfills all substantive conditions for approval under clause (ii)). This ensures that the assessee gets a fair opportunity to secure the necessary approval.
  • “Otherwise Found Eligible”: The direction includes the caveat “if assessee was otherwise found eligible,” meaning the Commissioner still has to verify all other substantive conditions for grant of final 80G approval.
IN THE ITAT AHMEDABAD BENCH ‘B’
Senior Citizen Council Gandhinagar
v.
Commissioner of Income-tax (Exemption)
Sanjay Garg, Judicial Member
and Narendra Prasad Sinha, Accountant Member
IT Appeal No. 362 (Ahd.) OF 2025
MAY  21, 2025
Mehul K. Patel, AR for the Appellant. R.P. Rastogi, CIT-DR for the Respondent.
ORDER
Narendra Prasad Sinha, Accountant Member. – This appeal is filed by the assessee against the order dated 20.08.2024 passed by the Commissioner of Income Tax (Exemption) Ahmedabad, (in short ‘the CIT(Exemption)’), rejecting the application for approval u/s. 80G(5)(iv) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
2. There was a delay of 109 days in filing of this appeal. The assessee has filed an affidavit explaining the reason of delay. It has been submitted that the assessee and its trustees were not conversant with Income-tax matters and had never faced any Income-tax litigation in the past. The assessee was unable to operate or login to the Income-tax portal. In the month of January, 2025, the assessee had come to know about rejection of registration u/s 12A/approval u/s 80G5(iv) of another trust through some other trustees of similar trust. On getting this information the matter was verified about pending approval under section 80G5(iv) the Act of the assessee and it was learnt that the said approval was already rejected. Thereafter, the matter was taken up with an advocate and on his advice the present appeal was filed and, in the process, there was delay of 109 days. The assessee has submitted that the delay in filing of the present appeal was not intentional and that there was no mala-fide intention on the part of the assessee. The ld. CIT-DR, on the other hand, submitted that the condonation of delay may be decided on its merit. Considering the explanation of the assessee, the delay in filing the present appeal is condoned.
3. The brief facts of the case are that the assessee is a registered charitable trust and had made an application for approval u/s 80G(5)(iv)(B) of the Act by filing Form No. 10AB electronically on 26.02.2024. From the application it was evident that the assessee trust had commenced its activities on 17.02.1993. The ld. CIT(Exemption) observed that in order to avail the benefit of section 80G(5)(iv)(B) of the Act, it was necessary that the activities of the institution or funds shall be commenced and no income or part thereof has been excluded from the total income on account of applicability of section 10(23C) or section 11 or section 12 of the Act, for any previous year ending on or before the date of such application, at any time after the commencement of the activities of the trust. Therefore, the ld. CIT(Exemption) had made inquiry from the assessee in this regard vide notice dated 11.06.2024. In reply the assessee had informed that in accordance with approval granted under section 12AA of the Act, the trust has been claiming exemption under section 11 or 12 of the Act in the past years. Since the assessee admitted of having claimed exemption/excluded its income, the ld. CIT(Exemption) found that the assessee was not eligible for approval under section 80G(5)(iv)(B) of the Act. Therefore, the application of the assessee trust was rejected as non-maintainable.
4. Aggrieved with the order of the ld. CIT(Exemption) the assessee has filed the present appeal. The following grounds have been taken in this appeal:
1.That on facts, and in law, the learned CIT(Exemption) has grievously erred in rejecting the application for approval u/s 80G(5)(iv)(B) of the Act as non-maintainable.
2.That on facts and in law, the appellant made a bona fide error in selecting subclause (iv) instead of sub-clause (ii) of section 80G(5) of the Act.
3.That on facts, and in law, learned CIT(Exemption) be directed to consider the application under the correct provisions of section 80G(5)(ii) of the Act, and decide on merits.
4.The appellant craves liberty to add, altar, amend any ground of appeal.
5. Sri Mehul K Patel, ld. AR of the assessee submitted that ld. CIT(Exemption) was not correct in rejecting the application for approval under section 80G(5)(iv)(B) of the Act as non-maintainable. He submitted that the assessee, while submitting the application, had made a bona fide error in selecting the sub-clause (iv) instead of sub-clause (ii) of the proviso to section 80G(5) of the Act. He, therefore, requested that the matter may be set aside to the file of ld. CIT(Exemption) with a direction to consider the application of the assessee under the correct provision of section 80G(5)(ii) of the Act and decide the same on merits. The Id. AR relied on the decision of the Mumbai Bench of the Tribunal in the case of Rotary Charity Trust v. CIT (Exemption) (Mumbai – Trib.)/ITA No. 6133/MUM/2024 dated 09.01.2025 in this regard and prayed for a similar direction.
6. Sh. R P Rastogi, the ld. CIT-DR on the other hand submitted that the ld. CIT(E) had rejected the application based on the submission made by the assessee in Form 10AB stating that the application is made under section 80G(5)(iv)(B). The ld. DR further submitted that the matter can be remitted back to the CIT(E) to consider the application afresh based on the claim of the assessee that wrong section had been inadvertently mentioned in the Form 10AB.
7. We have heard the parties and perused the material on record. Before we proceed to examine the facts in assessee’s case, it is necessary to first look at the relevant provisions of first proviso to sub-section (5) of section 80G which read as under – Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval, —
(i)where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the 1st day of April, 2021;
(ii)where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period;
(iii)where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier; —[or]
90[(iv)91[***] where activities of the institution or fund 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 approval is sought;
(B)commenced91a[***] at any time after the commencement of such activities:]
8. The application to be made to the Principal Commissioner or Commissioner for approval of the fund / institution u/s 80G(5)(vi) of the Act is guided by the first proviso to sub-section (5) of section 80G of the Act. Under clause (iv) of the said proviso, the application is required to be made in a case where the activities of the institution or fund has not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought or where it has commenced at any time after the commencement of the previous year. In the present case the assessee had filed its application on 26.02.2024 but its activities had commenced long back on 17.02.1993. Therefore, the clause (iv) of first proviso to sub-section (5) of section 80G of the Act was not applicable in its case. The assessee’s case was covered in clause (ii) of first proviso to sub-section (5) of section 80G of the Act, as it was already allowed approval in the past which was going to expire. Therefore, the correct section code under which the assessee ought to have selected is clause (ii) of first proviso to subsection (5) of section 80G. The Id. CIT(E) has treated the application as one filed under sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G and accordingly rejected the application for not fulfilling the stipulated conditions prescribed for filing application for approval in Form 10AB.
9. In view of above facts, we are of the considered view that there is merit in claim of the ld. AR that the assessee had selected the wrong section code inadvertently while filing the application for approval in Form 10AB. In view of these discussions and respectfully following the decision of the Mumbai Bench in the case of Rotary Charity Trust (supra), we remit the issue back to the file of ld. CIT(E), with a direction to consider the application of the assessee as under Clause (ii) to first proviso to section 80G(5) of the Act, and thereafter grant approval accordingly, if assessee is otherwise found eligible.
10. In the result, the appeal of the assessee is allowed for statistical purpose.