Rejection of Transitional Form 10A Does Not Invalidate

Rejection of Transitional Form 10A Does Not Invalidate Pre-Existing Registration Under Section 12AA

Issue

Whether the rejection of a transitional Form 10A application filed by an educational trust automatically cancels or invalidates its pre-existing registration under Section 12AA, thereby disentitling the trust from claiming income tax exemptions under Sections 11 and 12 for Assessment Year 2020-21.

Facts

Pre-Existing Registration: The assessee-trust, engaged in educational activities, was granted registration under Section 12AA in 2007, which was never lawfully cancelled or withdrawn.
Transitional Form 10A Filing: Due to changes in the statutory registration regime, the assessee filed Form 10A in 2020 for Assessment Year 2020-21.
Rejection by CIT(E): In early 2021, the CIT(Exemptions) treated the Form 10A as an application under Section 12AA and rejected it due to non-compliance with a questionnaire, without issuing any specific order to cancel or withdraw the original 2007 registration.
Subsequent Registration: Under the new regime, the assessee filed a fresh Form 10A and received Form 10AC, granting registration for Assessment Years 2022-23 to 2026-27.
Denial of Exemption: The Assessing Officer denied the exemption under Sections 11 and 12 for Assessment Year 2020-21 and taxed the surplus on the grounds that the trust lacked valid registration during the relevant year.

Decision

Continuance of Original Registration: Held that the assessee continued to hold a valid registration under Section 12AA for Assessment Year 2020-21 since there was no legal order cancelling or withdrawing its original 2007 registration.
Effect of Form 10A Rejection: Held that the procedural rejection of the transitional Form 10A application does not, by itself, result in the cancellation of a pre-existing Section 12AA registration.
Unjustified Classification by CIT(A): Held that the CIT(Appeals) erred in treating the assessee as an unregistered trust for Assessment Year 2020-21 based solely on the rejection of the transitional Form 10A.
Impact of Form 10AC: Held that the issuance of Form 10AC for subsequent Assessment Years (2022-23 to 2026-27) does not nullify or retroactively affect the validity of the earlier Section 12AA registration for Assessment Year 2020-21.
Final Ruling: Held that the denial of exemptions under Sections 11 and 12 was unsustainable, ruling fully in favor of the assessee.

Key Takeaways

Explicit Cancellation Required: A pre-existing registration under Section 12AA remains valid until and unless it is formally cancelled or withdrawn through specific statutory proceedings.
Procedural vs. Substantive Rights: Rejection of procedural transitional filings (such as transitional Form 10A) does not extinguish substantive registration rights granted earlier.
Prospective New Registration: Issuance of new registration certificates (Form 10AC) for future years does not invalidate or override historical registration claims for prior assessment years.

IN THE ITAT CHENNAI BENCH ‘B’

Ranganathan Rajeswari Charitable Trust

ACIT (Exemption)^*

Manu Kumar Giri, Judicial Member
and S.R. Raghunatha, Accountant Member

IT Appeal No. 4045 (Chny) of 2025
[Assessment year 2020-21]

SEPTEMBER 3, 2026

R. Vijayaraghavan, Adv. for the Appellant. Ms. P. Sunanda, JCIT for the Respondent.

ORDER

Manu Kumar Giri, Judicial Member.- The captioned appeal filed by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [hereinafter referred to as “the Ld.CIT(A)”], dated 04.11.2025 confirming the assessment order framed u/s. 143(3) of the Income Tax Act, 1961 for Assessment Year 2020-21.

2. The grounds of appeal raised by the assessee are as under:

Ground No. 1

The Order of the Learned Commissioner of Income Tax (Appeals), NFAC, [“CIT(Appeals)/NFAC”] is erroneous, contrary to law, facts on record and opposed to principles of natural justice.

Ground No. 2

The CIT(Appeals)/ NFAC erred in upholding the Order of the Assessing Officer denying exemption under sections 11 and 12 of the Act and taxing the surplus of income over the expenditure without considering the various contentions of appellant.

Ground No. 3

The CIT(Appeals)/ NFAC erred in holding the application filed in Form 10A on 28.09.2020 seeking registration under the erstwhile provisions of section12AA was rejected by the CIT(Exemptions) vide order dated 26.02.2021 and the registration granted in Form 10AC on 28.05.2021 was valid for the period AY 2022-23 to 2026-27 and therefore it cannot be extended to subject AY 2020-21.

Ground No. 4

The Order of the CIT(Appeals)/NFAC is vitiated for failure to consider the fact that the application made by the appellant on 28.09.2020 pursuant to the insertion of section 12AB of the Act by the Finance Act, 2020 w.e.f 01.06.2020 was omitted w.r.e.f 01.06.2020 by TOLA and thus the application and the consequent order, passed by the CIT(E) dt 26.02.2021 is non-est and void ab-initio.

Ground No. 5

The CIT(Appeals)/ NFAC failed to appreciate that the procedure for fresh registration under section 12AB of the Act inserted by the Finance Act, 2020 w,e,f 01.06.2020 was omitted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, [“TOLA”] w. r. e. f 01.06.2020 and a new section 12AB was inserted w.e.f .01.04.2021 wherein all the existing trusts/institutions are required to apply for fresh registration under the new scheme by submitting an online application in Form 10A within three months from the date on which the provision comes into force i.e. 3 months from 01.04.2021 (on or before 30.06.2021).

3. Brief facts of the case: The assessee is an educational institution/trust enjoying registration under section 12AA of the Income Tax Act, 1961, granted on 29.06.2007 vide Registration No. 127(69)/07-08/CIT-I/CBE.

3.1 For A.Y. 2020-21, the assessee claimed exemption under sections 11 and 12. The assessee’s original registration under section 12AA had neither been cancelled nor withdrawn.

3.2 Pursuant to the amendments introduced by the Finance Act, 2020 and the subsequent changes brought about by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”), the assessee, apparently under the then-prevailing understanding of the new registration procedure, filed Form 10A on 28.09.2020. The application was treated by the ld.CIT(E), Chennai as an application seeking registration under section 12AA and, owing to non-compliance with a questionnaire issued on 31.12.2020, the application dated 28.09.2020 was rejected by order dated 26.02.2021. Significantly, the order dated 26.02.2021 did not cancel or withdraw the assessee’s original registration dated 29.06.2007. It merely rejected the application dated 28.09.2020.

3.3 Thereafter, the assessee filed a fresh Form 10A under the new regime on 30.04.2021, pursuant to which Form 10AC dated 28.05.2021 was issued granting registration for A.Ys. 2022-23 to 2026-27. For A.Y. 2020-21, however, the AO denied exemption under sections 11 and 12 on the premise that the assessee did not possess a valid registration during the relevant assessment year and brought the surplus of Rs.1,09,17,204/- to tax.

4. On appeal, the ld.CIT(A)/NFAC confirmed the action of the AO, principally holding that the registration in Form 10AC dated 28.05.2021 was prospective and could not cover A.Y. 2020-21. Now assessee is in appeal before the Tribunal.

5. Before us the ld.AR submitted as under:

A. Original registration under section 12AA continued to subsist:-

The assessee’s primary contention is that registration under section 12AA granted on 29.06.2007 was a subsisting registration. Under the pre-TOLA regime, registration once granted under section 12AA continued unless it was cancelled in accordance with law. The CIT(E)’s order dated 26.02.2021 did not cancel the original registration. It only rejected the separate Form 10A application dated 28.09.2020. Therefore, the CIT(A) erred in treating the rejection of the subsequent application as cancellation of the assessee’s existing registration.

B. Form 10A dated 28.09.2020 was legally misconceived and became non-est:-

The Finance Act, 2020 had introduced a new regime involving section 12AB with effect from 01.06.2020. However, owing to TOLA, the Finance Act, 2020 version of section 12AB was itself omitted and was deemed to have been omitted with retrospective effect from 01.06.2020. TOLA inserted the operative section 12AB afresh with effect from 01.04.2021. Consequently, the legal basis upon which the assessee’s Form 10A dated 28.09.2020 was purportedly filed ceased to exist retrospectively. The assessee therefore submits that the ld.CIT(E)’s order dated 26.02.2021, insofar as it proceeded to adjudicate the Form 10A dated 28.09.2020 as an application under the erstwhile regime, could not operate to extinguish a subsisting registration under section 12AA.

C. TOLA specifically protected the existing registered trusts:-

After TOLA, section 12A(1)(ac)(i) contemplated applications by trusts already registered under section 12AA for migration to the new registration regime. The statutory framework ultimately required existing trusts to apply under the new regime after 01.04.2021. The present statutory text confirms that an entity registered under section 12AA immediately before the TOLA transition was specifically contemplated under section 12A(1)(ac)(i). Further, section 12A(2)(a) links the applicability of sections 11 and 12, in such cases, to the assessment year from which the trust was earlier granted registration. Thus, the legislative scheme does not support the proposition that an existing section 12AA registration automatically disappeared merely because an earlier, transitional Form 10A was rejected.

D. Rejection of application is not cancellation of registration: –

The distinction between rejection of an application for fresh registration and cancellation/withdrawal of an already granted registration is fundamental. The order dated 26.02.2021 expressly rejected the application dated 28.09.2020. It did not invoke the statutory mechanism for cancellation of the assessee’s registration dated 29.06.2007. Hence, the CIT(A)’s conclusion that “during the relevant financial year . the appellant did not have a valid and subsisting registration” proceeds on an incorrect factual and legal premise.

E. The subsequent Form 10AC cannot be read in isolation: –

The ld.CIT(A) proceeded on the assumption that because Form 10AC dated 28.05.2021 mentioned A.Ys. 2022-23 to 2026-27, the assessee necessarily stood unregistered for A.Y. 2020-21. That approach overlooks the independent legal effect of the original section 12AA registration dated 29.06.2007. The subsequent Form 10AC was part of the migration/re-registration regime. It was not an order cancelling or retrospectively replacing the assessee’s earlier registration.

F. The assessee had complied with substantive tax requirements: –

The assessee had filed Form 10B audit report on 20.12.2020 and ITR-7 on 21.12.2020 before the rejection order dated 26.02.2021. The assessee therefore submits that there was no allegation that its objects were non-charitable, its activities were non-genuine, or that it had violated the substantive conditions governing exemption. The dispute is purely one concerning the transitional registration mechanism.

G. Beneficial/technical provisions should not defeat substantive exemption:-

The entire dispute arose during the exceptional COVID-19 transitional period when the registration framework was undergoing repeated statutory amendments and extensions. The CBDT itself subsequently extended the timelines for filing Form 10A/10AB. Tribunal decisions have recognised that the transition from the old section 12AA regime to section 12AB was accompanied by extensions and procedural difficulties. Accordingly, a procedural application filed during the aborted first version of the new regime cannot reasonably be treated as extinguishing a registration that had already been validly granted in 2007.

6. The Revenue case may be summarised as follows:

The assessee’s Form 10A dated 28.09.2020 was rejected by the CIT(E) on 26.02.2021. The subsequent Form 10AC dated 28.05.2021 granted registration only for A.Ys. 2022-23 to 2026-27. The said Form 10AC did not contain any retrospective applicability to A.Y. 2020-21. Registration under section 12A/12AB was treated as prospective unless retrospective benefit was specifically granted. Consequently, the assessee was considered to have no valid registration for A.Y. 2020-21. In the absence of registration, the conditions of section 12A were not fulfilled and exemption under sections 11 and 12 could not be granted. The CBDT Circular relied upon by the assessee was considered inapplicable because, according to the CIT(A), the assessee did not have a valid registration covering A.Y. 2020-21. Therefore, the surplus of Rs.1,09,17,204/- was held taxable.

7. We have heard the rival submissions and perused the record and material furnished. The controversy has to be examined with reference to the statutory transition. The decisive question is not merely whether Form 10AC dated 28.05.2021 specifies A.Ys. 202223 to 2026-27. The first question is whether the assessee’s registration under section 12AA dated 29.06.2007 stood cancelled or otherwise ceased to be operative for A.Y. 2020-21. The ld.CIT(A) has not identified any order cancelling the original registration. The order dated 26.02.2021 did not cancel the original registration. The record, as supplied, establishes that the CIT(E)’s order dated 26.02.2021 rejected the application dated 28.09.2020. There is a material distinction between rejection of an application and cancellation of an existing registration. Therefore, the CIT(A) was not justified in drawing the further conclusion that the assessee “did not have a valid and subsisting registration” merely because the application dated 28.09.2020 had been rejected.

8. Further, the CIT(A) failed to consider the retrospective statutory amendment by TOLA. This is the crucial error. The Finance Act, 2020 had introduced section 12AB with effect from 01.06.2020. However, TOLA subsequently provided that the said section 12AB “shall be omitted and shall be deemed to have been omitted with effect from the 1st day of June, 2020”, while a fresh section 12AB was inserted with effect from 01.04.2021. Therefore, the legal regime which the ld.CIT(E) purportedly applied to the Form 10A dated 28.09.2020 had itself been retrospectively removed. The ld.CIT(A), while relying upon the rejection dated 26.02.2021, failed to examine this fundamental statutory development. The subsequent registration from A.Y. 2022-23 does not establish absence of registration for A.Y. 2020-21. The ld.CIT(A)’s reasoning effectively treats Form 10AC as the source of the assessee’s entitlement to exemption. That is incorrect on the facts presented. The assessee’s entitlement for A.Y. 2020-21 flows from its existing section 12AA registration dated 29.06.2007, provided that the same had not been lawfully cancelled. The later Form 10AC pertains to the new registration/migration regime and cannot, by itself, be construed as an order cancelling the earlier registration for A.Y. 2020-21. Section 12A(2) supports continuity in the migration regime. The statutory scheme specifically provides that, where the application is made under section 12A(1)(ac)(i), the provisions of sections 11 and 12 apply from the assessment year from which the trust was earlier granted registration. This legislative treatment is inconsistent with the ld.CIT(A)’s approach of treating the migration to section 12AB as creating a complete hiatus in the assessee’s entitlement to sections 11 and 12. No substantive violation has been brought on record. There is no finding in the material supplied that the assessee was not a charitable/educational institution or its activities were not genuine or its objects were non-charitable or its income was applied for non-charitable purposes or the original registration dated 29.06.2007 had been cancelled. The denial of exemption has resulted solely from the perceived registration gap. Once that foundational premise fails, the addition of the entire surplus cannot survive.

9. That a registration under section 12A, once granted, is not open to being ignored or treated as non-existent by the Assessing Officer is settled by the decision of the Hon’ble Supreme Court in ACIT v. Surat City Gymkhana 300 ITR 214 (SC), dt. 04.03.2008. The Asseessing Officer has no jurisdiction to sit in judgment over a subsisting registration; so long as it stands, exemption under section 11 must be examined on its merits and cannot be denied on the ground that the registration is invalid.

10. Exemption under section 11 has been allowed to the Appellant from Assessment Year 2007-08 up to Assessment Year 2019-20 on identical facts. There is no change in the objects, the constitution or the activities of the Trust in the year under appeal. In the case of Radhasoami Satsang v. CIT 193 ITR 321 (SC), dt. 15.11.1991, the Hon’ble Supreme Court held that where a fundamental aspect permeating through different assessment years has been found as a fact one way and has been allowed to stand, it is not appropriate to allow the position to be changed in a subsequent year. The departure made in the year under appeal rests on no change in facts, but only on a misreading of an unrelated order.

11. In view of the above discussion, we legally conclude that the assessee continued to possess the benefit of its registration under section 12AA dated 29.06.2007 for A.Y. 2020-21, there being no material demonstrating lawful cancellation or withdrawal thereof. The rejection of the Form 10A application dated 28.09.2020 did not, by itself, cancel the pre-existing registration. Further, in view of TOLA, the Finance Act, 2020 version of section 12AB was retrospectively omitted with effect from 01.06.2020, and the new section 12AB regime came into operation from 01.04.2021. Consequently, the ld.CIT(A) was not justified in treating the assessee as an unregistered trust/institution for A.Y. 2020-21 merely on the basis of rejection of the transitional Form 10A application. The subsequent Form 10AC dated 28.05.2021, valid for A.Ys. 2022-23 to 2026-27, does not have the effect of cancelling or nullifying the assessee’s earlier section 12AA registration for A.Y. 2020-21. Accordingly, the denial of exemption under sections 11 and 12 is unsustainable.

12. The addition of Rs.1,09,17,204/- representing surplus of income over expenditure is therefore deleted and the Assessing Officer is directed to allow the exemption claimed by the assessee under sections 11 and 12 of the Act, subject to verification of the other statutory conditions, if any.

13. In the result, the appeal of the assessee is allowed.