BHURABHAI PUNJABHAI PARSANA FOUNDATION vs CIT

Introduction

In a significant ruling that reinforces a taxpayer-friendly approach to procedural compliance, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) in Bhurabhai Punjabhai Parsana Foundation vs. CIT(E) (ITA No. 428/Ahd/2024, A.Y. 2023-24) addressed a critical issue concerning the timelines for filing Form 10AB under Section 80G(5) of the Income Tax Act, 1961. The Tribunal overturned the order of the Commissioner of Income Tax (Exemptions) [CIT(E)], which had rejected the assessee’s application for final approval as non-maintainable due to a perceived delay. By holding that the statutory timeline is directory, not mandatory, the ITAT set a crucial precedent for charitable trusts navigating the transitional provisions of the new tax regime introduced w.e.f. 01.04.2021. This case commentary delves into the facts, legal reasoning, and implications of this landmark decision, emphasizing how procedural technicalities must not override substantive justice, especially in the context of CBDT’s consistent extensions for electronic filing hardships.

Facts of the Case

The assessee, Bhurabhai Punjabhai Parsana Foundation, a charitable trust registered on 16.04.2021, was granted provisional approval under Section 80G(5)(iv) of the Act on 24.09.2021 in Form 10AC. Subsequently, the trust filed an application for final approval under Section 80G(5)(iii) in Form 10AB on 02.08.2023. The CIT(E), however, rejected this application on 08.01.2024, holding it as non-maintainable. The CIT(E) reasoned that as per the first proviso to Section 80G(5), the application must be filed at least six months prior to the expiry of the provisional approval or within six months of commencement of activities, whichever is earlier. Since the trust commenced activities on 11.11.2021, the CIT(E) concluded that the deadline was 30.09.2022, making the 02.08.2023 filing belated. Consequently, the CIT(E) also cancelled the provisional approval granted earlier. Aggrieved, the assessee appealed before the ITAT, arguing that the timeline should be interpreted liberally, especially given CBDT’s Circular No. 7/2024 extending the due date for Form 10A/10AB filings under Section 12A to 30.06.2024.

Reasoning of the ITAT

The ITAT’s reasoning forms the core of this judgment, providing a detailed analysis of the interplay between procedural timelines and substantive compliance. The Tribunal, comprising Judicial Member Siddhartha Nautiyal and Accountant Member Makarand V. Mahadeokar, relied heavily on its earlier decision in Adani Education Foundation (ITA No. 359/Ahd/2023) and the Chennai ITAT’s ruling in CIT-1982, Charitable Trust (ITA No. 827/Chennai/2023). The key points of reasoning are as follows:

1. Directory vs. Mandatory Nature of Timelines: The ITAT held that the timeline prescribed under clause (iii) of the first proviso to Section 80G(5) is directory, not mandatory. This conclusion was drawn from the legislative intent behind the amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The Tribunal observed that these amendments were transitional in nature, aimed at facilitating a smooth shift to a fully electronic regime for trust registrations. Imposing a strict, inflexible timeline would defeat the purpose of the reform, especially when the assessee had already obtained provisional approval and was operating in good faith.

2. No Distinction Between Section 12A and Section 80G(5): A pivotal aspect of the reasoning was the rejection of any distinction between timelines for Form 10AB under Section 12A (for registration under Section 12AB) and under Section 80G(5). The ITAT noted that both provisions were amended simultaneously under the same legislative framework. The CBDT, through Circular No. 6/2023 and Circular No. 7/2024, had extended the due date for filing Form 10A/10AB under Section 12A to 30.09.2023 and further to 30.06.2024, citing genuine hardships in electronic filing. The Tribunal found no rationale to exclude Section 80G(5) applications from similar extensions, as the underlying difficulties—technical glitches, lack of awareness, and procedural complexities—were identical. The ITAT emphasized that “there cannot be a distinction within the same provision for having different time-lines, without bringing out any exception.”

3. Substantive Compliance Over Technical Delay: The Tribunal underscored that the assessee had substantively complied with all requirements. The trust was registered on 16.04.2021, obtained provisional approval on 24.09.2021, and commenced activities on 11.11.2021. The application for final approval, though filed on 02.08.2023, was made while the provisional approval was still valid (as it had not been cancelled prior to the CIT(E)’s order). The ITAT reasoned that rejecting the application solely on the ground of a technical delay would unjustly deprive the trust of its right to collect donations eligible for deduction under Section 80G, thereby harming both the trust and its donors. The Tribunal cited the principle that procedural provisions should not hinder substantive justice, especially when the revenue’s interest is not prejudiced.

4. Reliance on Precedents: The ITAT drew heavily from the Chennai ITAT’s decision in CIT-1982, Charitable Trust, which had elaborately discussed the issue. That decision noted that the CBDT’s circulars extending deadlines for Form 10A/10AB under Section 12A were issued under Section 119 of the Act, which empowers the Board to relax procedural requirements for genuine hardships. The Chennai ITAT had held that there is no reason to provide a different timeline for Section 80G(5) applications, as both provisions serve the same objective of enabling charitable institutions to claim exemptions and donors to claim deductions. The Ahmedabad ITAT fully endorsed this view, adding that the CIT(E)’s strict interpretation was contrary to the legislative intent of facilitating compliance in the digital era.

5. Impact of CBDT Circulars: The Tribunal gave significant weight to CBDT Circular No. 7/2024 dated 25.04.2024, which extended the due date for filing Form 10A/10AB to 30.06.2024. While this circular specifically referenced Section 12A, the ITAT held that its spirit must apply to Section 80G(5) as well, given the identical nature of the provisions. The Tribunal observed that the CIT(E) had ignored the practical difficulties faced by taxpayers in electronic filing, which the CBDT itself had acknowledged. By rejecting the application without considering these circulars, the CIT(E) acted in a manner inconsistent with the Board’s own directives.

6. Cancellation of Provisional Approval: The ITAT also addressed the CIT(E)’s decision to cancel the provisional approval granted in Form 10AC. The Tribunal held that this cancellation was unjustified, as the provisional approval was valid at the time of filing the final application. Cancelling it retrospectively would create legal uncertainty and penalize the trust for a procedural lapse that could be rectified. The ITAT directed that the provisional approval be restored, and the final application be considered on merits.

Conclusion

The ITAT’s decision in Bhurabhai Punjabhai Parsana Foundation vs. CIT(E) is a landmark ruling that clarifies the procedural framework for charitable trusts under the new tax regime. By holding that the timeline for filing Form 10AB under Section 80G(5) is directory, the Tribunal has ensured that technical delays do not defeat the substantive rights of trusts and their donors. The judgment reinforces the principle that tax laws must be interpreted pragmatically, especially during transitional phases, and that CBDT circulars extending deadlines for similar provisions should be applied uniformly. This ruling empowers trusts to seek final approval even after the prescribed timeline, provided they have obtained provisional approval and are operating in good faith. It also underscores the judiciary’s role in preventing revenue authorities from adopting a hyper-technical approach that undermines the legislative intent of promoting charitable activities. For practitioners and taxpayers, this case serves as a vital precedent for challenging rejections based on procedural non-compliance, particularly when the CBDT itself has recognized genuine hardships in electronic filing.

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