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2025 (5) TMI 750 - AT - Income TaxRejection of application for approval u/s 80G(5) - Charitable activity u/s 2(15) - HELD THAT - The trust is registered u/s 12A we deem it fit to set-aside the order passed by CIT Exemption Pune and remand the matter back to him with a direction to treat the application of the assessee as filed under required/desired clause of first proviso to sub-section (5) of section 80G and consider the same for grant of approval u/s 80G(5) in accordance with law after providing reasonable opportunity of hearing to the assessee. Assessee is also hereby directed to comply with the notices issued by CIT Exemption Pune in this regard and produce requisite information/documents/ evidences in support of application for approval u/s 80G otherwise CIT Exemption Pune shall be at liberty to pass appropriate order as per law. Thus the grounds of appeal raised by the assessee in this appeal are partly allowed. Appeal filed by the assessee is allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of application filed under incorrect sub-clause of section 80G(5) Relevant legal framework and precedents: Section 80G(5) of the Income-tax Act prescribes conditions and procedural requirements for registration of trusts for grant of exemption certificates. The application must be filed under the correct sub-clause of the first proviso to sub-section (5). The Tribunal relied on a precedent from a coordinate bench in the case of Nitdaa Foundation vs. CIT, where a similar error in mentioning the incorrect clause was held to be a curable defect. Court's interpretation and reasoning: The Tribunal observed that the rejection by the CIT (Exemption) was primarily due to the application being filed under sub-clause (B) of clause (iv) of the first proviso to section 80G(5), which was not applicable to the assessee. However, this was a technical error without any deliberate or wilful intention. The Tribunal noted that the error was curable and that the application should be deemed to have been filed under the correct clause, as was held in the Nitdaa Foundation case. Key evidence and findings: The assessee admitted the error in mentioning the wrong clause. The Tribunal also noted that the assessee was registered under section 12A of the Income-tax Act, which is relevant for eligibility under section 80G. Application of law to facts: Applying the principle of curability of defects, the Tribunal concluded that the application should be treated as filed under the correct clause. The Tribunal directed the CIT (Exemption) to consider the application accordingly. Treatment of competing arguments: The Revenue contended that the application was rightly rejected due to non-fulfillment of conditions and technical errors. The Tribunal, however, gave precedence to the principle of substantial compliance and fairness, emphasizing that technical defects should not result in outright rejection without opportunity for rectification. Conclusion: The technical error in mentioning the wrong sub-clause was a curable defect, and the application must be considered as filed under the appropriate clause. Issue 2: Justification for rejection of application on grounds of non-fulfillment of condition (i) of section 80G(5) Relevant legal framework and precedents: Section 80G(5) sets out specific conditions that the trust must fulfill to qualify for registration. Condition (i) requires that the application must be made before the commencement of activities or that the trust has not claimed deductions under section 11 for previous years. Court's interpretation and reasoning: The CIT (Exemption) rejected the application on the ground that the assessee's activities had already commenced and that it had claimed deductions under section 11 for previous years, rendering it ineligible to apply under the specified sub-clause. The Tribunal, however, did not uphold this rejection outright but remanded the matter for reconsideration after treating the application as filed under the correct clause. Key evidence and findings: The assessee's claim of registration under section 12A and the timing of activities and claims under section 11 were critical to determining eligibility. Application of law to facts: Since the application was initially filed under an incorrect clause, the rejection based on condition (i) under that clause was premature. The Tribunal directed the CIT (Exemption) to reconsider the application under the correct clause, which may have different eligibility criteria. Treatment of competing arguments: The Revenue relied on strict compliance with conditions. The Tribunal balanced this with the principle of justice and procedural fairness, ensuring the assessee is given a fair opportunity to comply and be heard. Conclusion: The rejection on the ground of non-fulfillment of condition (i) was not sustained without reconsideration under the correct clause. Issue 3: Adequacy of opportunity of hearing and procedural fairness Relevant legal framework: Principles of natural justice require that an applicant be given reasonable opportunity to respond to queries and furnish clarifications before adverse orders are passed. Court's interpretation and reasoning: The Tribunal found that the CIT (Exemption) had set a compliance deadline of 29.08.2024 and passed the rejection order on 30.08.2024, which was considered insufficient time to furnish additional clarifications or evidence. Key evidence and findings: The timeline of notices and orders showed a narrow window for compliance. The assessee contended that no further opportunity was provided after the initial response. Application of law to facts: The Tribunal emphasized the need to provide a reasonable opportunity of hearing and directed the CIT (Exemption) to allow the assessee to produce documents, evidence, and explanations before passing a fresh order. Treatment of competing arguments: The Revenue did not dispute the procedural timeline but urged confirmation of the order. The Tribunal prioritized procedural fairness over strict timelines. Conclusion: The assessee must be afforded a reasonable opportunity of hearing before any final adverse order is passed. 3. SIGNIFICANT HOLDINGS The Tribunal held: "Thus, the whole controversy arose due to incorrect mention of the clause under which the application was required to be filed... Since, Form No. 10AC was filed in time, the error on the part of the assessee for mentioning the wrong clause is deemed to be a curable defect and the application on Form No. 10AC is deemed to be filed under clause (i) of the first proviso to sub-section (5) of section 80G." Core principles established include:
Final determinations:
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