CBDT Circular Not Extending Time To File Application For Regular Registration Of New Provisionally Registered Trusts U/S 80G Violative Of Constitution: Madras High Court

The Madras High Court has held that the Circular dated May 24, 2023, issued by the Central Board of Direct Taxes (CBDT) not extending time to file applications for regular registration of new provisionally registered trusts under Section 80G of the Income Tax Act is violative of the Constitution of India.The bench of Chief Justice Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy has observed that the petitioner trusts do not have any vested right to claim an extension of time. When the statute prescribes a time limit, the petitioner trusts are expected to apply within the said date to avail themselves of the benefits. The first respondent board issues circulars enlarging the time limit even beyond the prescribed limit to mitigate the rigors of the statute and the hardship faced by the assessees. The same is in exercise of its powers under Section 119(2)(b) of the Income Tax Act. No discrimination or differentiation was made between the existing trusts and the new trusts at the first instance when Circular No. 8 of 2022 was issued. When the impugned Circular No. 6 of 2023 was issued, the reason stated by the first respondent was to mitigate genuine hardship. The bench noted that on a combined reading of the earlier Circular No. 8 of 2022 and the impugned Circular No. 6 of 2023, it can be clear that the only reason that is shown for the exercise of the powers is that these trusts faced hardship since they could not apply on time. No reason whatsoever is mentioned to omit "the clause (i) of the first proviso to sub-section (5) of Section 80G of the Act" in respect of the new trusts applying under Form No. 10AB alone.The petitioner-trust was established on September 9, 2021, and is allotted a permanent account number under the Income-Tax Act, 1961. The trust is formed with charitable and educational goals. The petitioner had to apply for a provisional registration or approval under the Act as per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, which amended the provisions relating to the application for the registration. As per the first and second proviso to Section 10(23C), Section 12A(1)(ac) and the first and second proviso to Section 80G(5) were amended.As per the requirement, the petitioner applied for provisional approval in Form No. 10A to the respondent, seeking approval under clause (iv) of the first proviso to sub-section 5 of Section 80G of the Act on September 25, 2021. The petitioner was granted provisional approval on October 6, 2021. In the meantime, the petitioner commenced its activities on September 9, 2021, and therefore had to apply for regular approval or registration in Form No. 10AB within six months from the date of commencement, i.e., within six months from September 9, 2021.While so, considering the difficulties faced by the assessees in electronically filing Form No.10AB, the first respondent, namely, the Central Board of Direct Taxes, issued Circular No.8 of 2022, dated March 21, 2022, by extending the date for filing applications for regular registration or approval till September 30, 2022. The time extension was granted in respect of the existing trusts and the new trusts for registrations under Sections 10(23C), 12A, and 80G(5).Even within the extended time, the petitioner did not file Form No. 10AB and applied only on March 22, 2023. While so, considering the representations received from various trusts and institutions whose applications were rejected as beyond the time limit, to mitigate the genuine hardship faced by them, the respondent issued Circular No. 6 of 2023, dated May 24, 2023, once again extending the time limit granted. While extending further time in respect of the existing trusts, time was extended both in respect of the proviso to clause (23C) of Section 10 or under sub-clause (i) of clause (ac) of sub-section (1) of Section 12A or under clause (i) of the first proviso to sub-section (5) of Section 80G of the Act until September 30, 2023. While the same extension is granted to the new trusts also in respect of the first proviso to clause (23C) of Section 10 or under sub-clause (iii) of clause (ac) of sub-section (1) of Section 12A, the time extension is not granted in respect of the first proviso to sub-section (5) of Section 80G.The petitioner's application in respect of approval for the benefit under Section 80G(5) will not be considered within the time. Therefore, the petitioners' trust filed the Writ Petitions for declaration declaring clause 5(ii) of Circular No. 6 of 2023, dated May 24, 2023, insofar as it fails to extend the due date for making an application for approval under clause (iii) of the first proviso to sub-section 5 of Section 80G as arbitrary and ultra vires the Constitution of India.The writ petitioners contended that the circular was discriminatory. Once the respondents decided to grant further time, extending in respect of the existing trusts alone in respect of both limbs and not in...

CBDT Circular Not Extending Time To File Application For Regular Registration Of New Provisionally Registered Trusts U/S 80G Violative Of Constitution: Madras High Court

Mariya Paliwala

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