Madras High Court
Sri Nrisimha Priya Charitable Trust vs Central Board Of Direct Taxes on 2 April, 2024
Author: D.Bharatha Chakravarthy
Bench: Sanjay V.Gangapurwala, D.Bharatha Chakravarthy
2024:MHC:1613
W.P.No.27030 of 2023 etc., (batch cases)
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 02.04.2024
CORAM :
THE HON'BLE MR.SANJAY V.GANGAPURWALA ,
CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
W.P.Nos.27030, 27041, 27042, 27034, 27048, 27051 of 2023; 3248 and
3250 of 2024
In W.P.No.27030 of 2023 :
Sri Nrisimha Priya Charitable Trust
Represented by its Trustee,
Rangamani Rajan .. Petitioner
Versus
1. Central Board of Direct Taxes,
Represented by its Director,
Ministry of Finance,
North Block, New Delhi - 110 001.
2. Commissioner of Income Tax (Exemptions),
Income Tax Department,
No.121, M.G.Road, Nungambakkam,
Chennai - 600 034. .. Respondents
Prayer in W.P.No.27030 of 2023 : Writ Petition filed under Article 226 of
the Constitution of India praying for a Writ of declaration to declare Clause
5(ii) of the Circular No.6 of 2023 bearing F.No.370133/06/2023-TPL, dated
24.05.2023 issued by the 1st respondent insofar as it fails to extend the due
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1/23
W.P.No.27030 of 2023 etc., (batch cases)
date for making applications for approval under clause (iii) of the first
proviso to sub-section (5) of Section 80G of the Income Tax Act, 1961 as
illegitimate, arbitrary, and ultra vires the Constitution of India.
In W.P.Nos.27030, 27041, 27042, 27034, 27048, 27051 of 2023 :
For Petitioner : Mr.Suhrith Parthasarathy
For Respondents : Mr.AR.L.Sundaresan,
Additional Solicitor General of India,
Asst. by Mr.V.Mahalingam,
Senior Panel Counsel for R1
In W.P.Nos.3248 and 3250 of 2024 :
For Petitioner : Mr.R.Vijayaraghavan
for M/s.Subbaraya Aiyar Padmanabhan
and Ramamani
For Respondents : Mr.AR.L.Sundaresan,
Additional Solicitor General of India,
Asst. by Mr.V.Mahalingam,
Senior Panel Counsel for R1
COMMON ORDER
(Order made by the Hon'ble Mr Justice D.Bharatha Chakravarthy)
A. The Writ Petition:
These writ petitioners are trustees representing their respective
charitable trusts. Since the reliefs claimed by them are identical and
common, these Writ Petitions were heard together, and disposed of by this
common order.
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B. The Factual Matrix:
2. The following facts in W.P.No.27030 of 2023 are adverted to
illustrate the factual background :-
2.1. The petitioner trust was established on 09.09.2021 and is
allotted a Permanent Account Number under the Income-Tax Act, 1961
(from now on referred to as 'the Act'). The trust is formed with charitable
and educational goals. The petitioner had to apply for a provisional
registration/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 said Act, the first and second proviso to Section 10(23C), Section
12A(1)(ac) and the first and second proviso to Section 80G(5) of the Act
were amended. The amended provisions inter alia provide the following:-
" a) New trusts or institutions need to apply for the
provisional registration/approval at least one month prior
to the commencement of the previous year relevant to the
assessment year from which the said registration/approval
is sought. Such provisional registration/approval shall be
valid for a period of 3 years.
b) Provisionally registered/approved trusts or
institutions will again need to apply for regular
registration/approval at least six months prior to expiry of
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period of the provisional registration/approval or within
six months of the commencement of activities, whichever
is earlier. Regular registration/approval shall be valid for a
period of 5 years.
c) The trusts and institutions will need to apply
at least six months prior to the expiry of regular
registration/approval."
2.2. As per the said requirement, the petitioner applied for
provisional approval in Form No.10A to the second respondent seeking
approval under clause (iv) of the first proviso to sub-section 5 of Section
80G of the Act on 25.09.2021. The petitioner was granted provisional
approval on 06.10.2021. In the meanwhile, the petitioner commenced its
activities from 09.09.2021 and therefore, had to apply for regular
approval/registration in Form No.10AB within six months from the date of
commencement i.e., within six months from 09.09.2021.
2.3. While so, considering the difficulties faced by the assesses in
electronically filing Form No.10AB, the first respondent namely, the Central
Board of Direct Taxes, issued Circular No.8 of 2022, dated 21.03.2022,
thereby, extending the date for filing applications for regular
registration/approval till 30.09.2022. The time extension was granted in
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respect of the existing trusts and the new trusts for registrations under
Sections 10(23C), 12A and 80G(5) of the Act.
2.4. Even within the extended time, the petitioner did not file
Form No.10AB and applied only on 22.03.2023. 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 first respondent issued Circular No.6 of 2023,
dated 24.05.2023 once again extending the time limit granted. It is essential
to extract the relevant portion of the circular which reads as follows:-
" 5. In order to mitigate genuine hardship in such
cases, the Board, in exercise of the power granted under
section 119 of the Act, extends the due date of making
application in,-
(i) Form No. 10A, in case of an application
under clause (i) 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, till 30.09.2023
where the due date for making such application has
expired prior to such date;
(ii) Form No. 10AB, in case of an application
under clause (iii) 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 of the Act, till 30.09.2023
where the due date for making such application has
expired prior to such date."
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2.5. Thus, it can be seen that while extending further time, (a) in
respect of the existing trusts, time was extended both in respect of 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 till 30.09.2023; (b) 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 of the Act.
2.6. Therefore, the petitioner's application in respect of approval
for the benefit under Section 80G(5) of the Act will not be considered as
within the time. Therefore, the petitioners’ trust has come up with the
present Writ Petitions for declaration declaring the aforementioned clause
5(ii) of the Circular No.6 of 2023, dated 24.05.2023 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 of the Act as arbitrary
and ultra vires the Constitution of India.
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2.7. The writ petitioners contend that the impugned circular is
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 respect of the new trusts in respect of Section 80G would be violative
of Article 14 of the Constitution of India. In the absence of approval under
Section 80G, donors may not come forward, which ultimately would spell
doom for the very existence of the petitioner trusts. No reason is given and
the decision is irrational.
C. The Counter :
3. The Writ Petitions are resisted by the respondents by filing a
counter-affidavit. It is stated that the original date of filing was extended till
30.09.2022 to grant an opportunity. The petitioner trusts ought to have filed
their Form No.10AB well within time or at least within the extended time.
However, considering various hardships, the time was further extended up
to 30.09.2023. While granting further extension for the second time, in
respect of the new trusts, time was extended only in respect of registrations
under Sections 10(23C), 12A of the Act and not for approvals under clause
(iii) of the first proviso to Section 80G(5) of the Act. While extending the
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W.P.No.27030 of 2023 etc., (batch cases)
time, no extension was provided for approval under Section 80G5 of the Act
for the institutions that are provisionally approved under the said Section.
3.1. There are reasons for making the distinction. The same are
mentioned in paragraph No.12 of the counter-affidavit which reads as
follows:-
"The reason for making the above distinction is because
approval under clause (i) of the first proviso to section
80G(5) may be applied by existing funds or institutions, by
making an application in Form No.10A while applying for
registration/approval in Form No. 10A under clause (i) of
the first proviso of section 10(23C) or sub-clause (i) of
section 12A(1)(ac). Hence, funds or institutions which
take benefit of the extension of the due dates for filing
Form No. 10A under the first regime or the second regime,
were also allowed to make an application for approval u/s
80G(5) (beyond the due date) so that the donations
received by them are also eligible for deduction under
section 80G.
However, the requirement for new funds or institutions to
seek approval by making an application in Form No. 10AB
(as it stood prior to amendment by Finance Act 2023) arise
only when such funds or institutions were provisionally
approved u/s 80G(5) and had been granted approval in
Form No. 10AC, or the approval to such funds or
institutions is due to expire. Such funds or institutions
were required to seek approval u/s 80G(5) by making
application in Form No. 10AB within the due date (i.e.
30.09.2022). Further, the amendments made to section
115TD of the Act by Finance Act, 2023 do not directly or
indirectly impact such funds or institutions.
Hence, there is a difference between the existing funds or
institutions which were required to seek approval under
clause (i) of the first proviso to section 80G(5) vis-a-vis
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W.P.No.27030 of 2023 etc., (batch cases)
the funds or institutions which were provisionally
approved under section 80G(5) and required to seek
approval by making an application in Form No. 10AB
within the due date. The distinction made is reasonable
and has a rational nexus with the object sought to be
achieved. The two are a different class. Further, grant of
exemption and extension of time are not a matter of right."
3.2. It submitted that petitioners did not have any vested right to
claim for an extension of time having failed to apply within the period. In
the absence of any right to the petitioner trusts, the decision of the
respondents not to extend time in respect of Section 80G of the Act cannot
be questioned.
3.3. When the matter was being heard, we expressed our mind as
to whether Section 80G of the Act was omitted by way of a conscious
decision or whether it could have even been a typographical omission to
leave out the sentence alone considering the wordings of the first circular
granting extension for both the existing and new trusts and the wordings of
the second impugned circular. Mr.AR.L.Sundaresan, learned Additional
Solicitor General of India sought time to place the decision taken by the
respondents by filing an additional counter-affidavit and accordingly, by the
order, dated 19.02.2024, we granted further time for filing an additional
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counter-affidavit. Accordingly, an additional counter-affidavit, dated
06.03.2024 is also filed.
3.4. The additional counter-affidavit only reiterates that the
petitioner trusts were bound to apply within time and that they cannot seek
for extension of time as a matter of right. It again reiterates that in respect
of the old trusts, time was extended for both matters, while, in respect of the
new trusts having provisional approval, time is not extended in respect of
Section 80G of the Act. It does not reveal any conscious decision which
was taken by way of application of mind at the time of issuance of the
impugned Circular No.6 of 2023 or any time before.
D. The Submissions:
4. We have heard Mr Suhrith Parthasarathy, learned Counsel for
the petitioners in W.P.Nos.27030, 27041, 27042, 27034, 27048, 27051 of
2023 and Mr.AR.L.Sundaresan, learned Additional Solicitor General of
India for the respondents in all the cases.
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4.1. Mr.Suhrith Parthasarathy, learned Counsel for the petitioners
in the said petitions would submit that the only question which was before
the respondents was the hardship faced by the trusts in digital filing of the
respective forms. While considering the same, an extension has been given
both in respect of the existing as well as the new trusts on the first occasion
and when the respondents thought it fit to extend the same for the second
time up to 30.09.2023, there is no rationale in leaving out the provisions in
respect of Section 80G of the Act alone in respect of the new trusts. The
said classification does not in any manner relate to the object sought to be
achieved and as such, there is no intelligible differentia in making a
distinction between existing and new trusts. Therefore, the impugned
subordinate legislation is liable to be struck down as arbitrary and violative
of Article 14 of the Constitution of India.
4.2. He also submits that once the respondents choose to extend
the time, then, there is a vested right on the part of the petitioner trusts and
their very existence is put into jeopardy since the donors will not get an
exemption under Section 80G of the Act in the absence of approval and
therefore, would submit that the impugned legislation is illegal. In support
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of his submissions, the learned Counsel would rely upon the judgment of
the Hon'ble Supreme Court of India in Association of Old Settlers of
Sikkim and Ors. Vs. Union of India1, more specifically relying upon
paragraphs Nos.32, 39 and 40 of the judgment to contend that the
classification made by the respondents is not reasonable and there is no
nexus with the object sought to be achieved and by excluding the new trusts
in the matter of grant of approval under Section 80G of the Act, the
respondents have discriminated among similarly placed persons.
4.3. Mr.AR.L.Sundaresan, learned Additional Solicitor General of
India for the respondents would submit that the petitioner trusts should have
applied in time or within the first extension which was granted. It is their
fault for not applying within the time. The grant of very extension itself is
an act of benevolence shown by the first respondent and that will not in any
manner create any right on the part of the petitioner trusts. The distinction
is made between the two classes of trusts namely, the existing trusts (old
trusts) and the new trusts. Such differentiation can be made between the
two classes of trusts and such a classification would be permissible.
1 (2023) 5 SCC 717
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4.4. The learned Additional Solicitor General of India would rely
upon the following judgments in support of his proposition that the
classification made by the respondents is a reasonable classification and
hence, it is legal:-
S.No. Judgments Citations
1. Babulal Amthalal Mehta Vs. Collector of 1957 SCR 1110 : AIR 1957
Customs, Calcutta and Ors. SC 877
2. Shashikant Laxman Kale and Anr. Vs. Union (1990) 4 SCC 366
of India and Anr.
3. ITC Bhadrachalam Paper Boards Ltd., Vs. 1994 Supp (2) SCC 322
Collector of Central Excise, Hyderabad
4. Union of India and Ors. Vs. (1998) 5 SCC 111
K.G.Radhakrishana Panickar and Ors.
5. Transport and Dock Workers Union and Ors. (2011) 2 SCC 575
Vs. Mumbai Port Trust and Anr.
4.5. The learned Additional Solicitor General of India, by relying
upon the following judgments, would also contend that the matter of
concession shown by the respondents by extending the time can never give
rise to any concomitant right on the part of the petitioners to claim further
extension:-
S.No. Judgments Citations
1. Ald Automotive Private Limited Vs. (2019) 13 SCC 225
Commercial Tax Officer now upgraded as
Assistant Commissioner (CT) and Ors.
2. Union of India and Ors. Vs. Cosmo Films (2023) 9 SCC 244
Limited
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3. LG Electronics India Pvt. Ltd. Vs. State of (2023) 114 GSTR 197
Tamil Nadu and Anr.
4.6. The learned Additional Solicitor General of India, by further
adverting to the judgment of the Hon'ble Supreme Court of India referred by
the learned Counsel for the petitioners in Association of Old Settlers of
Sikkim (cited supra) would contend that in the said case, relief was granted
by the Hon'ble Supreme Court of India in exercise of its powers under the
Article 142 of the Constitution of India and such relief cannot be granted by
this Court.
E. The Point for Consideration:
5. We have considered the rival submissions made on either side
and perused the material records of the case. Upon consideration of the
submissions made, the following two questions arise for consideration in
these cases:-
Whether or not the classification made by the respondents in the
matter of grant of extension of time between the existing and new trusts and
to apply for approval in respect of clause (i) of the first proviso to sub-
section (5) of section 80G of the Act is reasonable?
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F. The Discussion and Findings :
6. At the outset, we agree with the learned Additional Solicitor
General of India 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 the
benefits. The first respondent Board issues circulars enlarging the time limit
even beyond the prescribed limit to mitigate the rigours 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 Act.
6.1. 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.
Paragraph No.5 was already extracted above. It is also essential to extract
paragraph No.4 of the impugned Circular which reads as follows:-
" 4. Representations have been received stating
that several trusts have not been able to apply for
registration/ approval within the required time due to
genuine hardship. This has also led to rejection of
applications simply on the ground that these were delayed.
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As mentioned in para 1(a) above, the last date for filing an
application by the existing trusts seeking registration/
approval was extended to 25.11.2022 vide Circular No. 22
of 2022 dated 01.11.2022. Further, as stated in 1(c) above,
the due date for furnishing application for
registration/approval by the provisionally
registered/approved trusts was extended till 30.09.2022.
These trusts shall be subject to tax under section 115TD of
the Act in accordance with the provisions of the said
section, as amended by the Finance Act, 2023 if the
application is not made by 25.11.2022 or 30.09.2022, as
the case may be."
(emphasis supplied)
6.2. Thus, 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 which 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.
6.3. Even though the counter-affidavit attempted to furnish
reasons for making the above distinction, ultimately, no reason for leaving
out clause (i) of the first proviso to Section 80G5 in respect of the new trusts
is given. The relevant paragraph No.12 was extracted above. It only
reiterates the eligibility of dedication and to the amendments made to
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W.P.No.27030 of 2023 etc., (batch cases)
Section 115TD of the Finance Act, 2023. Thus, while we agree with the
contention of the learned Additional Solicitor General of India that it is well
within the powers of the first respondent Board to extend time, and it would
also be well within the power of the first respondent Board to make any
classification between the trusts, ultimately, we could not find any reason
whatsoever in leaving out the new trusts in respect of approval under
Section 80G alone.
6.4. As a matter of fact, we entertained a doubt as to whether it
was a conscious decision at all taken in the first place or an inadvertent
omission of a sentence while drafting the impugned Circular No.6 of 2023.
Though the respondents filed an additional counter-affidavit, no particulars
as to the decision being taken between any date after the issue of the earlier
Circular No.8 of 2022 and before or at the time the impugned Circular No.6
of 2023 is mentioned or placed on record. The impugned circular by itself
also does not contain any reason whatsoever for making the classification.
6.5. The counter-affidavit filed also actually does not contain any
reason whatsoever. Except for reiterating that the petitioner trusts do not
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have any vested right, there is no other ground that is put forth by the first
respondent. Even though the new trusts as well as the existing trusts have
no right to demand for extension of time as a matter of right, when the
respondents have thought it fit to extend the time, considering the hardship,
there is no material which is placed before this Court nor any reasoning is
contained in the impugned order that the new trusts did not face the
hardship in respect of filing of the application under Section 80G5 of the
Act alone. Therefore, leaving out the clause in respect of Section 80G5 of
the Act alone that too only in respect of the new trusts does not in any
manner relate to the object sought to be achieved by the impugned circular
nor does it provide any basis for the discrimination/classification. Useful
reference as to the restatement of the law in this regard can be made to the
Judgment of the Hon’ble Supreme Court of India in State of Tamilnadu &
Anr. Vs. National South Indian River Interlinking Agriculturist
Association2, more particularly to paragraph Nos.15 – 15.2 which reads
thus:
" 15. The equality code in Article 14 of the
Indian Constitution prescribes substantive and not formal
equality. It is now a settled position that classification per
se is not discriminatory and violative of Article 14. Article
14 only forbids class legislation and not reasonable
classification. A classification is reasonable, when the
2 (2021) 15 SCC 534
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twin tests as laid down by S.R. Das, J. in State of W.B. v.
Anwar Ali Sarkar [State of W.B. v. Anwar Ali Sarkar,
(1952) 1 SCC 1 : 1952 SCR 284] are fulfilled:
15.1. The classification must be based on an
intelligible differentia which distinguishes persons or
things that are grouped, from others left out of the group.
15.2. The differentia must have a rational
relationship to the object sought to be achieved by the
statute."
6.6. In the instant case, the differential treatment is not based on
any substantial distinction that is real and pertinent to the object of the
circular. The discrimination is artificial. The respondents are evasive and
could not provide any rationale for such a classification. Accordingly, we
hold that the impugned clause (ii) of the Circular, dated 24.05.2023 is
arbitrary and violative of Article 14 of the Constitution of India and
accordingly, would be ultra vires the Constitution.
6.7. Because we find that clause (ii) of the impugned circular is
unconstitutional, we direct the first respondent to consider the applications
of the petitioners as to the recognition/approval in respect of clause (i) of
the first proviso to sub-section (5) of section 80G of the Act as within time
and consider the same and pass orders thereon on merits as per law.
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G. The Result :
7. In the result, these Writ Petitions are allowed on the following
terms:-
(i) The clause 5(ii) of Circular No.6 of 2023 bearing
F.No.370133/06/2023-TPL, dated 24.05.2023 of the first respondent is
declared as illegitimate, arbitrary, and ultra vires the Constitution of India;
(ii) The respondents are directed to consider the applications
submitted by the petitioners as to the recognition/approval in respect of
clause (i) of the first proviso to sub-section (5) of section 80G of the Act as
within time and consider the same and pass orders thereon on merits, in
accordance with law within six months from the date of receipt of a copy of
this order;
(iii) There shall be no order as to costs. Consequently,
W.M.P.Nos.26465, 26492, 26470, 26479, 26481, 26482, 26491, 26467,
26490 of 2023; 3517 and 3518 of 2024 are closed.
(S.V.G., CJ.) (D.B.C., J.)
02.04.2024
Index : yes
Speaking order
Neutral Citation : yes
grs
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To
1. The Director,
Central Board of Direct Taxes,
Ministry of Finance,
North Block, New Delhi - 110 001.
2. The Commissioner of Income Tax (Exemptions),
Income Tax Department,
No.121, M.G.Road, Nungambakkam,
Chennai - 600 034.
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W.P.No.27030 of 2023 etc., (batch cases)
THE HON'BLE CHIEF JUSTICE
AND
D.BHARATHA CHAKRAVARTHY, J.
grs
W.P.No.27030 of 2023 etc., (batch cases)
02.04.2024
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W.P.No.27030 of 2023 etc., (batch cases)
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