Madras High Court chief jusice bench strikes down part of CBDT circular that denied time extension for seeking tax exemptionThe petitioners had challenged the vires of clause 5 (ii) of the CBDT circular issued on May 24, 2023, as it discriminated against the newly established trusts in providing extension of time for submitting form 10 AB for tax exemption under 80 G of Income Tax Act.

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Madras High Court strikes down part of CBDT circular that denied time extension for seeking tax exemption
The petitioners had challenged the vires of clause 5 (ii) of the CBDT circular issued on May 24, 2023, as it discriminated against the newly established trusts in providing extension of time for submitting form 10 AB for tax exemption under 80 G of Income Tax Act.

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R Sivakumar
Updated on:
03 Apr 2024, 5:44 pm
2 min read
CHENNAI: The Madras High Court has struck down a part of a circular issued by the Central Board of Direct Taxes that denied extension of the time limit for submitting applications by newly established trusts for availing of income tax exemptions under 80 G of Income Tax Act, 1961.

The order was passed by the first bench of Chief Justice SV Gangapurwala and Justice D Bharatha Chakravarthy on Tuesday on the petitions filed by the Sri Nrisimha Priya Charitable Trust.

The petitioners had challenged the vires of clause 5 (ii) of the CBDT circular issued on May 24, 2023, as it discriminated against the newly established trusts in providing extension of time for submitting form 10 AB for tax exemption under 80 G of Income Tax Act.

“Clause 5(ii) of Circular No.6 of the first respondent (CBDT) is declared as illegitimate, arbitrary, and that which ultra vires the Constitution of India,” the bench said in the order.

It directed the CBDT and the Commissioner of Income Tax (Exemptions) 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 80 G of the Act as submitted within the time and pass orders on merits within six months.

The CBDT extended the date of filing of applications for regular registration/approval for trusts till September 30, 2022. It was extended for existing and new trusts for registration under sections 10 (23C), 12 A and 80 G (5) of Income Tax Act for availing tax benefits. Further extension was given till May 24, 2023 through the circular. However, such extension was not granted to the newly formed trusts in respect of 80 G (5) (i). Challenging this, the petitioner trust filed the petition.

Advocate Suhrith Parthasarathy, appearing for the petitioners, submitted that an extension was given to both the existing as well as the new trusts on the first occasion and when such relief was given the second time, the newly established trusts were left out in respect of exemption under section 80 G.

The bench held that 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. Accordingly, we hold that the impugned clause (ii) of the Circular is arbitrary and violative of Article 14 of the Constitution.

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