CHENNAI: The Madras High Court has struck down a clause in the circular issued by the Central Board of Direct Taxes (CBDT) that denied extension of time limit to newly established trusts for submitting applications to avail exemption under 80G of Income Tax Act.
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 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 newly established trusts in providing extension to submit Form 10 AB for tax exemption under 80G of I-T Act.
“The clause 5(ii) of Circular No.6 of the first respondent (CBDT) is declared as illegitimate, arbitrary, and ultra vires the Constitution of India,” the bench said in the order.
It directed CBDT and the Commissioner of Income Tax (Exemptions) to consider the applications 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 submitted on time and pass orders on merits within six months.
The CBDT, while granting extension of time for the second time, for submission of application for availing of tax benefits under sections 10(23C), 12A and 80G(5) of Income Tax Act, till May 24, 2023, excluded newly formed trusts from filing forms under section 80G(5)(i).
Advocate Suhrith Parthasarathy, appearing for the petitioners, submitted there is no rationale in excluding new trusts from the provisions of section 80G.
The bench reasoned 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 and violative of Article 14 of the Constitution, the bench added.