CIT(E) Must Grant Approval Even If Institute Applied for Wrong Registration Under Section 10(23C): ITAT Chandigarh

 

A recent ruling by the Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that a genuine institution should not be denied approval merely due to a technical error in choosing the wrong category for registration under Section 10(23C) of the Income Tax Act.

The Case in Brief

The assessee in this case was a Centrally Funded Institution of National Importance, set up by the Government of India in 2015. Since its inception, it had been carrying out educational and charitable activities in line with its approved objectives.

However, when it came to seeking tax exemption under Section 10(23C) – which grants exemption to certain charitable and educational institutions – the assessee made a technical mistake.

•   Instead of applying as an existing institution(which commenced before 1 April 2021) under clause (iii) of the first proviso,

•   It inadvertently applied for provisional registrationunder clause (A) of clause (iv).

The CIT(Exemptions) granted provisional approval in Form 10AC but later rejected the final approval application. The reasoning?

The assessee had already started its activities in 2015, so provisional approval was not valid, and since that provisional approval was “bad in law,” the final application could not be entertained.

What the ITAT Said

The Tribunal found that:

1.  No doubtswere raised about the aims, objects, or genuineness of the assessee’s activities.

2.  The only issuewas a procedural/technical lapse – selecting the wrong category in the application.

3.  Such a bona fide mistake should not result in denial of exemption where the intent and eligibility are otherwise clear.

The ITAT directed the CIT(E) to grant approval to the assessee as if it was an “old” institution, in existence before 1 April 2021, eligible under clause (iii) of the first proviso to Section 10(23C).

Ruling: Indian Institute of Management vs. CIT(E)
[2025] 174 taxmann.com 272 (Chandigarh – Trib.) [01-05-2025]

 

Why This Ruling Matters

This decision is significant for educational and charitable institutions that:

•   Were set up before 1 April 2021

•   Have already commenced activities

•   But inadvertently applied under the wrong sub-clause for Section 10(23C) approval

It underscores that substance should prevail over form — and that procedural lapses, if bona fide, should not lead to denial of tax benefits.

 

Practical Takeaways for Institutions

1.  Check the correct clause before applying

•   Clause (iii): For institutions already in existence before 1 April 2021

•   Clause (A) of clause (iv): For new institutions seeking provisional approval

2.  If a wrong category was chosen, don’t lose hope

•   This ruling shows that tribunals can allow correction if there is clear evidence of eligibility

3.  Document your activities

•   In this case, the absence of doubt about the institute’s objects and activities played a key role in securing relief

4.  Procedural mistakes are not fatal

•   If you can prove genuineness, the law is on your side

 

Final Word

This ruling is a relief for many institutions navigating the post-2021 regime of mandatory registration under Section 10(23C). The ITAT has sent a clear message – don’t punish genuine institutions for minor procedural slips.

In other words, the law recognizes that a wrong tick in a box should not overshadow years of genuine service to education and society.

The copy of the order is as under: