ITAT Nagpur Gives Major Relief to Charitable Trusts: Wrong Clause Selection in Form 10AB Held Mere Technical Error
In another important ruling benefiting charitable trusts and institutions facing rejection of registration applications on technical grounds, the Nagpur Bench of the Income Tax Appellate Tribunal (ITAT) has held that incorrect selection of clause while filing Form 10AB is merely a technical or inadvertent error and cannot become a valid ground for cancellation or denial of registration under section 12AB of the Income Tax Act.
The ruling was delivered in the case of Vandaniya Laxmibai Kelkar Smruti Pratishthan vs. ITO (Exemption) [ITA Nos.605 & 628/Nag/2024, order dated 21.03.2025] and is likely to provide substantial relief in numerous pending cases involving technical defects in registration applications filed under the new charitable trust registration regime.
The assessee trust in the present case was engaged in charitable activities primarily relating to running hostel facilities for girls and providing residential and daily living support. The trust had originally obtained provisional registration under the new registration regime after 01.04.2021 and thereafter applied for final registration in Form 10AB.
However, the Commissioner of Income Tax (Exemption) rejected the application and even cancelled the provisional registration primarily on the ground that the assessee had selected the wrong clause while applying for provisional registration under section 12A(1)(ac). According to the department, the trust ought to have applied under Item (B) instead of Item (A) of sub-clause (vi) of section 12A(1)(ac).
The rejection was not based on any allegation regarding:
• non-genuine activities,
• misuse of funds,
• violation of charitable objects,
• non-compliance of law, or
• absence of supporting documents.
In fact, the trust had furnished detailed replies, financial statements, activity reports, Aadhaar cards of beneficiaries, donation receipts, and several supporting evidences regarding charitable activities carried out by it. The CIT(E) had also not recorded any adverse finding regarding the genuineness of activities of the trust.
Before the Tribunal, the assessee strongly argued that the error in selecting the clause while uploading Form 10AB was merely an inadvertent and technical mistake. It was submitted that the issue related only to procedural classification and did not affect the substantive eligibility of the trust for registration under section 12AB. The assessee further relied upon several judicial precedents where tribunals had already held that wrong mentioning of sub-section or clause in Form 10AB cannot become a ground for rejection of charitable registration.
An additional and very significant argument was raised by the assessee by referring to the Finance Bill, 2025. It was pointed out before the Tribunal that the legislature itself had proposed relaxation regarding technical defects in registration applications and proposed omission of provisions treating incomplete or incorrect applications as “specified violations” leading to cancellation of registration.
The assessee specifically emphasized that the spirit of the legislative amendment itself demonstrated that procedural and technical defects should not result in harsh consequences like cancellation of charitable registration.
After considering the rival submissions, the Nagpur ITAT found merit in the assessee’s contention and observed that the error in selecting the clause while uploading the form was inadvertent in nature. The Tribunal accepted that the issue deserved reconsideration and accordingly set aside the impugned orders passed by the CIT(E). The matter was restored back to the file of the CIT(E) for fresh adjudication after proper consideration of the facts and legal position.
Though the Tribunal restored the matter for fresh adjudication, the ruling carries substantial significance because it clearly recognizes that technical mistakes in selection of clauses under the new electronic registration regime cannot automatically justify rejection or cancellation of registration where charitable activities are otherwise genuine.
This judgment is likely to become highly relevant in hundreds of pending matters where trusts and institutions are facing difficulties because of:
• incorrect clause selection,
• portal-related filing confusion,
• technical mistakes in Form 10A/10AB,
• incomplete electronic fields, or
• procedural mismatches under the new registration regime.
The ruling also reflects an important judicial trend emerging across various tribunals that beneficial provisions governing charitable institutions deserve liberal interpretation and cannot be defeated merely because of procedural defects or software-driven technicalities.
For charitable trusts already engaged in genuine charitable activities, the decision reinforces that substantive compliance and genuineness of objects remain far more important than technical mistakes committed while navigating complex electronic filing systems under the Income Tax Act.
The copy of the order is as under:
