ITAT Mumbai on Section 80G Renewal: Procedural Defects and Correctable Objects Not Sufficient for Rejection

The Mumbai bench of the Income Tax Appellate Tribunal, in the case of Goregoan Sports Club Vs ITO (ITAT Mumbai), has clarified that renewal of approval under Section 80G cannot be turned down merely because of (a) curable procedural lapses and (b) an object clause allowing application of funds outside India, when no such overseas application has actually occurred and steps are already underway to amend the clause.

This decision is important for charitable and not-for-profit institutions seeking or renewing approval under Section 80G of the Income Tax Act 1961, especially where technical mistakes or legacy clauses in trust deeds/Memorandum of Association (MOA) exist but have not been acted upon in practice.

Background of the Dispute

The assessee, Goregoan Sports Club, applied for renewal of approval under Section 80G by filing Form 10AB before the Commissioner of Income Tax (Exemption) [CIT(E)], Mumbai.

Key factual matrix

  • The assessee already enjoyed registration under Section 12A for the period AY 2022-23 to AY 2026-27.
  • The assessee had existing approval under Section 80G up to AY 2024-25.
  • For renewal beyond that period, the assessee filed an application with the CIT(E).
  • The CIT(E) rejected the renewal, prompting the assessee to file an appeal before the ITAT Mumbai.

Reasons Given by CIT(E) for Denial of Section 80G Renewal

The CIT(E) refused the renewal of Section 80G approval primarily on two grounds:

1. Object clause permitting application of funds outside India

On scrutiny of the trust deed/MOA, the CIT(E) noticed that:

  • One of the objects authorised utilization or application of funds outside India.
  • According to the CIT(E), such an enabling clause was contrary to Section 11 of the Income Tax Act, which governs exemption for income from property held under trust for charitable or religious purposes.
  • On this basis, the CIT(E) took the view that the assessee was not eligible for renewal of Section 80G approval.

2. Application filed under an incorrect statutory provision

The CIT(E) also held that:

  • Since the assessee had already been provisionally approved under Section 80G, the renewal application was required to be filed under the specific provision applicable to such provisional approvals.
  • The correct legal position, as noted by the CIT(E), is that where a trust or institution has been granted provisional approval under Section 80G, it should move an application under Section 80G(5)(iii):
    • At least six months prior to expiry of the provisional approval period, or
    • Within six months from commencement of activity,
      whichever is earlier.
  • The assessee’s application, however, mentioned the wrong provision of law.
  • Citing this defect, the CIT(E) rejected the application instead of treating the error as rectifiable.

Assessee’s Submissions Before the ITAT

Before the Tribunal, the learned counsel for the assessee challenged both reasons relied upon by the CIT(E).

On the object clause regarding overseas application of funds

The assessee argued:

  • The trust deed/MOA merely carried a permissive object enabling application of funds outside India.
  • In reality, the assessee had never applied any funds outside India for its activities.
  • Thus, there was no actual violation of Section 11 or any other provision of the Act on facts.
  • The assessee had already initiated steps to remove or amend the contentious object clause from its governing document.
  • In support, the assessee produced documentary evidence, including minutes of its Annual General Meeting, showing that the process to amend the object clause was in progress.

On filing under the wrong provision

On the procedural ground, the assessee effectively took the stand that: