ITAT Provides Relief to NGO: Minor Filing Error Won’t Deny 80G Tax Exemption

In a taxpayer-friendly judgment, the Income Tax Appellate Tribunal (ITAT), Nagpur Bench, has reaffirmed that technical errors in tax filings should not override genuine eligibility for exemptions. The tribunal granted relief to Gayatri Gram Vikas Sanstha, a Maharashtra-based NGO, which was denied Section 80G benefits due to a simple mistake in selecting the appropriate application clause.

This ruling comes as a positive development for charitable trusts and NGOs, ensuring that inadvertent procedural mistakes do not cost them critical tax benefits.

Background: What Led to the Dispute?

The case centers around Gayatri Gram Vikas Sanstha, a registered trust operating since 1994-95 in Akola, Maharashtra. The trust had applied for provisional registration under Section 80G(5)(iv)(A) of the Income Tax Act, 1961, which allows tax exemption for donations made to eligible charitable institutions.

However, the Commissioner of Income Tax (Exemption) [CIT(E)] rejected the application. The reason? The trust mistakenly applied under a clause meant for institutions yet to commence activities, while in reality, the trust had been active for decades. According to the CIT(E), the trust should have applied under Section 80G(5)(iv)(B), which covers already operational organizations.

The earlier provisional approval was cancelled, leading the trust to approach the ITAT for relief.

The Trust’s Argument

The NGO argued that the rejection was based solely on a technical mistake — an incorrect clause mentioned in the form — and did not reflect the genuine charitable nature and ongoing public welfare activities of the trust.

They emphasized that there was no fraudulent intention or attempt to mislead the department. Instead, it was a simple error in selecting the appropriate section during online filing, something that could happen to any non-profit lacking technical expertise in tax law.

What ITAT Ruled

The ITAT bench, comprising Judicial Member V. Durga Rao and Accountant Member K.M. Roy, ruled in favor of the trust. The tribunal recognized that:

• The trust had indeed been functioning since 1994–95.
• Its charitable activities were genuine and undisputed.
• The incorrect clause was chosen due to a technical oversight, not with an intention to deceive.

The ITAT held that procedural lapses should not override substantive eligibility. It directed the trust to submit a fresh application under the correct clause — Section 80G(5)(iv)(B) — and instructed the Commissioner to evaluate the application on its merits, without being influenced by the earlier rejection.

Key Takeaways from the Ruling

1. Substance Over Form: Tax benefits should be judged based on the applicant’s eligibility and genuine activities, not just technicalities.
2. Relief for NGOs: A one-time mistake in filing the wrong clause will not automatically disqualify a trust from 80G benefits.
3. Guidance for CIT(E): Authorities are advised to take a fair and reasonable approach while evaluating exemption applications.

Why This Matters

This ruling brings much-needed clarity for NGOs and charitable trusts navigating the complex procedures of income tax exemption under Section 80G. It ensures that technical or clerical errors during application will not result in outright denial of benefits if the applicant meets all other legal conditions.

With thousands of NGOs depending on donor contributions, the ability to offer 80G benefits to donors is vital for sustaining operations. The ITAT’s approach underscores the need for the tax department to be facilitative rather than punitive, especially in cases involving social welfare institutions.

Final Thoughts

In India’s evolving tax ecosystem, this decision serves as an important reminder that justice should not be sacrificed at the altar of procedure. By focusing on the intent and eligibility of the applicant, rather than minor form-filling errors, the ITAT has set a positive precedent for other cases involving NGO registrations and exemptions.

📅 Published on: 09 July 2025
✍️ Author: CS Chhavi Goyal