2023 (11) TMI 1210 - AT - Income Tax

Granting registration for 80G - application rejected has been filed beyond six months of commencement of activities and hence held it as time barred - whether the application of the assessee was time barred or not? - HELD THAT - The sub-clause of the Proviso to Section 80G(5) says that the Institution which have provisional registration have to apply at-least six months prior to expiry of the provisional registration or within Six months of commencement of activities, whichever is earlier. In continuation of this when we read the sub clause iii of Proviso of section 80G(5), which we have already reproduced above, it is clear that the intention of parliament in putting the word or within six months of commencement of its activities, whichever is earlier is in the context of the newly formed Trust/institutions. For the existing Trust/Institution, the time limit for applying for Regular Registration is within six months of expiry of Provisional registration if they are applying under sub clause (iii) of the Proviso to Section 80G(5) of the Act. This will be the harmonious interpretation. If we agree with the interpretation of the ld.CIT(E), then say a trust which was formed in the year 2000, performed charitable activities since 2000, but did not applied for registration u/s. 80G, the said trust will never be able to apply for registration now. This in our opinion is not the intention of the legislation. This interpretation leads to absurd situation. As decided in K P Varghase 1981 (9) TMI 1 - SUPREME COURT at the statutory provision shall be interpreted in such a way to avoid absurdity. In this case to avoid the absurdity as discussed by us in earlier paragraph, we are of the opinion that the words, within six months of commencement of its activities has to be interpreted that it applies for those trusts/institutions which have not started charitable activities at the time of obtaining Provisional registration, and not for those trust/institutions which have already started charitable activities before obtaining Provisional Registration. We derive the strength from the Speech of Hon ble Finance Minister and the Memorandum of Finance Bill 2020. Therefore, we hold that the Assessee Trust had applied for registration within the time allowed under the Act. Hence, the application of the assessee is valid and maintainable. Even otherwise, the Provisional Approval is upto A.Y. 2025-26, and it can be cancelled by the ld. CIT(E) only on the specific violations by the assessee. However, in this case the ld. CIT(E) has not mentioned about any violation by the Assessee. Therefore, even on this ground the rejection is not sustainable. CIT(E) has not discussed whether the Assessee fulfils all other conditions mentioned in the section as he rejected it on technical ground. Therefore, in these facts and circumstances we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. Therefore, we direct the ld. CIT(E) to treat the application as filed within statutory time and verify assessee s eligibility as per the Act. The ld. CIT(E) shall grant opportunity to the assessee.

Summary

Issues Involved:
1. Legality of the order passed by the Commissioner of Income Tax (Exemption).
2. Consideration of documents submitted by the assessee for registration under Section 80G of the IT Act.
3. Fulfillment of legal requirements by the assessee for obtaining registration under Section 80G.
4. Legality of non-granting exemption under Section 80G despite provisional registration.
5. Condonation of delay by the Commissioner of Income Tax (Exemption).
6. Examination of the explanation provided by the assessee.
7. Use of judicial pronouncements against the assessee without confrontation.
8. Issuance of a specific show cause notice following the principle of natural justice.
9. Appreciation of the aims and objects of the trust by the Commissioner.
10. Necessity of exemption under Section 80G for a new project.
11. Legal requirement for registration under Section 80G.
12. Consideration of CBDT Circular No. 17 of 2022.

Summary of Judgment:

1. Legality of the Order:
The assessee contended that the order passed by the Commissioner of Income Tax (Exemption), Jaipur was illegal and against the law. The Tribunal noted that the Commissioner rejected the application solely on the ground of being time-barred without discussing the merits of the case.

2. Consideration of Documents:
The assessee argued that the Commissioner should have considered the documents submitted and accepted the claim for registration under Section 80G. The Tribunal found that the Commissioner did not evaluate the documents due to the application's dismissal on technical grounds.

3. Fulfillment of Legal Requirements:
The assessee claimed to have fulfilled all the legal requirements for obtaining registration under Section 80G. The Tribunal emphasized that the Commissioner did not assess this aspect as the application was rejected for being time-barred.

4. Legality of Non-Granting Exemption:
The assessee argued that the non-granting of exemption under Section 80G was illegal, especially when provisional registration was already granted. The Tribunal agreed that the provisional approval was valid until A.Y. 2025-26 and could only be canceled on specific violations, which were not mentioned by the Commissioner.

5. Condonation of Delay:
The assessee requested condonation of delay due to peculiar circumstances. The Tribunal interpreted the relevant statutory provisions and found that the application was filed within the permissible time limit, considering the amendments introduced by the Finance Act 2020 and the COVID-19 extensions.

6. Examination of Explanation:
The assessee argued that the Commissioner ignored the explanations provided. The Tribunal noted that the Commissioner did not communicate any dissatisfaction with the explanations, which was incumbent upon him.

7. Use of Judicial Pronouncements:
The assessee contended that judicial pronouncements were used against them without confrontation. The Tribunal agreed that the Commissioner should have confronted the assessee with any judicial precedents used against them.

8. Issuance of Show Cause Notice:
The assessee argued that the rejection was illegal due to the absence of a specific show cause notice. The Tribunal emphasized the importance of following the principle of natural justice and noted the lack of a specific show cause notice.

9. Appreciation of Aims and Objects:
The assessee argued that the Commissioner should have appreciated the trust's aims and objects. The Tribunal agreed that the Commissioner should have considered the totality of circumstances and the trust's objectives.

10. Necessity of Exemption for New Project:
The assessee argued that the necessity for exemption under Section 80G arose due to a new project. The Tribunal found that the application was valid and maintainable as per the statutory provisions.

11. Legal Requirement for Registration:
The assessee contended that there was no legal requirement to obtain registration without necessity. The Tribunal interpreted the relevant provisions and found that the application was filed within the permissible time limit.

12. Consideration of CBDT Circular:
The assessee argued that the Commissioner should have taken inspiration from CBDT Circular No. 17 of 2022. The Tribunal directed the Commissioner to verify the assessee's eligibility as per the Act, considering all necessary documents.

Conclusion:
The Tribunal set aside the Commissioner's order, directing him to treat the application as filed within the statutory time limit and verify the assessee's eligibility as per the Act, granting the assessee an opportunity to submit necessary documents. The appeal was allowed for statistical purposes.