2024 (4) TMI 89 - AT - Income Tax

Time limit to file application u/s 80G(5) - assessment of trust - Rejection of application filed in Form No.10AB for approval u/s 80G(5) stating that assessee has not filed application within the statutory time limit - scope of New Procedure for registration - whether the application of the assessee was time barred or not? - assessee has received registration u/s 12AB and was granted Provisional Registration as Trust/Institution HELD THAT - When we read the Budget Speech of the Hon ble Finance Minister 2020 and the Memorandum of Finance Bill 2020 together it becomes clear that the concept of Provisional registration was mainly to facilitate the registration of newly formed Trust/Institutions which have not yet begun the activities. The parliament in its wisdom has decided to differentiate between the Trust which were newly formed and the trust which were already doing charitable activities - There is Second category of trust/institutions which were already doing Charitable Activities but had never applied for registration u/s.80G(5) of the Act. It is not mandatory that every charitable trust/institution has to apply for registration u/s.80G(5) - there is no bar in the Act that such trust or institutions cannot apply for registration u/s.80G in the new procedure. In these kinds of cases the Trust/Institute though doing charitable activity may apply first for the Provisional Registration under the Act. After getting the Provisional Registration the Trust/Institution have to apply for Regular Registration. These kind of Trust/Institutes will fall under sub clause (iii) of the Proviso to Section 80G(5) of the Act since they have obtained Provisional registration. As per KP VARGHESE case 1981 (9) TMI 1 - SUPREME COURT statutory provision shall be interpreted in such a way to avoid absurdity. In this case to avoid the absurdity as discussed 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 the Hon ble Finance Minister and the Memorandum of Finance Bill. 2020. Therefore in these facts and circumstances of the case 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. Decided in favour of assessee.

Summary

Issues Involved:
1. Rejection of application for approval u/s 80G(5) due to time limit.
2. Applicability of time limit for filing application under section 80G(5).
3. Nature of time limit under clause (iii) of first proviso to section 80G(5).
4. Consequences of denial of approval u/s 80G(5) on technical grounds.
5. Interpretation of statutory provisions in light of legislative intent and amendments.

Summary:

Issue 1: Rejection of application for approval u/s 80G(5) due to time limit:
The assessee appealed against the order of the CIT(Exemption), Pune, which rejected the application filed in Form No.10AB for approval u/s 80G(5) on the ground that it was filed beyond the prescribed time limit.

Issue 2: Applicability of time limit for filing application under section 80G(5):
The assessee argued that the activities commenced in February 2020 and provisional approval was granted on 04.01.2022, making it impossible to comply with the time limit prescribed in the second limb of clause (iii) of the first proviso to section 80G(5). Thus, the first limb of clause (iii) was applicable, and the application filed on 18.05.2023 was within the stipulated time.

Issue 3: Nature of time limit under clause (iii) of first proviso to section 80G(5):
The assessee contended that the time limit stipulated under clause (iii) of the first proviso to section 80G(5) was directory in nature and not mandatory, and therefore, the approval should not be denied solely on this ground.

Issue 4: Consequences of denial of approval u/s 80G(5) on technical grounds:
The assessee argued that denying approval u/s 80G(5) on a technical ground would permanently disentitle it from obtaining approval despite being genuinely engaged in charitable activities since February 2020.

Issue 5: Interpretation of statutory provisions in light of legislative intent and amendments:
The Tribunal noted that the Finance Act, 2020 introduced amendments to simplify the registration process, including the concept of "Provisional Approval." The intention was to facilitate registration, especially for newly formed trusts/institutions. The Tribunal emphasized that statutory provisions should be interpreted to avoid absurdity, as highlighted by the Supreme Court in K P Varghese vs. ITO.

Conclusion:
The Tribunal held that the words "within six months of commencement of its activities" in sub-clause (iii) of the proviso to section 80G(5) apply to trusts/institutions that had not started charitable activities at the time of obtaining provisional registration. Since the assessee had already commenced activities before obtaining provisional registration, the application was considered valid and maintainable. The order of the CIT(Exemption) was set aside for denovo adjudication, with instructions to provide the assessee an opportunity of being heard. The appeal was allowed for statistical purposes.