2024 (4) TMI 982 - AT - Income Tax

Rejection of application for registration u/s 12AA(1)(ac)(iii) and application of the assessee for final approval as per the provisions of section 80G(5)(iii) - CIT(E) observed that the assessee earlier was granted provisional registration in Form 10AC which was valid till A.Y 2026-27, he, therefore, held that the present application of the assessee being premature was not maintainable and rejected the same HELD THAT - The assessee-trust has been granted registration u/s 12AB(1)(a) of the Act for five years vide order dated 31.05.2021 which is valid from A.Y 2022-23 to A.Y 2026-27. As per the provisions of section 12A(1)(ac)(iii) of the Act, the assessee-institution is supposed to apply for final registration after grant of provisional registration u/s 12AB of the Act. A perusal of the aforesaid provisions of section 12A(1)(ac)(iii) of the Act would reveal that where the trust or the institution was provisionally registered u/s 12AB of the Act, the application for final registration can be made at least six months prior to the expiry of the period of provisional registration or within six months of the commencement of its activity, whichever is earlier, which means that the application for final registration has to be made at the earliest possible event i.e. either within six months of the commencement of the activities or at least six months prior to the expiry of the provisional registration. The aforesaid provision does not mean that there is any bar on the applicant to move an application before the period of six months from the expiry of the provisional registration. What has been provided is that the application must be made before the expiry of six months from the date of expiry of final registration. There is no bar in moving the application at the earliest possible event, rather, it is expected from the assessee-trust to do so. The impugned order of the CIT(E) is set aside and the matter is restored to the ld. CIT(E) to consider the application of the assessee for final registration and grant the same if the same is otherwise so admissible to the assessee. Approval u/s 80G(5) - CIT (Exemption) rejected the application of the assessee observing that the time limit prescribed for making an application for final approval u/s 80G of the Act was at least six months prior to the expiry of the period of the provisional approval or within six months of the commencement of its activities, whichever is earlier and fresh application by the assessee was filed on 02.07.2023 which was after the extended date of 30.09.2022. - HELD THAT - The issue is squarely covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the case of Tomorrow s Foundation vs. CIT(Exemption) 2024 (3) TMI 941 - ITAT KOLKATA wherein as held after grant of provisional approval, the application cannot be rejected on the ground that the institution had already commenced its activities even prior to grant of provisional registration. Under such circumstances, the date of commencement of activity will be counted when an activity is undertaken after the grant of provisional registration either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act. We grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. It is directed that the ld. CIT(E) will decide the application of the assessee for final approval as expeditiously as possible but not later than two months from the receipt of this order. It is further directed that, if the assessee is granted final approval by the ld. CIT(E) then, the benefit of approval u/s 80G of the Act, available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to be continued without any break. The assessee will not be deprived of the benefit during the time period falling between 31/03/2021 and the date of grant of provisional approval under clause (iv) i.e., 28/05/2021, due to technical errors occurred in making the application under the relevant provisions of the Act because of the confusion and misunderstanding on part of the assessee as well as on part of the ld. CIT(E) in properly interpreting the relevant provisions. Both the appeals of the assessee are treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of application for registration u/s 12AA(1)(ac)(iii) of the Income Tax Act.
2. Rejection of application for final approval u/s 80G(5)(iii) of the Income Tax Act.

Summary:

Issue 1: Rejection of Application for Registration u/s 12AA(1)(ac)(iii)

The assessee appealed against the order of the CIT(Exemptions), which rejected their application for registration u/s 12AA(1)(ac)(iii) as premature. The CIT(Exemptions) noted that the assessee already had provisional registration valid until A.Y 2026-27. The Tribunal observed that the assessee was granted registration u/s 12AB(1)(a) for five years starting from A.Y 2022-23. According to section 12A(1)(ac)(iii), the application for final registration must be made at least six months before the provisional registration expires or within six months of commencing activities, whichever is earlier. The Tribunal clarified that there is no restriction on applying earlier than six months before the expiry of provisional registration. The Tribunal set aside the CIT(Exemptions)'s order and directed them to consider the application for final registration.

Issue 2: Rejection of Application for Final Approval u/s 80G(5)(iii)

The assessee, already registered u/s 80G(5) since 2021, faced rejection of their application for final approval under the amended provisions of section 80G of the Act. The CIT(Exemptions) noted that the assessee applied for provisional approval under Clause (iv) instead of reapplying under Clause (i) for existing approvals. The CIT(Exemptions) rejected the application, citing the expiry of the prescribed time limit. The Tribunal referred to the decision in "Tomorrow's Foundation vs. CIT(Exemption)" and similar cases, stating that institutions with provisional approval must apply for final registration within six months of commencing activities or six months before the provisional approval expires. The Tribunal concluded that the CIT(Exemptions) misinterpreted the provisions and directed them to grant provisional approval if the assessee is otherwise eligible. They emphasized that the benefit of approval u/s 80G should be deemed continuous without any break due to technical errors in application interpretation.

Conclusion:

Both appeals of the assessee were allowed for statistical purposes, with directions to the CIT(Exemptions) to reconsider the applications for final registration and approval, ensuring no deprivation of benefits due to technical errors or misinterpretation of provisions.

Kolkata, the 23rd April, 2024.