2024 (6) TMI 563 - AT - Income Tax

Rejection for approval u/s 80G - Application not filed within due date specified in the act - Whether the commencement date of activities affects the application maintainability? - HELD THAT - Jurisdiction of the CIT(E) is to pass order on merits if he / she wants to do it on account of non-satisfaction for both purposes of rejecting such an application and cancelling its approval. But in the instant case, unfortunately this has not happened instead it is held to be non-maintainable, on a trivial ground that date of commencement of activity is 18/04/2006 and / or Form 10AB dt. 23/09/2023 is time barred as it is filed beyond time i.e; 30/09/2022. Totality is ignored. In any case the said Form No. 10AB was filed before 30/09/2023 the due date which was extended (supra). There is thus no decision on merits of the case. Merits / demerits of Form No. 10AB dt. 23/09/2023 for final approval of assessee society are just not examined, an approach wholly untenable in law. Provisional and Final Approval Application - Since the assessee society had obtained provisional approval w.e.f 05/04/2023 and therefore, it was incumbent upon them to have filed Form No. 10AB on or before 05/10/2023 which in fact they have filed on 23/09/2023 much before the expiry of six months on 05/10/2023. Assessee society case is therefore covered by first part / limb of Section 80G(5)(iii) proviso as second part/limb deals with the commencement of the activities which is not applicable herein at all in the facts and circumstances of the present case as the case is first of the provisional approval after incorporation of society on 06/09/2022 which was obtained by the assessee society on 05/04/2023. The Form No. 10AB as natural corollary for final approval of assessee society was filed on 23/09/2023 well within due date of expiry of six months period from date of provisional approval. The present case does not fall under second part / limb as the assessee society had commenced there activities from 18/04/2006 to 06/09/2022 / 05/04/2023 (80G) under Red Cross Society of India Act, 1920 the umbrella organization as stated and it is only on 06/09/2022 they acquired a new legal status upon incorporation under Societies Registration Act (XXI of 1860) and as amended by Punjab Amendment Act, 1957 and prior thereto they worked under Indian Red Cross Society Act, 1920. Therefore, the date of commencement of activity w.e.f 18/04/2006 is insignificant and is of no consequence. The expression whichever is earlier in above factual backdrop remains unworkable to the scheme of Society / Institution /Fund applying for final approval u/s 80G(5)(iii) in the peculiar facts and circumstances of the present case.

Summary

Issues Involved:
1. Validity of the rejection of the application for final approval u/s 80G(5)(iii) of the Income Tax Act, 1961.
2. Interpretation of the time limit for filing the application under clause (iii) of the first proviso to sub-section (5) of Section 80G.
3. Consideration of the date of commencement of activities versus the date of provisional approval.

Summary:

Validity of the Rejection of Application:
The Assessee, Indian Red Cross Society District Branch SAS Nagar, Mohali, Punjab, filed an appeal against the rejection of its application for final approval u/s 80G(5)(iii) by the CIT (E), Chandigarh. The application was filed in Form No. 10AB under Rule 11AA and was rejected as non-maintainable under the clause (iii) of the first proviso to sub-section (5) of Section 80G.

Interpretation of the Time Limit:
The CIT (E) rejected the application on the grounds that it was not filed within the time limit prescribed under clause (iii) of the first proviso to sub-section (5) of Section 80G, which requires filing at least six months prior to the expiry of the provisional approval or within six months of the commencement of activities, whichever is earlier. The Assessee argued that the society started operations on 18/04/2006 but was formally registered on 06/09/2022 and obtained provisional approval on 05/04/2023. The application for final approval was filed on 23/09/2023, which the Assessee contended was within the six-month period from the date of provisional approval.

Date of Commencement of Activities vs. Date of Provisional Approval:
The Tribunal observed that the Assessee was working under the Indian Red Cross Society Act, 1920, until it was incorporated as a society under the Societies Registration Act on 06/09/2022. The Tribunal held that the date of provisional approval (05/04/2023) is relevant for determining the time limit for filing the application for final approval, not the date of commencement of activities (18/04/2006). The Tribunal concluded that the application filed on 23/09/2023 was within the six-month period from the date of provisional approval and hence was maintainable.

Order:
The Tribunal set aside the impugned order of the CIT (E) and remanded the matter back to the CIT (E) to pass a fresh order on merits, preferably within four weeks, considering the observations made and the new CBDT Circulars No. 6/2023 and No. 7 of 2024. The appeal of the Assessee was allowed for statistical purposes. The order was pronounced in the open Court on 01/05/2024.