2024 (6) TMI 924 - AT - Income Tax

Rejection of application for registration u/s 80G - assessee post obtaining provisional approval and applied for regular/permanent approval - CIT(E) rejected the application on the ground that the application is not filed within time limit prescribed under clause (iii) of third proviso of section 80G(5) - HELD THAT - We find that on similar set of facts, the Coordinate Bench of Jodhpur Tribunal in the case of Bhamashah Sundarlal Daga Charitable Trust 2023 (11) TMI 1210 - ITAT JODHPUR as held 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. In the second category of cases, there are again two possibilities, one trust was already doing charitable activities and was already having Registration u/s 12AA or 80G(5) of the Act, such trust were directed to re-apply for registration under new procedure on or before 30th August, 2020 but due to Covid- 19 this date was subsequently extended. 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) of the Act. However, there is no bar in the Act that such trust or institutions cannot apply for registration u/s80G 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. 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. Thus we restore the matter back to the file of ld. CIT(E) to reconsider the application afresh by following the decision supra and to pass order afresh in accordance with law. Needless to order that before passing order, the ld. CIT(E) shall grant reasonable opportunity of hearing. Appeal of assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of application for registration under Section 80G.
2. Interpretation of the proviso to Section 80G(5) regarding the timing of the application.
3. Consideration of provisional registration granted by the predecessor Commissioner.
4. Compliance with the extended period for filing the application as per CBDT Circular.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 80G:
The assessee, a trust established in 1953 and registered under Section 12A since 1977, applied for final approval under Section 80G on 02/02/2023 after obtaining provisional approval on 16/12/2022. The Commissioner of Income Tax (Exemptions) [CIT(E)] rejected the application on the grounds that it was not filed within the prescribed time limit under clause (iii) of the third proviso to Section 80G(5). The CIT(E) also canceled the provisional approval granted earlier.

2. Interpretation of the Proviso to Section 80G(5):
The CIT(E) interpreted the proviso to Section 80G(5) to mean that the application should have been filed on or before 30/09/2022, which the assessee failed to do. The assessee argued that the application should be considered valid due to the extension granted by CBDT Circular No. 6/23 dated 24/05/2023, which extended the due date to 30/09/2023. The Tribunal referred to the Jodhpur Bench's decision in Bhamashah Sundarlal Daga Charitable Trust Vs CIT(E), which clarified that the phrase "within six months of commencement of its activities" applies to newly formed trusts and not to those already engaged in charitable activities. The Tribunal agreed with this interpretation, noting that the intention of the legislation was to simplify the registration process and not to create absurd situations.

3. Consideration of Provisional Registration Granted by the Predecessor Commissioner:
The assessee highlighted that it had been granted provisional registration by the predecessor Commissioner, which was valid until AY 2025-26. The Tribunal noted that the CIT(E) did not mention any specific violations by the assessee that would justify canceling the provisional approval. The Tribunal emphasized that the provisional approval should remain valid unless specific violations are identified.

4. Compliance with the Extended Period for Filing the Application as per CBDT Circular:
The assessee argued that their application should be considered valid in light of the CBDT Circular extending the due date to 30/09/2023. The Tribunal found that the assessee had applied for final approval within the extended period and that the CIT(E) should have considered this extension. The Tribunal directed the CIT(E) to reconsider the application afresh, following the decision of the Jodhpur Bench and granting the assessee a reasonable opportunity for a hearing.

Conclusion:
The Tribunal restored the matter to the file of the CIT(E) to reconsider the application afresh, following the decision of the Jodhpur Bench in Bhamashah Sundarlal Daga Charitable Trust Vs CIT(E). The CIT(E) was directed to pass a new order in accordance with the law, granting the assessee a reasonable opportunity for a hearing. The appeal was allowed for statistical purposes.

Order:
The appeal of the assessee was allowed for statistical purposes, and the matter was announced in open court on 11th January 2024.