2024 (6) TMI 1219 - AT - Income Tax

Rejection of application for approval u/s 80G as time barred - process for charitable institutions and introduced provisional registration to facilitate newly formed trusts - scope of amendment - HELD THAT - 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 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. As decided by K P Varghase 1981 (9) TMI 1 - SUPREME COURT 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 the 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, assessee had received provisional approval under section 80G(5) on 27.05.2021 and it was valid upto A.Y. 2023-24. The assessee had applied for registration under section 80G on 24.05.2023, which was before A.Y. 2023-24. Thus, assessee had applied for permanent registration under section 80G before the expiry of provisional approval. Therefore, the application of the assessee was not time barred. Assessee appeal allowed.

Summary

Issues Involved:
1. Whether the delay in filing the application for approval under section 80G of the Income Tax Act can be condoned.
2. Whether the application for approval under section 80G was time-barred.

Issue-wise Detailed Analysis:

1. Delay in Filing the Application:
The appellant argued that the delay in filing the application under section 80G(5) was due to bona fide reasons and circumstances beyond their control. The Tribunal found that there was sufficient reason for the delay and accordingly condoned it. The Tribunal accepted the affidavit explaining the reasons for the delay, thus allowing the appeal to proceed.

2. Time-barred Application:
The core issue was whether the application filed by the assessee on 24.05.2023 for approval under section 80G was time-barred. The Commissioner of Income Tax (Exemption) [CIT(E)] had rejected the application on the grounds that it was not filed within the time limit specified under clause (iii) of the first proviso to section 80G(5).

Statutory Provisions and Interpretation:
The Tribunal examined the relevant statutory provisions of section 80G(5) and the amendments introduced by the Finance Act, 2020, which included the concept of "Provisional Approval." According to the proviso to section 80G(5), the application for approval must be made at least six months prior to the expiry of the provisional approval or within six months of the commencement of activities, whichever is earlier.

Background and Legislative Intent:
The Tribunal referred to the Budget Speech of the Hon'ble Finance Minister and the Memorandum of the Finance Bill, 2020, to understand the legislative intent behind the amendments. The amendments aimed to simplify the registration process for charitable institutions and introduced provisional registration to facilitate newly formed trusts.

Interpretation of Provisions:
The Tribunal emphasized a harmonious interpretation of the statutory provisions to avoid absurdity. It concluded that the phrase "within six months of commencement of its activities" applies to newly formed trusts that had not started charitable activities at the time of obtaining provisional registration. For existing trusts already engaged in charitable activities, the relevant time limit is within six months of the expiry of the provisional registration.

Findings:
The Tribunal found that the assessee trust, which had commenced its activities long before obtaining provisional registration, had applied for regular registration within the stipulated time frame. The application was filed before the expiry of the provisional approval, thus making it valid and maintainable.

Conclusion:
The Tribunal set aside the order of the CIT(E) and remanded the case for de novo adjudication. The CIT(E) was directed to provide an opportunity for the assessee to be heard. The appeal was allowed for statistical purposes.

Order Pronouncement:
The order was pronounced in the open Court on 18th April, 2024.