2024 (1) TMI 848 - AT - Income Tax

Application for approval u/s 80G filed in Form 10AB - application rejected only on one ground that the application has been filed beyond the specified time and hence held it as time barred - whether the application of the assessee was time barred or not? - HELD THAT - The sub-clause says that the 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 the 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. If we agree with the interpretation of the CIT(E), then say a trust which was formed in the year 2000, performed charitable activities since 2000, but did not apply for registration u/s.80G, the said trust will never be able to apply for registration now. This in our opinion is not the intention of the legislation. This interpretation leads to absurd situation. 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. Provisional Approval is upto A.Y.2025-26, and it can be cancelled by the CIT(E) only on the specific violations by the assessee. However, in this case the ld.CIT(E) has not mentioned about any violation by the Assessee. Therefore, even on this ground the rejection is not sustainable. CIT(E) has not discussed whether the Assessee fulfils all other conditions mentioned in the section as he rejected it on technical ground. Therefore, we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. Therefore, we direct the CIT(E) to treat the application as filed within statutory time and verify assessee s eligibility as per the Act. CIT(E) shall grant opportunity to the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:
1. Rejection of registration under Section 80G of the Income Tax Act, 1961.
2. Alleged violation of principles of natural justice due to insufficient opportunity to present details.
3. Evaluation of application based on merits versus technical grounds.

Summary:

1. Rejection of Registration under Section 80G:
The Commissioner of Income Tax (Exemption) rejected the assessee's application for approval under Section 80G of the Income Tax Act, 1961, on the grounds that it was filed beyond the specified time limit, thus being time-barred. The application was filed on 27.03.2023, whereas it should have been filed on or before 18.02.2023, as per the clause (iii) of the first proviso to Section 80G(5) of the Act.

2. Alleged Violation of Principles of Natural Justice:
The assessee contended that the Commissioner did not grant sufficient opportunity to submit details and information, thereby violating the principles of natural justice. The Tribunal noted that the Commissioner had not discussed the merits of the case and rejected the application solely on technical grounds.

3. Evaluation Based on Merits vs. Technical Grounds:
The Tribunal analyzed the statutory provisions, including the relevant part of Section 80G(5) and the amendments introduced by the Finance Act, 2020. It was noted that the amendments aimed to simplify the registration procedure for charitable trusts and institutions. The Tribunal emphasized that the interpretation of the provisions should avoid absurdity and align with the legislative intent to facilitate registration.

The Tribunal referred to the Hon'ble Supreme Court's observations in K P Varghese Vs. ITO, emphasizing that statutory provisions should be construed to avoid absurdity and mischief. The Tribunal concluded that the words "within six months of commencement of its activities"� should apply to newly formed trusts/institutions that had not started charitable activities at the time of obtaining provisional registration, not to those already engaged in charitable activities.

Conclusion:
The Tribunal held that the assessee had applied for registration within the allowed time under the Act, making the application valid and maintainable. The Commissioner of Income Tax (Exemption) was directed to treat the application as filed within the statutory time and verify the assessee's eligibility as per the Act, granting the assessee an opportunity to present necessary documents. The appeal of the assessee was allowed for statistical purposes, and the case was set aside to the Commissioner for further verification. The Tribunal did not adjudicate each ground separately due to the decision to set aside the case.

Order Pronounced:
The appeal of the assessee was allowed for statistical purposes, with the order pronounced in open court on 5th January 2024.