2024 (3) TMI 839 - AT - Income Tax

Application for final approval u/s 80G(5)(iii) - time limit prescribed for making an application for final approval u/s 80G - application of the assessee rejected as the assessee had already commenced its activities since long and since the time period for making application mentioned in Clause (iii) to First Proviso to section 80G(5) of the Act had already expired, therefore, the assessee could not be granted final registration u/s 80G(5) HELD THAT - CBDT Circulars regarding the exemption of date for final applications for approval are applicable only for the institutions who stood already registered on the date of Amendment and have made application for renewal of the registration without any time break. However, the said last date which has been extended to 30.09.23 by CBDT Circular No.6 of 2023 is not applicable for the institutions who have filed application for fresh provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and thereafter for making application under Clause (iii) to First Proviso to section 80G(5) of the Act. As observed above, for making application for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act, the institution must have been provisionally registered either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act. Therefore, after grant of provisional approval, the application cannot be rejected 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. In the case in hand, the assessee admittedly has applied for final registration after grant of provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and therefore, the application filed by the assessee is within limitation period. The issue is squarely covered by the decision of Vivekananda Mission Asram 2023 (12) TMI 1298 - ITAT KOLKATA and in the case of West Bengal Welfare Society vs. CIT(Exemption) ( 2023 (9) TMI 1422 - ITAT KOLKATA . Therefore, the impugned order of the CIT(Exemption) is set aside and the ld. CIT(Exemption) is directed to 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. Appeal of the assessee stands allowed.

Summary

Issues involved: Appeal against rejection of application for final approval under section 80G(5)(iii) of the Income Tax Act.

The judgment pertains to an appeal filed by the assessee against the Commissioner of Income Tax (Exemption), Kolkata's order rejecting the application for final approval under section 80G(5)(iii) of the Income Tax Act. The assessee, already registered as a charitable institution under section 80G of the Act, applied for provisional approval under the wrong clause, which led to the rejection of the final approval application. The Commissioner observed that the application for final approval should have been 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. Despite the CBDT Circular extending the deadline for final approval applications, the assessee's application was filed after the extended date, resulting in rejection (para 3).

The Tribunal analyzed the relevant provisions of section 80G(5) of the Act, highlighting the requirements for institutions to reapply for approval after the amendment brought by the Taxation and Other Laws Act, 2020. Institutions already approved had to reapply under Clause (i) of the First Proviso within a specified timeframe. The Tribunal emphasized the distinction between applications under Clause (i) and Clause (iv) of the First Proviso, noting that the assessee's error in applying under the latter clause did not preclude them from seeking final registration under Clause (iii). Citing precedents, the Tribunal clarified that the application for final registration could be made after receiving provisional approval, regardless of when the activities commenced. The Tribunal set aside the Commissioner's order and directed the grant of provisional approval to the assessee if found eligible (para 5-6).

The Tribunal also addressed the misconception by the Commissioner regarding the applicability of CBDT Circulars on final application deadlines. It clarified that the extended dates were for institutions seeking renewal without a break and not for those applying for fresh provisional registration under Clause (iv) followed by final registration under Clause (iii). The Tribunal emphasized that the date of activity commencement should be considered post the grant of provisional registration, as in the present case. Relying on previous rulings, the Tribunal overturned the Commissioner's decision and instructed the grant of provisional approval to the assessee if eligible (para 6).

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the Commissioner's order and directing the grant of provisional approval under Clause (iii) of the First Proviso to section 80G(5) of the Act, subject to eligibility (para 7).