2024 (3) TMI 941 - 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 - as per revenue assessee had already commenced its activities since long even prior to grant of provisional registration, 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 has extended the date upto 30.09.2023 for making application under Clause (i) to First Proviso to section 80G(5) of the Act, which means that the institutions, which were already registered prior to the amendment brought to section 80G(5) by Amendment Act of 2020 w.e.f. 01.04.2021, if an institution for some reasons could not make an application for renewal/continuance of registration under Clause (i) to First Proviso to section 80G(5) of the Act within the stipulated period of three months, it could still apply under Clause (i) upto 30.09.2023. Once an institution has applied under Clause (i) to First Proviso to section 80G(5) of the Act on or before 30.09.2023, it will be further governed by the statutory provisions of Clause (iii) of First proviso to section 80G(5) of the Act and not by the CBDT Circular for the purpose of limitation. CBDT Circular is for extension of date to help the institutions which could not apply under Clause (i) within stipulated period of three months, and not for curtailing limitation or barring institutions for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act. 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. If the view of the ld. CIT(Exemption) is accepted to be correct, then no institution which has already been into charitable activities before seeking provisional approval under Clause (iv) to First Proviso to section 80G(5) of the Act would ever be entitled to grant of final registration under Clause (iii) to First Proviso to section 80G(5) of the Act even after grant of provisional approval, which would make the relevant provisions of section 80G(5) otiose and defeat the object and purpose of these statutory provisions. As held that after grant of provisional approval, the application cannot be rejected on the ground that the institution had already commenced its activities even prior to grant of provisional registration. Thus 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 otherwise squarely covered by the decision of Vivekananda Mission Asram 2023 (12) TMI 1298 - ITAT KOLKATA and in the case of West Bengal Welfare Society 2023 (9) TMI 1422 - ITAT KOLKATA and Sri Aurobindo Bhawan Trust, Krishnagar vs. CIT(Exemption) 2024 (3) TMI 839 - 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. The ld. CIT(A) will decide the application for final registration within three months of the receipt of copy of this order. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Whether the application for final approval under section 80G(5)(iii) of the Income Tax Act was time-barred.
2. Interpretation of the relevant provisions of section 80G(5) of the Act and CBDT Circulars regarding the timelines for application.

Summary:

Issue 1: Time-barred Application for Final Approval under Section 80G(5)(iii)
The assessee's application for final approval under section 80G(5)(iii) of the Income Tax Act was rejected by the CIT (Exemption) on the grounds that it was filed after the prescribed time limit. The CIT (Exemption) noted that the application should have been submitted at least six months prior to the expiry of the provisional approval or within six months of the commencement of its activities, whichever was earlier. Since the assessee commenced its activities long before the provisional registration and applied after the extended date of 30.09.2022, the application was deemed time-barred.

Issue 2: Interpretation of Section 80G(5) and CBDT Circulars
The Tribunal examined the relevant provisions of section 80G(5) and CBDT Circulars. It was noted that institutions already approved under section 80G(5)(vi) before the 2020 Amendment Act had to re-apply for approval under Clause (i) of the First Proviso to section 80G(5) within three months from 1st April 2021. The CBDT extended this deadline to 30.09.2023. Institutions applying for the first time or not approved by 01.04.2021 could apply under Clause (iv) of the First Proviso, requiring a provisional approval followed by a final registration application under Clause (iii).

The Tribunal clarified that the assessee, instead of applying for renewal under Clause (i), applied for fresh provisional registration under Clause (iv), which was granted from 10.03.2023 to AY 2025-26. The Tribunal held that the assessee was entitled to apply for final registration under Clause (iii) and there was no bar to making such an application, as supported by the decision in "Vivekananda Mission Asram vs. CIT."

The Tribunal found that the CIT (Exemption) misconstrued the provisions and CBDT Circulars. The extensions provided by the CBDT were for institutions already registered before the amendment and not for those applying under Clause (iv). The Tribunal emphasized that the statutory provisions should not be interpreted to preclude institutions that commenced activities before provisional approval from applying for final registration.

Conclusion:
The Tribunal restored the matter to the CIT (Exemption) for a fresh decision, directing that the application for final registration cannot be rejected on the grounds of prior activity commencement. The appeal was allowed for statistical purposes, and the CIT (Exemption) was instructed to grant provisional approval if the assessee was otherwise eligible and to decide the application for final registration within three months.