2024 (7) TMI 890 - AT - Income Tax

Rejection of final approval u/s 80G(5)(iii) - application was not submitted within the prescribed time limits - provisional approval has also been granted to the assessee-institution - as argued assessee had already commenced its activities since 2002 i.e. even prior to grant of provisional approval, 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 approval u/s 80G(5) HELD THAT - Institutions which stood already approved u/s 80G(5)(vi) on the date of Amendment brought to section 80G of the Act by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 have to re-apply for fresh registration under Clause (i) to the First Proviso to section 80G(5) of the Act and those institutions have to be granted approval for five years by the ld. CIT(Exemption) without any enquiry. The prescribed date for final application for approval under Clause (i) to the First Proviso to section 80G(5) of the Act was stipulated as three months from 1st Day of April 2022. However, the CBDT from time to time extended the date for filing of the said application under Clause (i) to the First Proviso to section 80G(5) of the Act and finally vide Circular No.6 of 2023 dated 24.05.2023, the said date was extended upto 30.09.2023. As provisional approval has also been granted to the assessee-institution from 28.06.2022 to A.Y 2025-26, therefore, the assessee-trust was entitled to apply for final approval and there was no bar to the institution for making such application. This issue has already been adjudicated upon by the Coordinate Bench of the Tribunal in the case of Vivekananda Mission Asram vs. CIT 2023 (12) TMI 1298 - ITAT KOLKATA wherein 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. 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. CIT(Exemption) is directed to grant final approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. It is directed that the ld. CIT(Exemption) will decide the application of the assessee for final approval as expeditiously as possible but not later than two months from the receipt of this order. It is further directed that, if the assessee is granted final approval by the ld. CIT(Exemption) then, the benefit of approval u/s 80G of the Act, if it was available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to have been continued without any break. Assessee will not be deprived of the benefit during the time period falling between 31/03/2021 and the date of grant of provisional approval under clause (iv) i.e., 28/06/2022, due to technical errors occurred in making the application under the relevant provisions of the Act because of the confusion and misunderstanding on part of the assessee as well as on part of the ld. CIT(Exemption) in properly interpreting the relevant provisions. Appeal of the assessee is treated as allowed for statistical purposes.

Summary

Issues Involved:
1. Rejection of the application for final approval under section 80G(5)(iii) of the Income Tax Act.
2. Interpretation of the provisions of section 80G(5) of the Income Tax Act.
3. Applicability of CBDT Circulars regarding the extension of the date for final applications for approval.

Issue-wise Detailed Analysis:

1. Rejection of the application for final approval under section 80G(5)(iii) of the Income Tax Act:
The assessee's application for final approval under Clause (iii) to the First Proviso to section 80G(5) was rejected by the Commissioner of Income Tax (Exemption) [CIT(Exemption)] because the application was not submitted within the prescribed time limits. The CIT(Exemption) observed that the assessee had commenced its activities since 2002, and the application for final approval was required to be made within six months of the commencement of its activities or six months prior to the expiry of the provisional approval, whichever was earlier. Since the application was submitted after the extended date of 30.09.2022, the CIT(Exemption) rejected it.

2. Interpretation of the provisions of section 80G(5) of the Income Tax Act:
The Tribunal analyzed the provisions of section 80G(5) and the relevant clauses. It was noted that institutions already approved under section 80G(5)(vi) on the date of the Amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, had to re-apply for fresh registration. The Tribunal referred to the case of "Vivekananda Mission Asram vs. CIT" and "West Bengal Welfare Society vs. CIT(Exemption)," where it was held that an institution granted provisional approval is eligible to apply for final registration irrespective of prior commencement of activities. The Tribunal clarified that the application for final registration must be filed within six months of the commencement of activities or six months prior to the expiry of the provisional approval, whichever is earlier.

3. Applicability of CBDT Circulars regarding the extension of the date for final applications for approval:
The Tribunal noted that the CIT(Exemption) misconstrued the CBDT Circulars regarding the extension of the date for final applications. The Circulars extending the date to 30.09.2023 were applicable only to institutions already registered on the date of the Amendment and seeking renewal without any time break. The Tribunal emphasized that these extensions did not apply to applications under Clause (iii) to the First Proviso to section 80G(5).

Conclusion:
The Tribunal held that the application for final approval could not be rejected solely because the institution had commenced its activities before the grant of provisional registration. It directed the CIT(Exemption) to reconsider the application for final approval within two months, ensuring that the benefits of approval under section 80G continue without any break if the assessee is found eligible. The Tribunal's decision aligns with the precedents set in similar cases, ensuring consistency in the interpretation of section 80G(5) provisions. The appeal of the assessee was allowed for statistical purposes.