2024 (10) TMI 301 - AT - Income Tax

Denial of approval u/s 80G - application being filed beyond allowed time limit after commencement of activities/ not filed within six months of commencement of activities - HELD THAT - 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. Hon ble Supreme Court in the case of K P Varghase 1981 (9) TMI 1 - SUPREME COURT observed that 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. Thus, we set-aside the order under 80G to ld.CIT(E) for denovo adjudication. CIT(E) shall give opportunity to the assessee of being heard. Accordingly, grounds of appeal are allowed for statistical purpose.

Issues Involved:

1. Whether the application for approval under section 80G was filed within the prescribed time limit.
2. Interpretation of the relevant statutory provisions under section 80G(5) of the Income Tax Act.
3. The applicability of the new registration procedure introduced by the Finance Act, 2020.
4. The interpretation of the statutory provision to avoid absurdity and ensure rational construction.

Issue-wise Detailed Analysis:

1. Timeliness of Application for Approval under Section 80G:

The primary issue was whether the assessee's application for approval under section 80G was filed within the prescribed time limit. The assessee, a Section 8 Company incorporated on 17.02.2020, commenced its activities on 03.01.2023 and applied for permanent registration under section 80G on 30.09.2023. The Commissioner of Income Tax (Exemption) [CIT(E)] rejected the application as it was not filed within six months of the commencement of activities, as required under section 80G(5) of the Act. The Tribunal examined whether this rejection was justified, considering the statutory provisions and the intent of the law.

2. Interpretation of Section 80G(5) of the Income Tax Act:

The Tribunal analyzed the relevant statutory provisions of section 80G(5), which outlines the conditions for approval of donations to institutions or funds. The provision requires that applications for approval be made within six months of the commencement of activities or six months prior to the expiry of provisional approval, whichever is earlier. The Tribunal noted that the CIT(E) interpreted this provision strictly, resulting in the rejection of the assessee's application as time-barred.

3. Applicability of the New Registration Procedure Introduced by the Finance Act, 2020:

The Tribunal considered the amendments introduced by the Finance Act, 2020, which included the concept of "Provisional Approval" to facilitate the registration of newly formed charitable institutions. The Tribunal noted that these amendments aimed to simplify the registration process and were not intended to prejudice existing institutions. The Tribunal emphasized that the amendments should be interpreted in a manner that aligns with the legislative intent of simplification.

4. Interpretation to Avoid Absurdity and Ensure Rational Construction:

The Tribunal referred to the principles of statutory interpretation, emphasizing that provisions should be construed to avoid absurdity and ensure a rational outcome. Citing the Hon'ble Supreme Court's observations in K P Varghese Vs. ITO, the Tribunal highlighted that statutory provisions must be interpreted to avoid unreasonable results. The Tribunal concluded that the phrase "within six months of commencement of its activities" in section 80G(5) should be interpreted in the context of newly formed institutions that had not commenced activities at the time of provisional registration. For institutions like the assessee, which had already commenced activities before obtaining provisional registration, the time limit should be interpreted as within six months of the expiry of provisional registration.

Conclusion:

Based on the above analysis, the Tribunal held that the assessee's application for registration was filed within the time allowed under the Act. Consequently, the application was deemed valid and maintainable. The Tribunal set aside the order of the CIT(E) and remanded the case for denovo adjudication, directing the CIT(E) to provide the assessee with an opportunity to be heard. The appeal was allowed for statistical purposes, emphasizing the need for a fair and reasonable interpretation of the statutory provisions.

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