2024 (10) TMI 1173 - AT - Income Tax

Denial of Registration u/s 80G - belated filing of application in form 10AB - HELD THAT - When we read the Budget Speech of Hon ble Finance Minister 2020 and the Memorandum of Finance Bill 2020 together, it becomes clear that the concept of Provisional registration was mainly to facilitate the registration of newly formed Trust/Institutions which have not yet begun the activities. 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 subclause (iii) of the Proviso to Section 80G(5) of the Act. If we agree with the interpretation of the CIT(E), then say a trust which was formed in the year 1986, performed charitable activities since 1986, but did not applied 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. Even otherwise, the Provisional Approval is upto AY 2024-25, and it can be cancelled by the CIT(E) only on the specific violations by the assessee. Therefore, we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. 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 direct the CIT(E) to treat the application as filed within statutory time and verify assessee s eligibility as per the Act. The CIT(E) shall grant opportunity to the assessee. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:

1. Timeliness of the application filed under Section 80G(5) of the Income Tax Act.
2. Validity and interpretation of provisional approval under Section 80G(5).
3. Jurisdiction and procedural requirements for cancellation of provisional approval by the Commissioner of Income Tax (Exemption).

Detailed Analysis:

1. Timeliness of the Application:

The primary issue in this case was whether the assessee's application for approval under Section 80G(5) was filed within the statutory time limit. The assessee filed the application on 26/09/2023, which was contested by the Commissioner of Income Tax (Exemption) [CIT(E)] as being beyond the permissible time frame. The CIT(E) argued that the application was not filed within the time limit allowed under clause (iii) of the first proviso to Section 80G(5). However, the tribunal found that the assessee had applied well in advance, as the provisional approval was valid until the Assessment Year (AY) 2024-25, and the application was filed before six months of its expiry, in compliance with the statutory requirement.

2. Validity and Interpretation of Provisional Approval:

The tribunal addressed the interpretation of the proviso to Section 80G(5), which stipulates that an application must be made at least six months prior to the expiry of provisional approval or within six months of commencement of activities, whichever is earlier. The CIT(E) held that since the assessee commenced activities in 1986, the application should have been made by 30/06/2021, extended to 30/09/2022 by CBDT circulars. However, the tribunal clarified that this requirement applies primarily to newly formed trusts that have not commenced activities. For existing trusts with provisional approval, the application should be filed within six months before the expiry of such approval. The tribunal emphasized that ignoring the provisional approval's validity until AY 2024-25 was a critical oversight by the CIT(E).

3. Jurisdiction and Procedural Requirements for Cancellation:

The tribunal noted that the CIT(E) had no jurisdiction to cancel the provisional approval without proper procedure, including issuing a show-cause notice. The provisional approval could only be revoked upon specific violations by the assessee, which were not demonstrated in this case. The tribunal highlighted that the CIT(E) failed to consider whether the assessee met other conditions under Section 80G(5) due to the premature rejection based on timeliness.

Conclusion:

The tribunal concluded that the assessee's application was filed within the prescribed time limit and was thus valid. It directed the CIT(E) to treat the application as timely and assess the assessee's eligibility under the Act. The CIT(E) was instructed to provide the assessee with an opportunity to present necessary documents and verify compliance with all statutory requirements. The appeal was allowed for statistical purposes, emphasizing procedural fairness and adherence to legislative intent regarding provisional approvals.