2024 (12) TMI 26 - AT - Income Tax

Rejection of registration u/s 80G - assessee s application was filed beyond the statutory time limit - Cancellation of provisional registration - 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 2000, performed charitable activities since 2000, but did not apply 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. In this case there is gross non application of mind by the CIT(E), as he has not considered the reply filed by the assessee in response to show cause notice and not followed the binding decision of ITAT Pune in the case of T.B.Lulla Charitable foundation 2024 (6) TMI 798 - ITAT PUNE . Hon ble Supreme Court in the case of Union Of India And Others vs Kamlakshi Finance Corporation 1991 (9) TMI 72 - SUPREME COURT has held that the Collector has to follow the binding precedence of jurisdictional Tribunal. CIT(E) has not discussed whether the Assessee fulfils all other conditions mentioned in the section as he rejected it on technical ground. Therefore, in these facts and circumstances we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. Therefore, we direct the CIT(E) to treat the application as filed within statutory time and verify assessee s eligibility as per the Act. CIT(E) shall grant opportunity to the assessee. Assessee shall be at liberty to file all the necessary documents before the CIT(E). Appeal of the assessee is allowed for statistical purpose.

Summary

Issues Involved:

1. Rejection of application for approval/renewal under Section 80G(5) due to alleged delay.
2. Cancellation of provisional registration without due process or opportunity for hearing.
3. Interpretation and application of provisions of Section 80G of the Income Tax Act.
4. Compliance with procedural requirements and adherence to binding precedents.

Detailed Analysis:

1. Rejection of Application for Approval/Renewal under Section 80G(5) Due to Alleged Delay:

The primary issue in this case was whether the application for approval under Section 80G(5) was filed within the statutory time limit. The Commissioner of Income Tax (Exemption) rejected the application, stating it was filed beyond the time limit prescribed under clause (iii) of the first proviso to Section 80G(5). The Tribunal found that the assessee had a provisional approval valid until Assessment Year 2024-25 and had applied for regular approval well in advance, as required six months before the expiry of the provisional registration. The Tribunal noted that the CIT(E) had erred by not considering the provisional approval and its validity, which was crucial to determining the timeliness of the application. The Tribunal clarified that the requirement to apply "within six months of commencement of its activities" is intended for newly formed trusts without prior activities, not for existing trusts with provisional approval.

2. Cancellation of Provisional Registration Without Due Process or Opportunity for Hearing:

The assessee contended that the cancellation of provisional registration, granted on 06/04/2022, was done without following due process and without affording an opportunity for a hearing. The Tribunal observed that the CIT(E) did not provide any reasons related to the genuineness of the activities or violations of conditions prescribed in Section 80G(5). The Tribunal emphasized that the provisional approval could only be cancelled on specific violations, and the CIT(E) failed to consider the submissions made by the assessee in response to the show cause notice.

3. Interpretation and Application of Provisions of Section 80G of the Income Tax Act:

The Tribunal undertook a detailed interpretation of Section 80G(5), particularly focusing on the proviso concerning the application timeline for regular registration. The Tribunal highlighted the legislative intent behind the introduction of provisional registration in the Finance Bill 2020, which aimed to facilitate the registration of newly formed trusts. The Tribunal concluded that the CIT(E)'s interpretation was flawed, as it would prevent long-standing trusts from applying for registration if they had not done so previously. The Tribunal stressed that the correct interpretation allows existing trusts to apply for regular registration within six months of the expiry of provisional registration.

4. Compliance with Procedural Requirements and Adherence to Binding Precedents:

The Tribunal criticized the CIT(E) for not considering the binding decision of the ITAT Pune in the case of T.B. Lulla Charitable Foundation and for not addressing the submissions made by the assessee. The Tribunal referenced the Supreme Court's decision in Union Of India And Others vs Kamlakshi Finance Corporation, which mandates adherence to jurisdictional tribunal precedents. The Tribunal directed the CIT(E) to treat the application as filed within the statutory time and to verify the assessee's eligibility as per the Act, ensuring a fair opportunity for the assessee to present necessary documents.

Conclusion:

The Tribunal allowed the appeal for statistical purposes, directing the CIT(E) to reassess the application, considering it filed within the prescribed time limit and verifying the eligibility of the assessee under the provisions of the Income Tax Act. The Tribunal's decision emphasized the importance of correct interpretation of legislative provisions, adherence to procedural fairness, and compliance with binding judicial precedents.