2024 (1) TMI 946 - AT - Income Tax

Charitable trust's section 80G(5) application valid despite late filing as six-month limit runs from provisional registration expiry

ITAT Surat held that charitable trust's application for final approval under section 80G(5) was valid despite being filed after the prescribed time limit. ... Exemption u/s 11 - application for final approval u/s 80G rejected as is not filed within time limit prescribed under clause (iii) of third proviso of section 80G(5) - cancellation of provisional approval without giving show cause notice - assessee submits that the assessee is old. institute and never applied for approval u/s 80G, prior to amendment for amendment in procedure of registration under section 12AB as well as 80G - HELD THAT:- As decided in Bhamashah Sundarlal Daga Charitable Trust [2023 (11) TMI 1210 - ITAT JODHPUR] sub-clause says that the Institution which have provisional registration have to apply at-least six months prior to expiry of the provisional registration or within Six months of commencement of activities, whichever is earlier. 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 sub clause (iii) of the Proviso to Section 80G(5) of the Act. This will be the harmonious interpretation. 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 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. This interpretation leads to absurd situation. 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 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. Even otherwise, the Provisional Approval is upto A.Y.2025-26, and it can be cancelled by the CIT(E) only on the specific violations by the assessee. However, in this case CIT(E) has not mentioned about any violation by the Assessee. Therefore, even on this ground the rejection is not sustainable. 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. Thus we restore the matter back to the file of ld. CIT(E) to reconsider the application afresh by following the decision of Bhamashah Sundarlal Daga Charitable Trust Vs CIT(E) (supra) and to pass order afresh in accordance with law. Grounds of appeal raised by the assessee are allowed for statistical purposes. Delay in filing application u/s 80G(5) - If the application is within time as per provisions of clause (iii) of proviso to section 80G(5) or if delay can it be condoned or not? - As relying on Vananchal Kelawani Trust [2024 (1) TMI 877 - ITAT SURAT] the delay in filing application for regular approval under section 80G(5) of 123 days are condoned. Considering the facts that we have condoned the delay in filing application for regular approval, therefore, the appeal is restored back to the file of ld. CIT(E) to reconsider it afresh and pass order in accordance with law. Needless to direct that before passing the order ld. CIT(E) shall grant opportunity to the assessee to filed additional submissions, if so desired. Application rejected as filled belated - taking view that commencement of activities of the assessee is 28.07.2022 and the assessee was required for regular approval under section 80G(5) on or before 28.01.2023, which the assessee failed - Whether receipt of donation can be considered as commencement of its activities? - HELD THAT:- We find that the assessee was allotted land from SMC vide allotment latter dated 23.12.2022 only. The assessee applied for regular approval on 23.04.2023. We find merit in the submissions of the assessee that the activities of assessee-trust in real sense starts from the day when the beneficiary is actually got benefits of the activities carried out by institution in furtherance of its objects and that mere receipt of donation is not a commencement of charitable activities. We also accept the contention of ld. AR for the assessee that in his case for the purpose of counting six months at the worst the date of allotment from SMC, which is 23.122.2022. Considering the peculiar facts of the present case, this appeal is restore back to the file of ld. CIT(E) to verify limited facts that if the assessee fulfil all other requite conditions and to allow them approval under section 80G(5) in accordance with law. In the result, the grounds of appeal in the present appeal is allowed. Issues Involved:1. Rejection of application for approval under Section 80G(5) of the Income Tax Act, 1961.2. Time limit for filing the application for approval under Section 80G(5).3. Interpretation of statutory provisions and condonation of delay in filing applications.Summary:Issue 1: Rejection of Application for Approval under Section 80G(5)The appeals by different assessees were directed against the rejection of their applications for approval of funds under Section 80G(5) by the Commissioner of Income Tax (Exemptions) [CIT(E)], Ahmedabad. The applications were rejected on technical grounds, primarily for being time-barred as per the statutory provisions.Issue 2: Time Limit for Filing the ApplicationThe assessees argued that they were old institutions that had never applied for approval under Section 80G before the amendment in the registration procedure. They contended that they applied for provisional approval after the amendment, which was granted, and subsequently applied for regular approval. The CIT(E) rejected their applications, stating that they were not filed within the time limit prescribed under clause (iii) of the third proviso to Section 80G(5).Issue 3: Interpretation of Statutory Provisions and Condonation of DelayThe Tribunal considered the submissions and found that the CIT(E) had rejected the applications based on a strict literal interpretation of the statutory provisions, which led to an absurd and unjust result. The Tribunal referred to the decision of the Coordinate Bench of Jodhpur in the case of Bhamashah Sundarlal Daga Charitable Trust vs. CIT(E), which emphasized a harmonious interpretation of the provisions to avoid prejudice to the assessees. The Tribunal held that the applications were valid and maintainable and directed the CIT(E) to reconsider them afresh, granting the assessees an opportunity to file additional submissions.Separate Appeals:- ITA Nos. 577 & 578/Srt/2023: Similar facts to ITA No. 555/Srt/2023; appeals restored with similar directions.- ITA No. 556/Srt/2023 (GHB Green Foundation): Delay of 123 days in filing application condoned; appeal restored for fresh consideration.- ITA No. 688/Srt/2023 (Shreemati Shantaben Haribhai Gajera Foundation): Delay of 182 days in filing application condoned; appeal restored for fresh consideration.- ITA No. 852/Srt/2023 (SDA Aarogya Trust): Dispute on the commencement date of activities; appeal restored for verification of facts and fresh consideration.Conclusion:The Tribunal allowed the appeals for statistical purposes, directing the CIT(E) to reconsider the applications afresh in accordance with the law, granting reasonable opportunities for hearings and submissions. The judgment emphasized a harmonious interpretation of statutory provisions to avoid absurd and unjust results.