Provisional registration holders can commence activities post-registration for section 80G(5)(iii) final approval eligibility

ITAT Kolkata allowed the appeal regarding application for final approval under section 80G(5)(iii). The revenue authority had rejected the application claiming the assessee commenced activities before provisional registration and exceeded the time limit. The tribunal held that for institutions with provisional registration under clause (iv), the commencement date counts from post-provisional registration activities, not pre-registration activities. CBDT circular extensions apply only to renewal applications, not fresh provisional registrations. The tribunal directed the authority to grant final approval if the assessee meets other eligibility criteria, following precedents from similar cases.

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Issues involved: Appeal against rejection of application for final approval under section 80G(5)(iii) of the Income Tax Act.

The judgment pertains to an appeal filed by the assessee against the Commissioner of Income Tax (Exemption), Kolkata's order rejecting the application for final approval under section 80G(5)(iii) of the Income Tax Act. The assessee, already registered as a charitable institution under section 80G of the Act, applied for provisional approval under the wrong clause, which led to the rejection of the final approval application. The Commissioner observed that the application for final approval should have been made at least six months prior to the expiry of the provisional approval or within six months of the commencement of activities, whichever is earlier. Despite the CBDT Circular extending the deadline for final approval applications, the assessee's application was filed after the extended date, resulting in rejection (para 3).

The Tribunal analyzed the relevant provisions of section 80G(5) of the Act, highlighting the requirements for institutions to reapply for approval after the amendment brought by the Taxation and Other Laws Act, 2020. Institutions already approved had to reapply under Clause (i) of the First Proviso within a specified timeframe. The Tribunal emphasized the distinction between applications under Clause (i) and Clause (iv) of the First Proviso, noting that the assessee's error in applying under the latter clause did not preclude them from seeking final registration under Clause (iii). Citing precedents, the Tribunal clarified that the application for final registration could be made after receiving provisional approval, regardless of when the activities commenced. The Tribunal set aside the Commissioner's order and directed the grant of provisional approval to the assessee if found eligible (para 5-6).

The Tribunal also addressed the misconception by the Commissioner regarding the applicability of CBDT Circulars on final application deadlines. It clarified that the extended dates were for institutions seeking renewal without a break and not for those applying for fresh provisional registration under Clause (iv) followed by final registration under Clause (iii). The Tribunal emphasized that the date of activity commencement should be considered post the grant of provisional registration, as in the present case. Relying on previous rulings, the Tribunal overturned the Commissioner's decision and instructed the grant of provisional approval to the assessee if eligible (para 6).

In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the Commissioner's order and directing the grant of provisional approval under Clause (iii) of the First Proviso to section 80G(5) of the Act, subject to eligibility (para 7).

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