Provisional registration holders cannot be denied final approval under section 80G(5)(iii) for pre-registration activities

ITAT Kolkata allowed the appeal regarding final approval under section 80G(5)(iii). The revenue contended that since the assessee had commenced activities prior to provisional registration, the time limit for final approval application had expired. The tribunal held that CBDT's extension to 30.09.2023 applied only to clause (i) applications, not clause (iii) final registrations. Once provisional approval is granted under clause (iv), institutions cannot be denied final registration merely because they operated before provisional approval. The commencement date should be counted from post-provisional registration activities. The CIT(Exemption) was directed to grant final approval if the assessee met other eligibility criteria.

---

---

Issues Involved:
1. Whether the application for final approval under section 80G(5)(iii) of the Income Tax Act was time-barred.
2. Interpretation of the relevant provisions of section 80G(5) of the Act and CBDT Circulars regarding the timelines for application.

Summary:

Issue 1: Time-barred Application for Final Approval under Section 80G(5)(iii)
The assessee's application for final approval under section 80G(5)(iii) of the Income Tax Act was rejected by the CIT (Exemption) on the grounds that it was filed after the prescribed time limit. The CIT (Exemption) noted that the application should have been submitted at least six months prior to the expiry of the provisional approval or within six months of the commencement of its activities, whichever was earlier. Since the assessee commenced its activities long before the provisional registration and applied after the extended date of 30.09.2022, the application was deemed time-barred.

Issue 2: Interpretation of Section 80G(5) and CBDT Circulars
The Tribunal examined the relevant provisions of section 80G(5) and CBDT Circulars. It was noted that institutions already approved under section 80G(5)(vi) before the 2020 Amendment Act had to re-apply for approval under Clause (i) of the First Proviso to section 80G(5) within three months from 1st April 2021. The CBDT extended this deadline to 30.09.2023. Institutions applying for the first time or not approved by 01.04.2021 could apply under Clause (iv) of the First Proviso, requiring a provisional approval followed by a final registration application under Clause (iii).

The Tribunal clarified that the assessee, instead of applying for renewal under Clause (i), applied for fresh provisional registration under Clause (iv), which was granted from 10.03.2023 to AY 2025-26. The Tribunal held that the assessee was entitled to apply for final registration under Clause (iii) and there was no bar to making such an application, as supported by the decision in "Vivekananda Mission Asram vs. CIT."

The Tribunal found that the CIT (Exemption) misconstrued the provisions and CBDT Circulars. The extensions provided by the CBDT were for institutions already registered before the amendment and not for those applying under Clause (iv). The Tribunal emphasized that the statutory provisions should not be interpreted to preclude institutions that commenced activities before provisional approval from applying for final registration.

Conclusion:
The Tribunal restored the matter to the CIT (Exemption) for a fresh decision, directing that the application for final registration cannot be rejected on the grounds of prior activity commencement. The appeal was allowed for statistical purposes, and the CIT (Exemption) was instructed to grant provisional approval if the assessee was otherwise eligible and to decide the application for final registration within three months.

---