Trust's Section 80G(5) application not time-barred when filed after provisional registration for existing charitable activities

ITAT Pune held that a trust's application under Section 80G(5) was not time-barred despite filing beyond six months of provisional registration. The tribunal distinguished between newly formed trusts yet to begin activities and existing trusts already conducting charitable work but never previously registered under 80G(5). For trusts already engaged in charitable activities before obtaining provisional registration, the six-month time limit applies from commencement of activities, not from provisional registration date. The decision relied on Finance Minister's Budget Speech 2020 and statutory interpretation principles to avoid absurdity, ruling in favor of the assessee trust.

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Issues Involved:
1. Rejection of application for approval u/s 80G(5) due to time limit.
2. Applicability of time limit for filing application under section 80G(5).
3. Nature of time limit under clause (iii) of first proviso to section 80G(5).
4. Consequences of denial of approval u/s 80G(5) on technical grounds.
5. Interpretation of statutory provisions in light of legislative intent and amendments.

Summary:

Issue 1: Rejection of application for approval u/s 80G(5) due to time limit:
The assessee appealed against the order of the CIT(Exemption), Pune, which rejected the application filed in Form No.10AB for approval u/s 80G(5) on the ground that it was filed beyond the prescribed time limit.

Issue 2: Applicability of time limit for filing application under section 80G(5):
The assessee argued that the activities commenced in February 2020 and provisional approval was granted on 04.01.2022, making it impossible to comply with the time limit prescribed in the second limb of clause (iii) of the first proviso to section 80G(5). Thus, the first limb of clause (iii) was applicable, and the application filed on 18.05.2023 was within the stipulated time.

Issue 3: Nature of time limit under clause (iii) of first proviso to section 80G(5):
The assessee contended that the time limit stipulated under clause (iii) of the first proviso to section 80G(5) was directory in nature and not mandatory, and therefore, the approval should not be denied solely on this ground.

Issue 4: Consequences of denial of approval u/s 80G(5) on technical grounds:
The assessee argued that denying approval u/s 80G(5) on a technical ground would permanently disentitle it from obtaining approval despite being genuinely engaged in charitable activities since February 2020.

Issue 5: Interpretation of statutory provisions in light of legislative intent and amendments:
The Tribunal noted that the Finance Act, 2020 introduced amendments to simplify the registration process, including the concept of "Provisional Approval." The intention was to facilitate registration, especially for newly formed trusts/institutions. The Tribunal emphasized that statutory provisions should be interpreted to avoid absurdity, as highlighted by the Supreme Court in K P Varghese vs. ITO.

Conclusion:
The Tribunal held that the words "within six months of commencement of its activities" in sub-clause (iii) of the proviso to section 80G(5) apply to trusts/institutions that had not started charitable activities at the time of obtaining provisional registration. Since the assessee had already commenced activities before obtaining provisional registration, the application was considered valid and maintainable. The order of the CIT(Exemption) was set aside for denovo adjudication, with instructions to provide the assessee an opportunity of being heard. The appeal was allowed for statistical purposes.

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