Trust wins appeal for section 12AA and 80G registrations despite early filing objections

ITAT Kolkata allowed the trust's appeals against CIT(E)'s rejection of applications for final registration under section 12AA(1)(ac)(iii) and final approval under section 80G(5)(iii). The CIT(E) had rejected both applications as premature, finding they were filed before the prescribed six-month period prior to provisional registration expiry. The Tribunal held that applications can be filed at the earliest possible event, with no bar on early filing. The matter was remanded to CIT(E) for fresh consideration, directing expeditious decision within two months and ensuring continuity of benefits without break during the interim period.

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Issues Involved:
1. Rejection of application for registration u/s 12AA(1)(ac)(iii) of the Income Tax Act.
2. Rejection of application for final approval u/s 80G(5)(iii) of the Income Tax Act.

Summary:

Issue 1: Rejection of Application for Registration u/s 12AA(1)(ac)(iii)

The assessee appealed against the order of the CIT(Exemptions), which rejected their application for registration u/s 12AA(1)(ac)(iii) as premature. The CIT(Exemptions) noted that the assessee already had provisional registration valid until A.Y 2026-27. The Tribunal observed that the assessee was granted registration u/s 12AB(1)(a) for five years starting from A.Y 2022-23. According to section 12A(1)(ac)(iii), the application for final registration must be made at least six months before the provisional registration expires or within six months of commencing activities, whichever is earlier. The Tribunal clarified that there is no restriction on applying earlier than six months before the expiry of provisional registration. The Tribunal set aside the CIT(Exemptions)'s order and directed them to consider the application for final registration.

Issue 2: Rejection of Application for Final Approval u/s 80G(5)(iii)

The assessee, already registered u/s 80G(5) since 2021, faced rejection of their application for final approval under the amended provisions of section 80G of the Act. The CIT(Exemptions) noted that the assessee applied for provisional approval under Clause (iv) instead of reapplying under Clause (i) for existing approvals. The CIT(Exemptions) rejected the application, citing the expiry of the prescribed time limit. The Tribunal referred to the decision in "Tomorrow's Foundation vs. CIT(Exemption)" and similar cases, stating that institutions with provisional approval must apply for final registration within six months of commencing activities or six months before the provisional approval expires. The Tribunal concluded that the CIT(Exemptions) misinterpreted the provisions and directed them to grant provisional approval if the assessee is otherwise eligible. They emphasized that the benefit of approval u/s 80G should be deemed continuous without any break due to technical errors in application interpretation.

Conclusion:

Both appeals of the assessee were allowed for statistical purposes, with directions to the CIT(Exemptions) to reconsider the applications for final registration and approval, ensuring no deprivation of benefits due to technical errors or misinterpretation of provisions.

Kolkata, the 23rd April, 2024.

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