Trust wins appeal for early section 12AA and 80G registration applications despite valid provisional status

ITAT Kolkata allowed the appeal regarding rejection of applications for registration under section 12AA(1)(ac)(iii) and final approval under section 80G(5)(iii). The CIT(Exemptions) had rejected both applications as premature, finding the trust's provisional registration valid until 2026-27. The tribunal held that provisions do not bar early applications; rather, applicants should file at the earliest possible event. The matter was restored to CIT(Exemptions) to reconsider the final registration application. For section 80G approval, the tribunal directed provisional approval if eligible, with final decision within two months, 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) of the Income Tax Act (ITA No. 25/Kol/2024)

The Commissioner of Income Tax (Exemptions) [CIT(Exemptions)] rejected the application for registration u/s 12AA(1)(ac)(iii) on the grounds of being premature, as the assessee had already been granted provisional registration in Form 10AC valid from A.Y 2022-23 to 2026-27. The Tribunal observed that the provisions of section 12A(1)(ac)(iii) allow for the application for final registration to be made at least six months prior to the expiry of the provisional registration or within six months of the commencement of activities, whichever is earlier. The Tribunal held that there is no bar on moving the application before the six-month period and set aside the CIT(Exemptions)'s order, restoring the matter for reconsideration.

Issue 2: Rejection of application for final approval u/s 80G(5)(iii) of the Income Tax Act (ITA No. 26/Kol/2024)

The CIT(Exemptions) rejected the application for final approval u/s 80G(5)(iii) because the assessee had already commenced its activities before the grant of provisional registration and the application was filed after the extended date of 30.09.2022. The Tribunal referred to the decision in "Tomorrow's Foundation vs. CIT(Exemption)" and other similar cases, emphasizing that institutions granted provisional approval can apply for final registration irrespective of prior commencement of activities. The Tribunal noted that the assessee's application for final registration was within the limitation period and directed the CIT(Exemptions) to grant provisional approval if the assessee is otherwise eligible, and to decide the application for final registration within three months.

The Tribunal also stated that if the final approval is granted, the benefit of approval u/s 80G should be deemed continuous without any break due to technical errors in the application process.

Conclusion:

Both appeals of the assessee were allowed for statistical purposes, and the CIT(Exemptions) was directed to reconsider the applications for final registration and approval.

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