Society wins Section 80G final approval after CIT(E) wrongly rejected application as time-barred despite timely filing

The ITAT Chandigarh allowed the appeal regarding Section 80G approval rejection. The CIT(E) incorrectly rejected the application as non-maintainable based on activity commencement date (18/04/2006) and alleged time-barring, without examining merits. The assessee society obtained provisional approval on 05/04/2023 and filed Form 10AB on 23/09/2023, well within the six-month deadline of 05/10/2023. The tribunal held that since the society was incorporated on 06/09/2022 and received provisional approval thereafter, the case fell under the first limb of Section 80G(5)(iii), making the earlier activity commencement date irrelevant for final approval purposes.

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Issues Involved:
1. Validity of the rejection of the application for final approval u/s 80G(5)(iii) of the Income Tax Act, 1961.
2. Interpretation of the time limit for filing the application under clause (iii) of the first proviso to sub-section (5) of Section 80G.
3. Consideration of the date of commencement of activities versus the date of provisional approval.

Summary:

Validity of the Rejection of Application:
The Assessee, Indian Red Cross Society District Branch SAS Nagar, Mohali, Punjab, filed an appeal against the rejection of its application for final approval u/s 80G(5)(iii) by the CIT (E), Chandigarh. The application was filed in Form No. 10AB under Rule 11AA and was rejected as non-maintainable under the clause (iii) of the first proviso to sub-section (5) of Section 80G.

Interpretation of the Time Limit:
The CIT (E) rejected the application on the grounds that it was not filed within the time limit prescribed under clause (iii) of the first proviso to sub-section (5) of Section 80G, which requires filing at least six months prior to the expiry of the provisional approval or within six months of the commencement of activities, whichever is earlier. The Assessee argued that the society started operations on 18/04/2006 but was formally registered on 06/09/2022 and obtained provisional approval on 05/04/2023. The application for final approval was filed on 23/09/2023, which the Assessee contended was within the six-month period from the date of provisional approval.

Date of Commencement of Activities vs. Date of Provisional Approval:
The Tribunal observed that the Assessee was working under the Indian Red Cross Society Act, 1920, until it was incorporated as a society under the Societies Registration Act on 06/09/2022. The Tribunal held that the date of provisional approval (05/04/2023) is relevant for determining the time limit for filing the application for final approval, not the date of commencement of activities (18/04/2006). The Tribunal concluded that the application filed on 23/09/2023 was within the six-month period from the date of provisional approval and hence was maintainable.

Order:
The Tribunal set aside the impugned order of the CIT (E) and remanded the matter back to the CIT (E) to pass a fresh order on merits, preferably within four weeks, considering the observations made and the new CBDT Circulars No. 6/2023 and No. 7 of 2024. The appeal of the Assessee was allowed for statistical purposes. The order was pronounced in the open Court on 01/05/2024.

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