Trust wins appeal after section 80G(5)(iii) approval rejected for missing deadlines gets CBDT Circular relief

ITAT Kolkata allowed the appeal regarding rejection of section 80G(5)(iii) final approval application for missing prescribed time limits. The tribunal held that the assessee-trust is entitled to benefit of CBDT Circular No.7 of 2024 extending the due date to 30.06.2024. The trust was granted liberty to file fresh application under the circular, which must be decided by CIT(Exemption) within two months. If approval is granted, section 80G benefits will be deemed continuous without break from the pre-2020 Amendment period, including the gap between 31.03.2021 and provisional approval date 28.05.2021.

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Issues Involved: Rejection of application for final approval under section 80G(5)(iii) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemption), Kolkata.

Issue-wise Detailed Analysis:

1. Background and Procedural History:
The assessee trust, already registered under section 80G(5) since 2008, faced a requirement to re-apply for approval due to amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, effective from 01.04.2021. The trust applied for provisional approval under Clause (iv) instead of revalidating existing approval under Clause (i). The CIT (Exemption) rejected the application for final approval under Clause (iii) due to non-compliance with the stipulated time limits.

2. Relevant Legal Provisions and CBDT Circulars:
Section 80G(5) outlines conditions for approval of charitable institutions. Clause (i) pertains to re-approval of already approved institutions, while Clause (iv) is for new applications. The CIT (Exemption) misinterpreted the provisions and the CBDT Circulars, which extended the application deadlines. The relevant Circulars extended the deadline for applications under Clause (i) to 30.09.2023.

3. Tribunal's Analysis and Precedents:
The Tribunal referenced the Coordinate Kolkata Bench's decision in "Tomorrow's Foundation vs. CIT(Exemption)" and "Vivekananda Mission Asram vs. CIT" which clarified that institutions already engaged in activities before provisional approval could still apply for final registration under Clause (iii). The Tribunal emphasized that the CIT (Exemption) misconstrued the provisions and the Circulars, which were intended to facilitate compliance, not restrict it.

4. Interpretation of Provisions and Circulars:
The Tribunal noted that the CBDT Circulars aimed to mitigate hardships due to complex provisions. The Tribunal held that institutions granted provisional approval under Clause (iv) could apply for final registration under Clause (iii), irrespective of prior activities. The Tribunal criticized the CIT (Exemption) for a narrow interpretation that would render the provisions ineffective.

5. Application of CBDT Circular No.7 of 2024:
The Tribunal acknowledged the recent Circular No.7 of 2024, which extended the deadline for final approval applications to 30.06.2024 and allowed existing trusts to surrender provisional approvals and reapply correctly. The Tribunal directed the CIT (Exemption) to consider the assessee's application under this Circular and grant final approval if eligible, ensuring continuity of benefits without interruption.

6. Conclusion and Directions:
The Tribunal set aside the CIT (Exemption)'s order and directed a fresh decision, considering the Tribunal's observations and the CBDT Circulars. The Tribunal allowed the assessee to reapply under the extended deadlines and directed the CIT (Exemption) to decide within two months of receiving the application, ensuring no break in the approval benefits.

Mutatis Mutandis Application:
The findings and directions in ITA No.321/Kol/2024 apply similarly to ITA No.324/Kol/2024, with necessary adjustments for specific dates and events.

Disposition:
Both appeals were treated as allowed for statistical purposes, with directions for fresh consideration and application under the extended deadlines provided by the CBDT Circulars.

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