ITAT allows appeal against rejection of final approval under section 80G(5)(iii) after provisional registration

ITAT Kolkata allowed the appeal regarding rejection of final approval under section 80G(5)(iii). The assessee applied for final registration after receiving provisional registration under Clause (iv) to First Proviso to section 80G(5), which was within the limitation period. The tribunal relied on precedents from Tomorrow's Foundation, Vivekananda Mission Asram, West Bengal Welfare Society, and Sri Aurobindo Bhawan Trust cases. The CIT(Exemption) order was set aside, and directions were issued to grant provisional approval under Clause (iii) if the assessee meets eligibility criteria.

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Issues Involved:
1. Rejection of the application for final approval under Section 80G(5)(iii) of the Income Tax Act.
2. Interpretation and application of Section 80G(5) provisions and related CBDT Circulars.
3. Eligibility and procedural requirements for final registration under Section 80G(5).

Issue-Wise Detailed Analysis:

1. Rejection of the application for final approval under Section 80G(5)(iii) of the Income Tax Act:

The assessee's application for final approval under Section 80G(5)(iii) was rejected by the CIT(Exemption) on the grounds that the application was not made within the prescribed time limit. The CIT(Exemption) noted that the time limit for making an application for final approval was at least six months prior to the expiry of the provisional approval period or within six months of the commencement of its activities, whichever is earlier. The assessee had commenced its activities long before the grant of provisional registration, and the application for final approval was filed after the extended date of 30.09.2022, leading to the rejection.

2. Interpretation and application of Section 80G(5) provisions and related CBDT Circulars:

The Tribunal referred to the provisions of Section 80G(5) and the relevant CBDT Circulars. It noted that institutions which stood already approved under Section 80G(5)(vi) on the date of the amendment brought by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, had to re-apply for fresh registration. The prescribed date for final application for approval under Clause (i) was extended to 30.09.2023 by CBDT Circular No.6 of 2023. The Tribunal emphasized that the extension of dates by the CBDT Circulars was applicable only to institutions that were already registered and applied for renewal without any time break. The Tribunal clarified that the extended date was not applicable to institutions applying for fresh provisional registration under Clause (iv) and thereafter for final registration under Clause (iii).

3. Eligibility and procedural requirements for final registration under Section 80G(5):

The Tribunal highlighted that institutions granted provisional approval under Clause (i) or Clause (iv) to the First Proviso to Section 80G(5) must apply for final registration under Clause (iii) at least six months prior to the expiry of the provisional approval period or within six months of commencement of its activities, whichever is earlier. The Tribunal referred to its previous decisions, including "Tomorrow's Foundation vs. CIT(Exemption)" and "Vivekananda Mission Asram vs. CIT," where it held that an institution granted provisional registration is eligible to apply for final registration irrespective of the commencement of activities prior to the grant of provisional approval. The Tribunal reiterated that the application for final registration cannot be rejected on the grounds that the institution had already commenced its activities before the provisional registration was granted.

Conclusion:

The Tribunal concluded that the CIT(Exemption) had misconstrued the provisions and CBDT Circulars regarding the time limits for final applications for approval. It held that the assessee, having applied for final registration after being granted provisional registration under Clause (iv), was within the limitation period. The Tribunal directed the CIT(Exemption) to grant provisional approval to the assessee under Clause (iii) to the First Proviso to Section 80G(5) if the assessee is otherwise found eligible and to decide the application for final registration within three months of receiving the order.

Result:

The appeal of the assessee was treated as allowed for statistical purposes, and the order of the CIT(Exemption) was set aside. The CIT(Exemption) was directed to grant provisional approval and decide the application for final registration within the stipulated time.

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