2024 (6) TMI 1048 - AT - Income Tax

Assessee wins appeal after revenue authority wrongly rejected section 80G(5)(iii) final approval application citing expired time limit

ITAT Kolkata allowed the appeal regarding rejection of final approval application under section 80G(5)(iii). The revenue authority rejected the ... Final approval under Clause (iii) to the First Proviso to section 80G(5) - provisional approval under Clause (iv) to the First Proviso to section 80G(5) - renewal/continuance under Clause (i) to the First Proviso to section 80G(5) - limitation for filing application for final registration (six months prior to expiry of provisional approval or within six months of commencement of activities) - applicability of CBDT extension circulars to applicants under Clause (i) to the First Proviso to section 80G(5) - eligibility to apply for final registration after grant of provisional approval notwithstanding earlier commencement of activitiesFinal approval under Clause (iii) to the First Proviso to section 80G(5) - provisional approval under Clause (iv) to the First Proviso to section 80G(5) - limitation for filing application for final registration (six months prior to expiry of provisional approval or within six months of commencement of activities) - Whether the application for final registration under Clause (iii) to the First Proviso to section 80G(5) was time barred where the assessee had commenced activities prior to grant of provisional approval and filed for final approval after provisional approval was granted. - HELD THAT: - The Tribunal held that an institution becomes eligible to apply for final registration under Clause (iii) to the First Proviso to section 80G(5) only after grant of provisional approval under Clause (i) or Clause (iv). The limitation provision requiring application at least six months prior to expiry of provisional approval or within six months of commencement of activities must be read with that qualification. Consequently, where provisional approval is granted, the period for counting commencement of activities is to be treated with reference to activities undertaken after grant of provisional approval; prior activities do not render the application for final registration time barred. The Tribunal relied on Coordinate Bench decisions to the same effect and rejected the CIT(Exemption)'s view that earlier commencement of activities precluded final registration. The Tribunal also observed that the CBDT circulars extending dates for making applications applied to institutions seeking renewal/continuance under Clause (i) and do not curtail the statutory limitation governing applications under Clause (iii) arising from provisional approvals under Clause (iv). Applying these principles to the facts, the assessee's application for final registration filed after grant of provisional approval was within limitation and could not be rejected on the ground of earlier commencement of activities.Application for final registration under Clause (iii) was not time barred where it was filed after grant of provisional approval; the CIT(Exemption)'s rejection on the ground of prior commencement of activities and reliance on CBDT date extensions was set aside and the matter was directed to be decided afresh with the assessee to be granted final approval if otherwise eligible.Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(Exemption)'s order rejecting the application for final approval, directed the CIT(Exemption) to grant approval under Clause (iii) to the First Proviso to section 80G(5) if the assessee is otherwise eligible, and directed that the application for final registration be decided within three months. Issues Involved:1. Rejection of the application for final approval under section 80G(5)(iii) of the Income Tax Act.2. Interpretation of the provisions and timelines for re-application and final approval under section 80G(5) of the Act.3. Applicability of CBDT Circulars regarding the extension of dates for final application for approval.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 Commissioner of Income Tax (Exemption), Kolkata. The rejection was based on the grounds that the assessee failed to apply within the prescribed time limits. Specifically, the application was required to be filed at least six months prior to the expiry of the provisional approval or within six months of the commencement of its activities, whichever was earlier. The assessee had commenced its activities long before the provisional registration, and the application for final approval was filed after the extended deadline of 30.09.2022. Hence, the CIT(Exemption) concluded that the application was time-barred.2. Interpretation of the Provisions and Timelines for Re-application and Final Approval under Section 80G(5) of the Act:The Tribunal referred to the decision in the case of 'Tomorrow's Foundation vs. CIT(Exemption)' and reiterated the relevant provisions of section 80G(5). According to these provisions, institutions already approved under section 80G(5)(vi) before the amendment brought by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, were required to re-apply for fresh registration under Clause (i) to the First Proviso to section 80G(5) within three months from 1st April 2021. The Tribunal noted that the CBDT had extended the deadline for such applications to 30.09.2023.For institutions applying for the first time or those not approved as of 01.04.2021, the application was to be made under Clause (iv) to the First Proviso to section 80G(5). These institutions, upon provisional approval, were required to apply for final registration under Clause (iii) at least six months before the expiry of the provisional approval or within six months of commencing activities, whichever came first.3. Applicability of CBDT Circulars Regarding the Extension of Dates for Final Application for Approval:The Tribunal observed that the CIT(Exemption) had misconstrued the applicability of the CBDT Circulars. The extensions provided by the CBDT were meant for institutions already registered before the amendment and seeking renewal without a break in registration. The extended date of 30.09.2023 was not applicable to institutions applying for fresh provisional registration under Clause (iv) and subsequently for final registration under Clause (iii).The Tribunal clarified that if an institution had been granted provisional approval, it was eligible to apply for final registration regardless of whether it had commenced activities before the provisional registration. The relevant date for commencing activities would be considered as post-provisional registration. This interpretation ensures that the statutory provisions of section 80G(5) are not rendered meaningless.Conclusion:The Tribunal held that the assessee's application for final registration was within the limitation period as it was filed after the grant of provisional registration under Clause (iv). The CIT(Exemption) was directed to grant provisional approval under Clause (iii) to First Proviso to section 80G(5) if the assessee was otherwise found eligible. The CIT(Exemption) was instructed to decide the application for final registration within three months of receiving the Tribunal's order.Result:The appeal of the assessee was allowed for statistical purposes, and the CIT(Exemption) was directed to grant provisional approval and decide on the final registration application within the stipulated timeframe.