Assessee with provisional registration from 28.06.2022 eligible for final approval; 80G(5) clause (iii) benefits deemed continuous despite filing errors

ITAT allowed the appeal, directing CIT(Exemption) to decide the assessee's application for final approval under clause (iii) to the First Proviso to section 80G(5) within two months. Tribunal held that institutions with provisional approval from 28.06.2022 could apply for final approval despite having commenced activities earlier; commencement for eligibility is to be counted from provisional registration. If final approval is granted, 80G benefits continuous from pre-amendment status will be deemed uninterrupted, and the assessee will not be deprived of benefits for the period between 31/03/2021 and 28/06/2022 due to technical filing errors.

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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 of the provisions of section 80G(5) of the Income Tax Act.
3. Applicability of CBDT Circulars regarding the extension of the date for final applications for approval.

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 Clause (iii) to the First Proviso to section 80G(5) was rejected by the Commissioner of Income Tax (Exemption) [CIT(Exemption)] because the application was not submitted within the prescribed time limits. The CIT(Exemption) observed that the assessee had commenced its activities since 2002, and the application for final approval was required to be made within six months of the commencement of its activities or six months prior to the expiry of the provisional approval, whichever was earlier. Since the application was submitted after the extended date of 30.09.2022, the CIT(Exemption) rejected it.

2. Interpretation of the provisions of section 80G(5) of the Income Tax Act:
The Tribunal analyzed the provisions of section 80G(5) and the relevant clauses. It was noted that institutions already approved under section 80G(5)(vi) on the date of the Amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, had to re-apply for fresh registration. The Tribunal referred to the case of "Vivekananda Mission Asram vs. CIT" and "West Bengal Welfare Society vs. CIT(Exemption)," where it was held that an institution granted provisional approval is eligible to apply for final registration irrespective of prior commencement of activities. The Tribunal clarified that the application for final registration must be filed within six months of the commencement of activities or six months prior to the expiry of the provisional approval, whichever is earlier.

3. Applicability of CBDT Circulars regarding the extension of the date for final applications for approval:
The Tribunal noted that the CIT(Exemption) misconstrued the CBDT Circulars regarding the extension of the date for final applications. The Circulars extending the date to 30.09.2023 were applicable only to institutions already registered on the date of the Amendment and seeking renewal without any time break. The Tribunal emphasized that these extensions did not apply to applications under Clause (iii) to the First Proviso to section 80G(5).

Conclusion:
The Tribunal held that the application for final approval could not be rejected solely because the institution had commenced its activities before the grant of provisional registration. It directed the CIT(Exemption) to reconsider the application for final approval within two months, ensuring that the benefits of approval under section 80G continue without any break if the assessee is found eligible. The Tribunal's decision aligns with the precedents set in similar cases, ensuring consistency in the interpretation of section 80G(5) provisions. The appeal of the assessee was allowed for statistical purposes.

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