2024 (8) TMI 361 - AT - Income Tax

Tribunal Allows Appeal for Trust: Late Form Filing u/s 80G(5) Deemed Unjust, Calls for Flexible Interpretation.

R.L. Education Sanstha Versus The CIT (Exemption), Pune

The Tribunal partly allowed the appeal by the appellant trust, remanding the matter to the CIT (Exemptions) for reconsideration. It held that the denial ... Denial of grant of approval u/s. 80G(5) - appellant trust had not filed the application within the prescribed time limit under clause (iii) of first provision to sub-section (5) of section 80G - HELD THAT:- Undisputedly, the appellant trust commenced its actual activities on 16.03.2011 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, i.e., on or before 31.03.2024. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). CIT(Exemptions) is not justified in denying the grant of approval u/s. 80G(5) to the appellant trust on the ground of delay in submission of Form No.10AB. In the circumstances, we remand the matter to the file of CIT(Exemptions) with a direction to dispose of the denovo application on merits.Appeal by appellant trust stands partly allowed. Issues:- Denial of approval u/s. 80G(5) of the Income Tax Act, 1961 based on delay in filing Form No. 10AB for regular approval.- Interpretation of clause (iii) of proviso to section 80G(5) regarding the time limit for filing the application for approval.- Consideration of the timing of commencement of activities in relation to the grant of provisional approval.Analysis:1. The appeal was filed by the assessee trust against the order denying approval u/s. 80G(5) of the Income Tax Act, 1961. The trust, registered u/s. 12A of the Act, had applied for approval under clause (iii) of the first proviso to sub-section (5) of section 80G. The denial was based on the ground that the trust did not file the application in Form No. 10AB within the prescribed time limit, as per the order dated 19.03.2024 by the ld. Commissioner of Income Tax (Exemptions), Pune.2. The key issue revolved around the interpretation of clause (iii) of the proviso to section 80G(5) concerning the time limit for filing the application for approval. The literal interpretation of the clause required the application to be made six months prior to the expiry of provisional approval or within six months of the commencement of activities, whichever is earlier. This interpretation posed challenges for institutions that had commenced activities before the grant of provisional approval, leading to potential hardship and injustice.3. The Tribunal acknowledged the difficulties arising from the literal interpretation of the clause and referred to established legal principles that allow for modifications to statutory provisions to align with legislative intent. In light of these principles, the Tribunal proposed a fair and reasonable construction by substituting the word 'earlier' with 'later' in the clause, thereby allowing institutions more flexibility in meeting the application deadline.4. Relying on the decision of the Hon'ble Supreme Court in the case of K.P. Varghese Vs. ITO, the Tribunal concluded that the trust, which had commenced activities before the grant of provisional approval, was entitled to file the application for regular approval before the expiry of the provisional approval. Therefore, the Tribunal held that the denial of approval based on the delay in filing Form No. 10AB was unjustified.5. Consequently, the Tribunal partly allowed the appeal by the appellant trust and remanded the matter to the Commissioner of Income Tax (Exemptions) for a fresh consideration of the application on its merits. The decision provided clarity on the interpretation of the time limit for filing applications for approval under section 80G(5) and emphasized the need for a pragmatic approach to address challenges faced by institutions in meeting statutory requirements.