Taxpayer wins appeal after registration denied under Section 80G for belated Form 10AB filing despite timely submission

ITAT Pune allowed taxpayer's appeal against CIT(E)'s denial of registration under section 80G for belated filing of Form 10AB application. The tribunal held that existing trusts/institutions performing charitable activities since inception can apply for regular registration within six months of provisional registration expiry, rejecting CIT(E)'s interpretation that would permanently bar older trusts from registration. The tribunal found the application was filed within prescribed time limits and directed CIT(E) to verify taxpayer's eligibility on merits rather than rejecting on technical grounds. Appeal allowed for statistical purposes.

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Issues Involved:

1. Timeliness of the application filed under Section 80G(5) of the Income Tax Act.
2. Validity and interpretation of provisional approval under Section 80G(5).
3. Jurisdiction and procedural requirements for cancellation of provisional approval by the Commissioner of Income Tax (Exemption).

Detailed Analysis:

1. Timeliness of the Application:

The primary issue in this case was whether the assessee's application for approval under Section 80G(5) was filed within the statutory time limit. The assessee filed the application on 26/09/2023, which was contested by the Commissioner of Income Tax (Exemption) [CIT(E)] as being beyond the permissible time frame. The CIT(E) argued that the application was not filed within the time limit allowed under clause (iii) of the first proviso to Section 80G(5). However, the tribunal found that the assessee had applied well in advance, as the provisional approval was valid until the Assessment Year (AY) 2024-25, and the application was filed before six months of its expiry, in compliance with the statutory requirement.

2. Validity and Interpretation of Provisional Approval:

The tribunal addressed the interpretation of the proviso to Section 80G(5), which stipulates that an application must be made at least six months prior to the expiry of provisional approval or within six months of commencement of activities, whichever is earlier. The CIT(E) held that since the assessee commenced activities in 1986, the application should have been made by 30/06/2021, extended to 30/09/2022 by CBDT circulars. However, the tribunal clarified that this requirement applies primarily to newly formed trusts that have not commenced activities. For existing trusts with provisional approval, the application should be filed within six months before the expiry of such approval. The tribunal emphasized that ignoring the provisional approval's validity until AY 2024-25 was a critical oversight by the CIT(E).

3. Jurisdiction and Procedural Requirements for Cancellation:

The tribunal noted that the CIT(E) had no jurisdiction to cancel the provisional approval without proper procedure, including issuing a show-cause notice. The provisional approval could only be revoked upon specific violations by the assessee, which were not demonstrated in this case. The tribunal highlighted that the CIT(E) failed to consider whether the assessee met other conditions under Section 80G(5) due to the premature rejection based on timeliness.

Conclusion:

The tribunal concluded that the assessee's application was filed within the prescribed time limit and was thus valid. It directed the CIT(E) to treat the application as timely and assess the assessee's eligibility under the Act. The CIT(E) was instructed to provide the assessee with an opportunity to present necessary documents and verify compliance with all statutory requirements. The appeal was allowed for statistical purposes, emphasizing procedural fairness and adherence to legislative intent regarding provisional approvals.

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