Appeal allowed; 80G(5) first proviso clause (iv)(B) application filed 30.09.2024 to be adjudicated afresh despite prior rejection

ITAT CHENNAI allowed the appeal and set aside CIT(E)'s order rejecting the 80G application as non-maintainable. The Tribunal held that the application filed on 30.09.2024 should be treated under clause (iv)(B) of the first proviso to Sec. 80G(5) (inserted by the Finance Act, 2024) and directed CIT(E) to adjudicate the application in accordance with law. CIT(E)'s rejection dated 17.03.2025 for delay under CBDT Circular No.7/2024 was disallowed; the matter is remitted for fresh decision. Appeal allowed for statistical purposes.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an application in Form No.10AB filed on 30.09.2024 under clause (iii) of the first proviso to section 80G(5) of the Income Tax Act is maintainable when CBDT Circular No.7/2024 dated 25.04.2024 prescribed a revised cut-off of 30.06.2024 for such applications?

2. Whether, following the Finance Act, 2024 amendment inserting clause (iv) to the first proviso to section 80G(5) effective from 01.10.2024, an application filed on 30.09.2024 should be treated and considered as filed under clause (iv)(B) (i.e., as an application that may be made at any time after commencement of activities) rather than being rejected as non-maintainable under clause (iii)?

3. Whether the departmental authority's rejection of the application as not maintainable (for delay beyond CBDT circular timeline) is sustainable after the statutory amendment took effect before adjudication of the application?

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Maintainability of application filed 30.09.2024 under clause (iii) in view of CBDT Circular No.7/2024

Legal framework: Prior to the Finance Act, 2024 amendment, clause (iii) of the first proviso to section 80G(5) prescribed time-limited provisional approval procedures; CBDT Circular No.7/2024 extended the administrative deadline for filing such applications to 30.06.2024.

Precedent Treatment: The Tribunal relied on contemporaneous administrative guidance (CBDT Circular) as operative for applications filed under the pre-amendment regime; co-ordinate bench decisions applying the amendment post-effective date were considered.

Interpretation and reasoning: The Tribunal observed that the application was filed on 30.09.2024 under clause (iii). The assessing authority rejected it as non-maintainable because it was filed after the 30.06.2024 date fixed by CBDT Circular. However, the Tribunal emphasized that clause (iii) governed applications under the prior timeline only until the statutory framework was amended.

Ratio vs. Obiter: The finding that an application filed after the administrative deadline under clause (iii) would be non-maintainable if considered solely under clause (iii) is ratio in relation to the pre-amendment regime; but the Court proceeded to consider the impact of the statutory amendment, which alters the result.

Conclusion: If considered strictly under clause (iii) and the CBDT Circular deadline, the application would be non-maintainable for being filed beyond 30.06.2024; however, that conclusion is superseded by the subsequent statutory change discussed under Issue 2.

Issue 2 - Treating the 30.09.2024 application as an application under clause (iv)(B) following Finance Act, 2024 amendment effective 01.10.2024

Legal framework: Finance Act, 2024 inserted clause (iv) in the first proviso to section 80G(5), including clause (iv)(B), permitting an assessee that has commenced activities to apply for approval at any time after commencement; amendment effective from 01.10.2024.

Precedent Treatment: The Tribunal referred to and followed a co-ordinate Bench decision which similarly directed consideration of applications filed shortly before the amendment's effective date as applications under the new clause (iv); a Mumbai Bench order to similar effect was cited as persuasive.

Interpretation and reasoning: The Tribunal reasoned that clause (iv) constitutes a new and separate mechanism distinct from clause (iii). Because clause (iv)(B) permits applications at any time after commencement, an application filed on 30.09.2024 (immediately prior to the amendment's operative date) should be construed as one that can be considered under the post-amendment provision once the amendment became effective. The Tribunal noted that the adjudicatory order rejecting maintainability was passed after the amendment had come into force; hence, the authority ought to consider the application under clause (iv)(B) rather than mechanically rejecting it under clause (iii) and the CBDT deadline.

Ratio vs. Obiter: The determination that the statutory amendment provides an independent basis for maintainability and that applications filed shortly before the amendment's effective date should be considered under clause (iv)(B) when adjudication occurs after the amendment is treated as the operative ratio for the present facts. Observations on legislative intent (Memorandum to Finance Bill, 2024) and policy rationales are obiter support for construction but reinforce the ratio.

Conclusion: The Tribunal directed that the application dated 30.09.2024 be treated and considered as filed under clause (iv)(B) of the first proviso to section 80G(5) and remitted to the competent authority for decision in accordance with law.

Issue 3 - Validity of the CIT(E)'s rejection post-amendment and remedial direction

Legal framework: Administrative rejection based on circular timelines must yield to later-enacted statutory amendments that alter the statutory scheme for filing and consideration of applications; authorities must decide pending applications in accordance with the law in force at the time of decision.

Precedent Treatment: The Tribunal followed co-ordinate Bench authority that required reconsideration of applications under the new statutory provision where the adjudicating order was delivered after the amendment's effective date.

Interpretation and reasoning: The Tribunal found the CIT(E) issued the rejection on 17.03.2025, after clause (iv) had become effective on 01.10.2024. Given that the amended provision provides a distinct entitlement to apply at any time after commencement, the Tribunal held that procedural timelines imposed by earlier administrative circulars could not lawfully be applied to deny maintainability when the statutory landscape had changed. The Tribunal thus directed the authority to treat the application as under clause (iv)(B) and decide afresh.

Ratio vs. Obiter: The directive to the authority to reconsider the application under clause (iv)(B) is ratio in relation to the impact of the amendment on pending applications decided post-amendment; commentary that the applicant may file a fresh application under the amended provision (as argued by the Department) is obiter and rejected as unnecessary given the Tribunal's remedial course.

Conclusion: The rejection on maintainability grounds by the authority is not sustainable where the adjudication occurred after the effective date of the statutory amendment; the authority is directed to consider the existing application as filed under clause (iv)(B) and to decide in accordance with law.

Cross-reference and remedial disposition

1. Cross-referencing Issue 1 and Issue 2: Although the application was filed under clause (iii) and later deemed non-maintainable under the CBDT timeline, the insertion of clause (iv) created a separate statutory basis that governs adjudication after 01.10.2024; therefore the Tribunal's remedial direction reconciles the conflict between administrative timelines and subsequent statutory amendment.

2. Disposition: The Tribunal allowed the appeal for statistical purposes and directed the authority to consider the 30.09.2024 application under clause (iv)(B) of the first proviso to section 80G(5) and to decide the matter in accordance with law.

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