2024 (3) TMI 1202 - AT - Income Tax

Application for final approval u/s 80G(5)(iii) rejected - as per revenue assessee had already commenced its activities since long even prior to grant of provisional registration and since the time period for making application mentioned in Clause (iii) to First Proviso to section 80G(5) of the Act had already expired therefore the assessee could not be granted final registration u/s 80G(5) - HELD THAT - The issue is squarely covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the case of Tomorrow s Foundation 2024 (3) TMI 941 - ITAT KOLKATA the appeal of the assessee is allowed accordingly and the ld. CIT(Exemption) is directed to grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act if the assessee is otherwise found eligible. It is directed that the ld. CIT(E) will decide the application of the assessee for final approval as expeditiously as possible but not later than two months from the receipt of this order. As further directed that if the assessee is granted final approval by the ld. CIT(E) then the benefit of approval u/s 80G of the Act available to the assessee prior to the Amendment brought vide Amending Act of 2020 will be deemed to be continued without any break. The assessee will not be deprived of the benefit during the time period falling between 31/03/2021 and the date of grant of provisional approval under clause (iv) i.e. 28/05/2021 due to technical errors occurred in making the application under the relevant provisions of the Act because of the confusion and misunderstanding on part of the assessee as well as on part of the ld. CIT(E) in properly interpreting the relevant provisions. Appeal of the assessee allowed for statistical purposes.

Summary

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 deadlines under section 80G(5) of the Income Tax Act.

Summary:

Issue 1: Rejection of the application for final approval under section 80G(5)(iii) of the Income Tax Act

The assessee's appeal was against the order dated 22.11.2023 by the Commissioner of Income Tax (Exemption), Kolkata, rejecting their application for final approval under section 80G(5)(iii) of the Income Tax Act. The assessee had been registered under section 80G(5) since 2008. Following the Amendment Act of 2020, which required re-application for approval under Clause (i) of the First Proviso to section 80G(5), the assessee applied for provisional approval under Clause (iv) instead. The CIT (Exemption) denied the final approval, citing that the application was not made within the prescribed time limits and was filed after the extended date of 30.09.2022.

Issue 2: Interpretation of the provisions and deadlines under section 80G(5) of the Income Tax Act

The Tribunal noted that the issue was covered by the decision in "Tomorrow's Foundation vs. CIT(Exemption)" and other related cases. The relevant provisions of section 80G(5) were discussed, emphasizing that institutions already approved before the amendment had to re-apply under Clause (i) and those applying for the first time could apply under Clause (iv). The Tribunal observed that the CIT (Exemption) misconstrued the CBDT Circulars regarding the extension of dates for final applications. The Circulars applied only to institutions making applications for renewal without a time break and not to those applying for fresh provisional registration.

The Tribunal held that the application for final registration cannot be rejected on the ground that the institution had already commenced its activities before the provisional registration. The date of commencement should be counted from the activity undertaken after the grant of provisional registration. The Tribunal restored the matter to the CIT (Exemption) for a fresh decision and directed that the application for final approval be decided within two months.

Conclusion:

The appeal was allowed for statistical purposes, directing the CIT (Exemption) to grant provisional approval and decide the application for final approval expeditiously. If granted, the approval under section 80G would be deemed continuous without any break, covering the period from 31/03/2021 to 28/05/2021, despite technical errors in the application process.