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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE, JM &
Appellant) : Respondent) : Ms. Rupal Shah, AR Appellant/Assessee by : Shri Joginder Singh, Sr. DR Revenue/Respondent by Date of Hearing : 16.11.2023 Date of Pronouncement : 20.11.2023 O R D E R Per Padmavathy S, AM:
This appeal is against the order of the Commissioner of Income Tax (Exemption), Pune [for short 'the CIT(E)'] dated 31.05.2023 rejecting the final registration under section 80G of the Income Tax Act, 1961 (for short 'the Act'). The assessee has raised the following grounds of appeal:
2 M/s Paw Pets Foundation “1. On the facts and in the circumstances of the case, the Commissioner of Income-tax (Exemption), hereinafter referred to as the "CIT(E)", has passed the order of rejection of application for final registration u/s 80G(5)(vi) of the Income Tax Act, arbitrarily and based on erroneous facts and superfluous reasons ignoring the relevant material facts.
2. The Ld. CIT(E) erred in understanding that the assessee commenced its activities before obtaining provisional approval.
3. The Ld CIT(E) thereby erred in understanding that the final registration was not applied within 6 months of commencement of business activities.
4. The order of rejection of application was passed without giving the institution any opportunity of being heard as laid down under Rule 11AA(5).
5. The order for approval of final registration u/s 12AB was passed on the same day, thereby suggesting that CIT(E) is satisfied as to the merits of the activities of the Trust.”
The assessee filed the application in Form 10AB under clause (iii) of first proviso to section 80G(5) of the Act before the CIT(E) on 17.11.2022. The CIT(E) rejected the application stating that the assessee has not filed the present application within the time allowed under clause (iii) of first proviso to section 80G(5) of the Act. Aggrieved the assessee is in appeal before the Tribunal.
The Ld. AR submitted that the application for final registration has been rejected based on some incorrect understanding of the facts. In this regard the ld. AR drew our attention to the relevant findings given by the CIT(E) as extracted below:
“5.1 Considering the above provisions, the assessee was specifically requested vide the initial notice itself to inform the date of expiry of provisional approval as well as the date of commencement of activities. The date of commencement of activities as per assessee's submission through e-
3 M/s Paw Pets Foundation portal is 12/07/2022. Therefore, it is seen that the activities of the assessee were commenced before obtaining provisional approval. However, if the actual date of commencement of activity in this case is considered for computation of limitation period for filing application under clause (iii) of first proviso to section 80G(5) of the Act, the assessee would never be eligible to file any such application. 5.2 For the sake of argument, take a hypothetical case of an assessee whose activities were commenced on 01/05/2022 but makes an application under clause (iv) of first proviso to section 80G(5) for provisional approval under section 80G(5)(vi) of the Act on 01/12/2022 i.e. after commencement of activities and gets such provisional approval on 15/12/2022. Such assessee would be required to file an application under clause (ii) of first proviso to section 80G(5) for regular approval under section 80G(5)(vi) of the Act on or before 30/11/2022 i.e. within six months from the date of commencement of activities. In such a case the assessee would be required to file an application for regular approval before making an application for provisional approval under section 80G(5)(vi) of the Act. However, the Statute does not permit for making application directly for regular approval. The assessee has to mandatorily get provisionally approved first, for being eligible for making any application for regular approval. The only remedy for such assessee would be to file an application for provisional approval before commencement of activities and then only the assessee can observe the further timeline of clause (iii) of first proviso to section 80G(5) of the Act. In such a situation any assessee who misses the bus or an assessee who has commenced its activities before the implementation of newly inserted provisions of Law in this regard, will not get any approval under section 80G(5)(vi) of the Act. This definitely is not the purpose of bringing-in the new provisions for registration/ approval of a charitable institution in the Statute. Considering the above, it is but natural that in case of an assessee who has already commenced its activities and intends to get approved under section 80G(5)(vi) of the Act, has to first get provisionally approved under section 80G(5)(vi) by making an application under clause (iv) of first proviso to section 80G(5) of the Act and then has to apply under clause (ii) of first proviso to section 80G(5) of the Act, for regular approval under section 80G(5)(vi), within 6 months from the date of provisional approval. In such a case, the date of commencement of activity would naturally be the date of provisional approval for computation of limitation period of six months for making an application under clause (iii) of first proviso to section 80G(5) of the Act. In view of the above, in the instant case, the limitation period for making application under clause (ii) of first proviso to section 80G(5) of the Income Tax Act, 1961 is required to be computed from the date of provisional approval.
5.3 Considering the above facts, it is seen that the assessee had commenced its activities before the date of provisional approval. Since, the activities of the assessee were already commenced before the date of provisional approval, the assessee was required to file the present application within 6 months from the date of provisional approval i.e., on or before 11/11/2022. The extended due date for filing of such application was 30/09/2022 as per CBDT, Circular No.8/2022, dated 31/03/2022. Whereas the present application filed by the assessee is on 17/11/2022, 1.e. beyond the time limit allowed under clause (ii) of first proviso to section 80G(5) of the Income Tax Act, 1961.”
The ld. AR submitted that the application is made well within the time limit and that the operation of the assessee has been commenced only after obtaining the provisional approval, therefore, the ld. AR submitted that the rejection of approval by the CIT(E) based on incorrect understanding of facts is liable to be quashed.
The ld. DR relied on the order of the CIT(E).
We have heard the parties and perused the material on record. We noticed from the observations of facts pertaining to the assessee as extracted in the earlier part of this order, the reasons for rejecting the application for final approval is that the application is made after the time limit has expired and that the assessee has commenced operations before obtaining the provisional approval. It is the contention of the ld. AR that the facts as mentioned by the CIT(E) are not correct and that the assessee has made application for final registration within six months from the commencement of business activity and that the activities of the assessee did not commence before obtaining the provisional approval. We also notice certain inconsistent findings given by the CIT(E) contending the operations are commenced prior to obtaining the provisional approval whereas in the above extracted paragraphs the CIT(E)
5 M/s Paw Pets Foundation himself has mentioned that the provisional approval is obtained in 12.05.2022 and the operations of the assessee commenced on 12.07.2022. Therefore we see merit in the argument of the ld AR that the facts and details submitted have not been properly understood by the CIT(E). Therefore in our considered view the details submitted by the assessee need factual verification and to be examined correctly once again. Accordingly we deem it fit to remit the issue back to the CIT(E) to examine the details pertaining to the granting of final approval afresh and decide in accordance with law. The assessee is directed to submit the relevant documents substantiating the various claims made regarding the commencement of activities, obtaining provisional approval etc., and co-operate with the appellate proceedings. It is ordered accordingly.
In the result, the appeal of assessee is allowed for statistical purposes.
Order pronounced in the open court on 20-11-2023.