Loading judgment…
Facts
The assessee, an institution established in 1952, held provisional approval under Section 80G(5) of the Income Tax Act, valid till A.Y. 2025-26. It applied for regular approval in Form 10AB on 30.09.2024. The CIT (Exemptions) rejected the application, deeming it belated as it was not filed within six months of the commencement of activities.
Held
The Tribunal clarified that for existing institutions with provisional approval, the application for regular Section 80G registration must be filed at least six months prior to the expiry of the provisional approval. It concluded that the assessee's application, filed on 30.09.2024 while provisional approval was valid until A.Y. 2025-26, was timely. Therefore, the CIT(E)'s rejection on grounds of limitation was set aside, and the CIT(E) was directed to examine the application on its merits.
Key Issues
Whether the application for regular Section 80G registration filed by an already established institution, which had provisional approval, was belated under clause (iii) of the first proviso to Section 80G(5) of the Income Tax Act, 1961, based on the interpretation of its time limits.
Sections Cited
Section 80G(5), Section 11, Section 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI OMKARESHWAR CHIDARA
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 27.03.2025, impugned herein, passed by the CIT (Exemptions) (in short Ld. Commissioner) u/s 80G of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2026-27.
In this case, the Assessee by filing an application in Form 10AB on dated 30.09.2024 under clause (iii) of 1st Proviso to section 80G(5) of the Act had sought for approval u/s 80G of the Act on the ground that the Assessee has obtained provisional approval u/s 80G of the Act vide order dated 04.10.2022 valid from 04.10.2022 to A.Y. 2025-26.
The Ld. Commissioner rejected the application filed by the Assessee by holding the application is belated as not filed within six months of the commencement of the activities, as prescribed in the provisions of section 80G(5) of the Act.
Thus, the Assessee being aggrieved has preferred this appeal under consideration and contradicted the impugned order by relying on certain judgments, which we will deal later.
On the contrary the Ld. DR supported the impugned order.
6. We have given thoughtful consideration to the peculiar facts and circumstances and rival claims of the parties and material available on record. For brevity, let us peruse the relevant provisions of section 80G(5) of the Act, as applicable to the controversy/issue involved in this case, which read as under:
“ The institution or fund referred to in clause (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval,— ……………………………………………………………………………… ……………………………………………………………………………… ………………………………………… Where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or Within six months of the commencement of the activities whichever is earlier, the application is required to be filed for regularization of provisional approval”.
From the aforesaid provisions, it appears that there are two conditions and/or two time limits for seeking regular registration u/s 80G(5) of the Act, such as application should have been filed at least six months prior to expiry of the period of provisional approval or within six months of commencement of its activities whichever is earlier.
Now coming to the instant case, the Assessee has claimed and not denied by the Ld. DR that the Assessee was established in 1952 and registered/certified as institution/fund established in the taxable territories for charitable purposes, vide certificate dated 23.09.1975 by the Ld. Commissioner of Income Tax, (CIT-IV), Mumbai and since then has been enjoying exemption u/s 11 and the benefit of the 80G of the Act. However, pursuant to the Amendment vide Finance Act, 2022, the Assessee had applied and got provisional approval u/s 80G(5) of the Act on dated 04.10.2022 which is valid up to A.Y. 2025-26.
As the Assessee established in 1952 and commenced its activities in 1952, therefore the 2nd clause for filing an application for regular registration such as, the application is required to be filed within six months of commencement of activities, has no applicability at all to the case of the Assessee.
10. As first clause of such provision mandates that the application is required to be filed six months prior to the expiry of the period of provisional approval and thus the Assessee has duly filed its application within the time, as prescribed in the relevant clause of the provision of the Act on dated 30.09.2024, as the provisional registration of the Assessee is available up to A.Y. 2025-26.
11. Thus, on the aforesaid analyzations and applicable provisions of law, the rejection of regular registration sought for by the Assessee, vide impugned order by the Ld. Commissioner, is un- sustainable in the eyes of law.
Our decision is also fortified by various judgments of the Tribunal including in the case of Shri Kailashmath Trust Vs. CIT (Exemption) decided on 05.01.2024, wherein the provisions of the relevant Act and the relevant speech of the Hon’ble Finance Minister in the budget 2022, have also been dealt with by the Hon’ble Co-ordinate Bench of the Tribunal and ultimately in the identical circumstances and/or adjudicating the decision of the Ld. Commissioner in denying the regular registration u/s 80G(5) of the Act, held the identical application as filed in this case for regularization of registration, as valid and within the limitation by observing and holding as under:
“5. The Commissioner of Income Tax (Exemption),Pune in the case of the Assessee held that the Activities of the Assessee had commenced in 04/03/1974, hence the assessee was liable to make application for Approval u/s 80G of the Act to file the present application within six months from the date of provisional approval i.e. on or before 18.02.2023 whereas the present application filed by the assessee on 27.03.2023 i.e.beyond the time limit allowed under clause (iii) of first proviso to section 80G(5) of the Income Tax Act, 1961, the ld.CIT(E) held it to be time barred.
New Procedure for registration:
The new provision for Registration was introduced by Finance Act, 2020. There was amendment in the registration procedure by Finance Act, 2020. For the first time the Finance Act, 2020 introduced the concept of “Provisional Approval”. Also due to the amendment, all the existing Trust/Institutions which were already having registration u/s12AA or 80G(5) were asked to reapply for registration as per the amendment brought in 2020 and a date was specified before which all those Trust/Institutions already having Registration was required to make a fresh application as per the amendment procedure. The said date was repeatedly extended due to covid pandemic.
7. In this background we have to interpret the relevant provisions. To interpret the provisions, we shall refer to the Budget Speech of the Hon’ble Finance Minister.
7.1 The Hon’ble Supreme Court in the case of K P Varghese Vs. ITO [1981] 131 ITR 597 (SC) has observed as under regarding use of Speech of a Minister as a tool in interpretation:
Quote , “ Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is an accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234, the other in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 and the third in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR l/[1980] 2 Taxman 501, where the speech made by the Finance Minister, while introducing the exclusionary clause in section 2(15) of the Act, was relied upon by the Court for the purpose of ascertaining what was the reason for introducing that clause.”
7.2 The Hon’ble Supreme Court has approved use of the Hon’ble Minister’s speech as tool of interpretation to understand the intent of the Statute.
Extract of relevant part of Speech of Hon’ble Finance Minister:
8. The Hon’ble Finance Minister in Budget Speech 2020 has said as under :
Quote “In order to simplify the compliance for the new and existing charity institutions, I propose to make the process of registration completely electronic under which a unique registration number (URN) shall be issued to all new and existing charity institutions. Further, to facilitate the registration of the new charity institution which is yet to start their charitable activities, I propose to allow them provisional registration for three years. ” Unquote.
Finance Bill 2020 :
“(vi) an entity making fresh application for approval under clause (23C) of section 10, for registration under section 12AA, for approval under section 80G shall be provisionally approved or registered for three years on the basis of application without detailed enquiry even in the cases where activities of the entity are yet to begin and then it has to apply again for approval or registration which, if granted, shall be valid from the date of such provisional registration. The application of registration subsequent to provisional registration should be at least six months prior to expiry of provisional registration or within six months of start of activities, whichever is earlier”
9. Thus, these amendments were introduced to simply the procedure of registration of Charitable Trusts/Institutions. The amendment made to simplify a procedure cannot be interpreted in a way that it causes prejudice to the Trust/institutions.
Thus, when we read the Budget Speech of the Hon’ble Finance Minister 2020 and the Memorandum of Finance Bill, 2020 together, it becomes clear that the concept of Provisional registration was mainly to facilitate the registration of newly formed Trust/Institutions which have not yet begun the activities. The parliament in its wisdom has decided to differentiate between the Trust which were newly formed and the trust which were already doing charitable activities. In the second category of cases, there are again two possibilities, one trust was already doing charitable activities and was already having Registration u/s 12AA or 80G(5) of the Act, such trust were directed to reapply for registration under new procedure on or before 30th August, 2020 but due to Covid-19 pandemic this date was subsequently extended. There is Second category of trust/institutions which were already doing Charitable Activities but had never applied for registration u/s.80G(5) of the Act. It is not mandatory that every charitable trust/institution has to apply for registration u/s.80G(5) of the Act. However, there is no bar in the Act that such trust or institutions cannot apply for registration u/s.80G in the new procedure. In these kinds of cases, the Trust/Institute though doing charitable activity may apply first for the ‘Provisional Registration ‘under the Act. After getting the Provisional Registration the Trust/Institution have to apply for Regular Registration. These kind of Trust/Institutes will
fall under sub clause (iii) of the Proviso to Section 80G(5) of the Act, since they have obtained Provisional registration.
10.1 In this background, we need to read the sub-clause (iii) of the Proviso to Section 80G(5) of the Act. For ready reference it is again reproduced here under :
“ iii) where the institution or fund has been provisionally approved, at least six months prior to expiry of the period of the provisional approval or within six months of commencement of its activities, whichever is earlier”
10.2 The sub-clause says that the Institution which have provisional registration have to apply at-least six months prior to expiry of the provisional registration or within Six months of commencement of activities, whichever is earlier.
10.3 In continuation of this when we read the ‘sub clause iii of Proviso’ of section 80G(5), which we have already reproduced above, it is clear that the intention of parliament in putting the word “or within six months of commencement of its activities, whichever is earlier” is in the context of the newly formed Trust/institutions. For the existing Trust/Institution, the time limit for applying for Regular Registration is within six months of expiry of Provisional registration if they are applying under sub clause (iii) of the Proviso to Section 80G(5) of the Act. This will be the harmonious interpretation.
If we agree with the interpretation of the ld.CIT(E), then say a trust which was formed in the year 2000, performed charitable activities since 2000, but did not apply for registration u/s.80G, the said trust will never be able to apply for registration now. This in our opinion is not the intention of the legislation. This interpretation leads to absurd situation.
11.1 In this context, we will like to refer to observations of the Hon’ble Supreme Court in the case of K P Varghase(supra), where in Hon’ble SC observed as under :
Quote, “It is a well-recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. There are many situations where the construction suggested on behalf of the revenue would lead to a wholly unreasonable result which could never have been intended by the Legislature. Take, for example, a case where A agrees to sell his property to B for a certain price and before the sale is completed pursuant to the agreement and it is quite well known that sometimes the completion of the sale may take place even a couple of years after the date of the agreement - the market price shoots up with the result that the market price prevailing on the date of the sale exceeds the agreed price at which the property is sold by more than 15 per cent of such agreed price. This is not at all an uncommon case in an economy of rising prices and in fact we would find in a large number of cases where the sale is completed more than a year or two after the date of the agreement that the market price prevailing on the date of the sale is very much more than the price at which the property is sold under the agreement. Can it be contended with any degree of fairness and justice that in such cases, where there is clearly no understatement of consideration in respect of the transfer and the transaction is perfectly honest and bona fide and, in fact, in fulfilment of a contractual obligation, the asses-see who has sold the property should be liable to pay tax on capital gains which have not accrued or arisen to him. It would indeed be most harsh and inequitable to tax the assessee on income which has neither arisen to him nor is received by him, merely because he has carried out the contractual obligation undertaken by him. It is difficult to conceive of any rational reason why the Legislature should have thought it fit to impose liability to tax on an assessee who is bound by law to carry out his contractual obligation to sell the property at the agreed price and honestly carries out such contractual obligation. It would indeed be strange if obedience to the law should attract the levy of tax on income which has neither arisen to the assessee nor has been received by him. If we may take another illustration, let us consider a case where A sells his property to B with a stipulation that after sometime, which may be a couple of years or more, he shall resell the property to A for the same price. Could it be contended in such a case that when B transfers the property to A for the same price at which he originally purchased it, he should be liable to pay tax on the basis as if he has received the market value of the property as on the date of resale, if, in the mean-while, the market price has shot up and exceeds the agreed price by more than 15 per cent. Many other similar situations can be contemplated where it would be absurd and unreasonable to apply section 52(2) according to its strict literal construction. We must, therefore, eschew literalness in the interpretation of section 52(2) and try to arrive at an interpretation which avoids this absurdity and mischief and makes the provision rational and sensible, unless of course, our hands are tied and we cannot find any escape from the tyranny of the literal interpretation. It is now a well- settled rule of construction that where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature, the Court may modify the language used by the Legislature or even 'do some violence" to it, so as to achieve the obvious intention of the Legislature and produce a rational construction -” Unquote.
11.2 Thus, as observed by the Hon’ble Supreme Court, that the statutory provision shall be interpreted in such a way to avoid absurdity. In this case to avoid the absurdity as discussed by us in earlier paragraph, we are of the opinion that the words, “within six months of commencement of its activities” has to be interpreted that it applies for those trusts/institutions which have not started charitable activities at the time of obtaining Provisional registration, and not for those trust/institutions which have already started charitable activities before obtaining Provisional Registration. We derive the strength from the Speech of the Hon’ble Finance Minister and the Memorandum of Finance Bill. 2020.
11.3 Therefore, in these facts and circumstances of the case, we hold that the Assessee Trust had applied for registration within the time allowed under the Act. Hence, the application of the assessee is valid and maintainable.
12. Even otherwise, the Provisional Approval is uptoA.Y.2025-26, and it can be cancelled by the ld.CIT(E) only on the specific violations by the assessee. However, in this case the ld.CIT(E) has not mentioned about any violation by the Assessee. Therefore, even on this ground the rejection is not sustainable.
However, the ld.CIT(E) has not discussed whether the Assessee fulfils all other conditions mentioned in the section as he rejected it on technical ground. Therefore, in these facts and circumstances we hold that the Assessee had made the application in form 10AB within the prescribed time limit and hence it is valid application. Therefore, we direct the ld.CIT(E) to treat the application as filed within statutory time and verify assessee’s eligibility as per the Act. The ld.CIT(E) shall grant opportunity to the assessee. Assessee shall be at liberty to file all the necessary documents before the ld.CIT(E).
Accordingly, the appeal of the assessee is allowed for statistical purpose. Since we have set aside to Ld.CIT(E), we do not intend to adjudicate each ground separately.
In the result, appeal of the assessee is allowed for statistical purpose.”
13. We further observe that the aforesaid judgment of the Pune Tribunal, has subsequently been followed by Pune Bench in the cases of Birmani Charitable Foundation Vs. CIT (Exemption) decided on 28.03.2024 and Shri Koteshwardev Vishwanath Vs. CIT (Exemption) decided on 15.10.2024.
14. Thus, on the aforesaid analyzations, we are inclined to set aside the impugned order and consequently direct the Ld. Commissioner to consider the application filed by the Assessee as valid and being filed within the limitation period and to decide the same on merit accordingly.
15. In the result, the Assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on 29.08.2025.