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Facts
The assessee, a registered charitable trust, applied for final registration under Section 80G(5) of the Income-tax Act. The CIT(E) rejected the application, stating that the assessee had wrongly selected sub-clause (B) of clause (iv) of the first proviso to Section 80G(5) when it should have been clause (iii), as the assessee had claimed exemption in previous years.
Held
The Tribunal held that the assessee had inadvertently selected the wrong section code for the final registration application. It also noted that the assessee was not given a proper opportunity to explain the error. The Tribunal directed the CIT(E) to grant final approval under Clause (iii) to the First Proviso to Section 80G(5), if the assessee is otherwise eligible.
Key Issues
Whether the CIT(E) was justified in rejecting the application for final registration under Section 80G due to the assessee inadvertently selecting the wrong sub-clause, and whether a proper opportunity to be heard was provided.
Sections Cited
80G(5), 14A, 10(23C), 11, 12
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Income Tax Appellate Tribunal, “D” BENCH MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of Ld. CIT(Exemption), Mumbai, vide order no. ITBA/EXM/F/EXM45/2024- 25/1069594414(1), dated 10.10.2024. The issue contended by the assessee in this appeal pertains to the CIT(E) rejecting the application for final registration under section 80G(5) of the Income-tax Act, 1961 (the Act).
Assessee is a registered charitable trust incorporated on 25.09.1996, engaged in promoting various public charitable activities especially providing education to weaker section of the society and to specially abled children. Assessee made an application for provisional registration on 25.03.2022 in Form 10A for registration u/s. 80G of the Act. Assessee was granted provisional registration under clause (iv) of first proviso to subsection (5) of section 80G of the Act on 04.04.2022 which is valid for the period starting 04.04.2022 to AY 2024-25. Subsequently, the assessee filed application in Form 10AB for final registration and in the said application has selected the section code under which the approval is sought as sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G of the Act. The CIT(E) rejected the said application stating that, “1 M/s Rotary Charity Trust [hereafter the applicant or the assessee') filed application in Form 10AB under clause (iv) (B) of 1st proviso to 80G(5) seeking approval under section 80G of the Act. 2 Under the relevant section 80G(5)(iv)(B) of the Act, in any other case, where activities of the trust or institution have (B) commenced and no income or part thereof the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub- clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12. for any previous year ending on or before the date of such application, at any previous year ending on or before the date of such application, at any time after the commencement of such activity." 3 On verification of the facts and circumstances of the case, it is found that the trust was incorporated on 25.09.1995. Further, the assessee has already claimed exemption by filing ITR-7 from AY-2022-23 & 2023-24 i.e. before applying for regularization of registration in Form 10AB (Previous Years). 4 As per above mentioned provision of Income Tax Act, the assessee has to file Form 10AB u/s 80G(5)(iv)(B), if the assessee has not claimed exemption in Previous years. Since the assessee has claimed exemption in Previous years, therefore this application u/s 80G is not allowable. Further, the assessee is not fulfilling the stipulated conditions prescribed for filing application for approval in Form 10AB. In view of the above this application Form is hereby rejected. 5 In conclusion, this application for grant of registration stands rejected.”
Ld. AR submitted that assessee while filing Form for final registration in Form 10AB has inadvertently mentioned the wrong section as sub- clause (B) of clause (iv) of first proviso to subsection (5) of section 80G instead of clause (iii) of first proviso to subsection (5) of section 80G. He further submitted that assessee could not explain the error before the CIT(E) because the notice calling for details mentioned that proceedings under section 14A and that when the staff of the assessee approached the office of the CIT(E), it was advised that no action is required. Ld. AR, accordingly submitted that no proper opportunity was given to the assessee before rejecting the application for registration under section 80G. Ld. AR also drew our attention to the relevant provisions of section 80G to submit that the reason as quoted by the CIT(E) for rejecting the application is not applicable to the assessee. Therefore, ld. AR prayed that directions may be given to ld. CIT(E) to grant approval for registration under section 80G to the assessee. Ld AR relied on the decision of the Kolkata Bench of the Tribunal in the case of North Eastern Social Research Centre vs CIT(E) [2024] 165 taxmann.com 12 (Kolkata Trib) in this regard and prayed for a similar direction as held hereunder –
The facts and issues involved in the case in hand being identical to that of the above referred to cases and in view of the findings given by the Coordinate Benches of the Tribunal, the appeal of the assessee is allowed accordingly and the ld. CIT(Exemption) is directed to grant final 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 Id. CIT(Exemption) 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. It is further directed that, if the assessee is granted final approval by the ld. CIT(Exemption) then, the benefit of approval u/s 80G of the Act, if it was available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to have been 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., 28/06/2022, 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(Exemption) in properly interpreting the relevant provisions.
Ld. DR on the other hand submitted that the CIT(E) has rejected the application based on the submission made by the assessee in Form 10AB stating that the application is made under section 80G(5)(iv)(B). Ld. DR further submitted that case can be remitted back to ld. CIT(E) to consider the application afresh based on the claim of the assessee that wrong section has been inadvertently mentioned in the Form 10AB.
We have heard the parties and perused the material on record. Before we proceed to examine the facts in assessee's case, it is important to first look at the relevant provisions of first proviso to subsection (5) of section 80G which read as under –
Provided that 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,- (i) where the institution or fund is approved under clause (vi) [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020], within three months from the Ist day of April, 2021; (ii) where the institution or fund is approved and the period of such approval is due to expire, at least six months prior to expiry of the said period; (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: [or] [(iv) [***] where activities of the institution or fund have-- (A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said approval is sought; (B) commenced [*** Jat any time after the commencement of such activities:]
6. Assessee, in terms of the above provisions, first applied for a provisional approval under sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G within and subsequently (refer clause 2 in Form 10A) and was given the provisional registration up to AY 2024-25 on 04.04.2022. In the application for final approval in Form 10AB, it is noticed that assessee has once again mentioned same section i.e. sub-clause (B) of clause (iv) of first proviso to subsection (5) of section SOG whereas the correct section code under which the assessee ought to have selected is clause (iii) of first proviso to subsection (5) of section 80G. We also noticed that ld. CIT(E) has treated the application as one filed under sub-clause (B) of clause (iv) of first proviso to subsection (5) of section 80G and accordingly rejected the application for not fulfilling the stipulated conditions prescribed for filing application for approval in Form 10AB.
6.1. From the perusal of forms filed and the facts of the case, in our considered view, there is merit in claim of the ld. AR that assessee has selected the wrong section code inadvertently while filing the application for final registration in Form 10AB. Further, we notice that assessee did not have the opportunity of being heard before ld. CIT(E) due to incorrect course of action advised, which otherwise assessee might have explained the facts to avoid the impugned rejection. In view of these discussions and respectfully following the above decision of the Kolkata Bench in the case of North Eastern Social Research Centre (supra), we remit the issue back to the file of ld. CIT(E), with a direction to grant final approval to assessee under Clause (iii) to first proviso to section 80G(5) of the Act, if assessee is otherwise found eligible. We also direct ld. CIT(E) to decide the application of the assessee for final approval as quickly as possible before the expiry of the provisional approval granted in order to enable the assessee to have the benefit of section 80G without any break. It is ordered accordingly.
In the result, appeal of the assessee is allowed for statistical purposes.
Order is pronounced in the open court on 09 January, 2025