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Facts
The assessee, a charitable institution registered under Section 12AA of the Income Tax Act, applied for registration under Section 80G(5). The CIT (Exemptions) denied the registration, stating that the assessee had commenced its activities before the relevant date and thus provisional registration should not have been granted.
Held
The Tribunal held that the assessee made a procedural error by filing under the wrong sub-clause for its application under Section 80G(5). The CIT wrongly denied registration based on this technicality. The Tribunal directed the CIT to grant approval to the assessee as an existing institution.
Key Issues
Whether the denial of registration under Section 80G(5) by the CIT was justified on account of the assessee filing the application under a wrong sub-clause, despite fulfilling other conditions.
Sections Cited
80G(5), 12AA, 80G
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER RAJPAL YADAV, VP The present appeal is directed at the instance of the assessee against the order of ld. CIT (Exemptions) dated 15.10.2024 vide which registration under Section 80G(5) of the Income Tax Act, 1961 was denied to the assessee.
Before adverting to the facts of present application, we deem it appropriate to discuss the position of law governing A.Y.2024-25 2 grant of registration under Section 80G(5) of the Income Tax Act.
With the assistance of ld. Representative, we have gone through the record carefully. Section 80G is a very lengthy Section. Its heading read as under :
DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS, ETC. Sub-section 1 of Section 80G provides that : “In computing the total income of the assessee, there shall be deduction in accordance with and subject to the provisions of this Section 3.1 Sub-Section (5) clause (vi) is the relevant provision of this Section for the purpose of the controversy in hand.
Therefore, we take note of the relevant part of this Section.
Sub Section (5) “This Section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and it fulfills the following conditions namely:- x x x x (vi) In relation to donations made after 31st day of March 1992, the institution or fund is for the time being [approved by the Principal Commissioner or Commissioner ] x x x x 3.2 Thereafter, 1st and 2nd proviso to sub-section (5) are the relevant provisions which contemplate the procedure A.Y.2024-25 3 required to be fulfilled. We take note of these provisions 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 1st 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; [(iv) in any other case, 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 and where no income or part thereof of the said institution or fund 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 time after the commencement of such activities:] Provided further that the Principal Commissioner or Commissioner, on receipt of an application made under the first proviso, shall,— (i) where the application is made under clause (i) of the said proviso, pass an order in writing granting it approval for a period of five years; (ii) where the application is made under clause (ii) or clause (iii) 73[or sub- clause (B) of clause (iv)] of the said proviso,— (a) call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of such institution or fund; and (B) the fulfilment of all the conditions laid down in clauses (i) to (v); (b) after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub- clause (a),— (A) pass an order in writing granting it approval for a period of five years; or [(B) if he is not so satisfied, pass an order in writing,–– A.Y.2024-25 4
(I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and cancelling its approval; or (II) in a case referred to in sub-clause (B) of clause (iv) of the first proviso, rejecting such application, after affording it a reasonable opportunity of being heard;] [(iii) where the application is made under sub-clause (A) of clause (iv) of the said proviso or the application is made under clause (iv) of the said proviso as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing granting it approval provisionally for a period of three years from the assessment year from which the approval is sought,] and send a copy of such order to the institution or fund: Provided also that the order under clause (i), sub-clause (b) of clause (ii) and clause (iii) of the 76[second] proviso shall be passed in such form and manner as may be prescribed, before expiry of the period of three months, six months and one month, respectively, calculated from the end of the month in which the application was received: Provided also that the approval granted under the second proviso shall apply to an institution or fund, where the application is made under— (a) clause (i) of the first proviso, from the assessment year from which approval was earlier granted to such institution or fund; (b) clause (iii) of the first proviso, from the first of the assessment years for which such institution or fund was provisionally approved; (c) in any other case, from the assessment year immediately following the financial year in which such application is made.]
Now we revert to the facts of the present case. The assessee is a Charitable Institution. It is enjoying benefit of Section 12AA of the Act because it is registered by CIT (Exemptions) Chandigarh under Section 12AA of the Income Tax Act. The Registration No. is AAQAS3676K23CD01. This registration was granted on 24.01.2024 and valid from 01.04.2024. On the strength of this registration, assessee A.Y.2024-25 5 has applied for registration and in Form 10AB at Sr.No. 2, it has filled the column as under : “2. Section Code : 14-Clause(iii) of first proviso to sub- section (5) of Section 80G.
The ld. CIT (E) did not dispute about the charitable activities carried out by the assessee but denied the registration on the ground that assessee was earlier granted provisional registration which should not have been granted to it because it has commenced its activities in Financial Year 2016-17. It is pertinent to note that assessee Society came into existence on 08.08.2016 and its registration of incorporation number is 87 of 2016-17. The position of law for grant of registration under Section 80G(5) has been changed w.e.f. 01.04.2021 by the relaxation and amendment of Certain Provisions Act, 2020. Reverting back to the first proviso of Section 80G, we find that this proviso contemplates that institution or fund referred to in clause
(vi) would make an application in prescribed form and manner to Principal Commissioner or Commissioner for grant of approval. Thereafter, under clause No. (1) to (IV) of this proviso, the category of the Societiers/Trust has been A.Y.2024-25 6 divided in two parts. If the Institution was approved in sub- clause (vi) before the Amendment given effect from 01.04.2021, then such an Institution would straight away apply for a registration within three months and after satisfying the activities of the assessee by the ld. Commissioner as contemplated in second proviso. In all other cases, first provisional registration will be granted under sub-clause (III) of Section 80G(5)(vi).
The mistake committed by the assessee is that it should have applied under sub-clause (i) of the first proviso to Section 80G(5). The assessee instead of filing under sub- clause (i) has filed under sub-clause (iii) which is meant for new institutions which came into existence after 01.04.2021 and due to this anomaly, ld. Commissioner did not grant approval to the assessee under Section 80G(5)(vi) of the Income Tax Act. We find that assessee Trust is already registered and only error committed by the assessee is the filing of the application under a wrong Section. Otherwise, it fulfills all the ingredients for grant of approval. Though under sub-clause (i) of the first proviso, the time limit was A.Y.2024-25 7 provided as three months from 1st day of April,2021 but this time limit has been extended by the CBDT time to time and lastly it was available upto the end of June, 2024 vide Circular No. 7 of 2024. The assessee has filed application on 07.05.2024. Thus, its application was within time but only error committed by the assessee was mentioning of the wrong Section. Therefore, we set aside the order of the CIT(Exemptions) and direct the CIT to grant approval to the assessee as if it is an old Institution which came into existence prior to 01.04.2021 and entitled for registration.
Such registration be granted to the assessee by treating the application under sub-clause (i) for grant of regular registration and not as a provisional registration. The necessary certificate be issued accordingly.
At the time of hearing, we have been apprised by the ld. Counsel for the assessee that assessee is a Government approved Institution engaged in charitable activities of imparting education and if its registration be restored on an early date, then it will get donations before expiry of 31st A.Y.2024-25 8 March. If the authorities process application of the assessee at the early date, it will be appreciated.
In the result, appeal of the assessee is allowed.