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Facts
The appellant, a Charitable Trust, applied for provisional registration in Form-10AC and subsequently filed Form-10AB. The CIT(Exemption) rejected the Form-10AB application, holding that it was barred by limitation as per Section 12A(1)(ac)(vi)(A) because the trust had commenced its activities before the new provisions came into effect and the application was not filed within six months from commencement.
Held
The Tribunal, relying on a precedent that interpreted a similar proviso to Section 80G(5), held that the literal interpretation of the time limit leads to absurdity for trusts that commenced activities before the new provisions. It concluded that the appellant's application was not barred by limitation and remanded the matter back to the CIT(Exemptions) for a de novo disposal on merits after providing a reasonable opportunity of being heard to the assessee.
Key Issues
Whether an application for registration under Section 12A filed by a trust that commenced activities prior to the new provisions is barred by limitation as per Section 12A(1)(ac)(vi)(A) of the Income Tax Act.
Sections Cited
12A, 12A(1)(ac)(vi)(A), 80G, 80G(5)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Exemption), Kochi rejecting the grant of registration U/s. 12A of the Income Tax Act, 1961 (in short “the Act”), dated 17/12/2024.
Opengrad Edu Foundation vs. CIT(E) 2. Briefly the facts of the case are that the appellant is a Charitable Trust applied for provisional registration under New Regime in Form-10AC on 16/10/2023. Subsequently, the appellant Trust has filed an application in Form-10AB of the Act on 29/06/2024. The same application came to be rejected by the CIT(Exemption) by holding that as per sub-clause (vi)(A) of clause (ac) of sub-section (1) of section 12A of the Act, the application is required to be filed with Six Months from the commencement of the activities of the Trust. Since, the appellant Trust has already commenced its activities before the new provisions came into effect and therefore, the application is barred by limitation and accordingly, the CIT(Exemption) dismissed the application.
When the appeal was called on, none appeared on behalf of the assessee despite issue of service of notice. Therefore, we dispose of this appeal after hearing the Ld. CIT-DR.
We heard the Ld. CIT-DR and perused the material available on record. The provisions of sub-clause (vi)(A) of clause (ac) of sub-section (1) of section 12A of the Act were read down by the Pune bench of this Tribunal in the case of R.L. Education Sanstha vs. Commissioner of Income Tax (Exemption) [2024] 165 taxmann.com 577 (Pune Trib), the relevant portion is extracted as under: - “6. We heard the Id. Departmental Representative and perused the material on record. In the present case, admittedly, the appellant trust has commenced the activities on 16.03.2011 even as on the date of grant of provisional approval on 01.10.2021. In this connection, for Opengrad Edu Foundation vs. CIT(E) better appreciation relevant provisions of proviso to section 80G are extracted below: "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) (ii) (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; The literal interpretation of clause (iii) of proviso means that in case the institution has been provisionally approved, application in the prescribed form for grant of the requisite approval w/s.80G(5) is required to be made six months prior to expiry of the provisional approval or within six months of commencement of the activities whichever is earlier.
There can be two categories of institutions; (1) the institutions which had commenced the activity subsequent to the grant of provisional approval (2) the institutions which had commenced the activity much before the date of grant of provisional approval (2). No doubt, in the case of former category the literal interpretation of clause (iii) of proviso to section 80G(5) does not lead to any hardship, absurdity or injustice. It is only in the case of later category the literal interpretation leads to hardship, absurdity or injustice as it is impossible to comply with the time limits prescribed under the proviso which had commenced the activities six months prior to the date of grant of provisional approval. Thus, the provision produces a manifestly absurd and unjust result which could never have been intended by the Legislature. In such a situation, it is now a settled rule of construction that the courts may modify the language used by the Legislature or even "do some violence" to it, so as to achieve the Opengrad Edu Foundation vs. CIT(E) obvious intention of the Legislature and produce a rational construction vide Luke V. IRC (1996) 54 ITR 692. The court may also in such a case read into the statutory provision a condition which, though not expressed, is implicit as constituting the basic assumption underlying the statutory provision.
In our considered opinion, in the light of the above discussion, a fair and reasonable construction clause (iii) of proviso to section 80G(5) would be to read into it a condition that in the place of word 'earlier' word "later" be substituted and can be read as 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 later, 9. We are also fortified in adopting the above construction by the decision of Hon'ble Supreme Court in the case of K.P. Varghese v. ITO [198117 Taxman 13/131 ITR 597 (SC).
Adverting to the facts of the present case, undisputedly, the appellant trust commenced its actual activities on 16.03.2011 and in view of the above construction of clause (iii) of proviso to section 80G(5) the appellant trust is entitled to file the application for regular approval prior to six months of expiry of the provisional approval, ie., on or before 31.03.2024. Therefore, it cannot be said that the application filed by the appellant trust for grant of regular approval is barred by limitation prescribed under the proviso to section 80G(5). Therefore, the Id. CIT(Exemptions) is not justified in denying the grant of approval u/s.80G(5) to the appellant trust on the ground of delay in submission of Form No. 10AB. In the circumstances, we remand the matter to the file of CIT(Exemptions) with a direction to dispose of the denovo application on merits.”
In view of the above, the application filed by the appellant Trust cannot be said to be barred by limitation and therefore, we remit the matter back to the file of the CIT (Exemption) with a direction to dispose of the application
In the result, appeal filed by the appellant stands partly allowed.