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Income Tax Appellate Tribunal, A BENCH, PUNE
Before: SHRI SATBEER SINGH GODARA & DR. DIPAK P. RIPOTE
आदेश / ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by Assessee against the order of Commissioner of Income Tax (Exemption), Pune dated 18/03/2024 passed under section 80G of Income Tax Act, 1961 rejecting application of the assessee for registration under Section 80G of the Income Tax Act filed on 26/09/2023. 2) The assessee has raised the following grounds of appeal :
1. The learned CIT (Exemption, Pune has erred in rejecting application for approval/renewal filed by Assessee under clause (iii) of first proviso to section 80G(5) by passing order dated 18th March 2024.
2. The Ld. CIT Exemption erred in law and on facts in treating the application under Clause (iii) of first proviso to sub-section (5) of Section 80G as non-maintainable on the ground of being filed beyond the statutory period as provided in Clause (iii) of first proviso to Section 80G(5) and thereby rejecting the same without going into the merits.
A.Y.2024-25 3. The ld. CIT Exemption erred in law and on facts in cancelling the provisional registration granted on 06/04/2022 without following the due process of law and without affording opportunity of hearing to the appellant.
The ld. CIT Exemption erred in law and on facts in cancelling the provisional registration granted on 06/04/2022 in absence of any dissatisfaction about genuineness of the activities of the appellant and in absence of any violation of conditions prescribed in clause (i) to (v) of Section 80G(5).
The Learned Commissioner of Income Tax Exemption erred in mis-interpreting and mis-reading the provisions of Section 80G.
The Order passed by the CIT Exemption, Pune rejecting the assessee’s application is not in keeping with provisions of law, is bad in law and thus the same needs to be set aside.
The Assessee prays for any other relief to be allowed in its case under provisions of law.
The assessee craves leave to add, alter, amend, modify, delete all or any of the grounds of appeal. 3) Submission of Ld.AR :Ld.AR submitted that the CIT(E) has erred in rejecting the application of the assessee merely on so called Delay when there is no delay. The Ld.AR submitted that the Trust has commenced activities in 1952. It is a charitable trust. It is registered under Maharashtra Public Trust Act. It is also registered under Section 12AB of the Income Tax Act. Ld.AR submitted a paper book and explained that all the necessary documents were submitted before the CIT(E). The CIT has not bothered to verify the documents filed by the assessee.Ld.AR submitted that Assessee had relied on the Decision of ITAT Pune in the case of T.B.Lulla Charitable Foundation ITA 1220/PUN/2023 before the CIT(E) but the CIT(E) has not bothered to read the decision of ITAT. The decision of ITAT Pune is binding on CIT(E) Pune . The CIT(E) has not discussed the submission made by the assessee in response to the show cause notice . Ld. AR filed copy of e-proceedings response acknowledgement obtained from the Income Tax web site to demonstrate that assessee had filed all necessary details and complete reply to the show cause notice.
4) Submission of Ld.DR : Ld.DR relied on the order of the CIT(E).
A.Y.2024-25 5) Findings and Analysis :We have heard both the parties and perused the records 5.1) In this case admittedly the activities of the assessee were started in 1952. The Assessee applied for Provisional approval u/s 80G(5) of the Act and received Provisional approval ,which was valid till AY 2024-25. Then the assessee applied for Regular Approval on 26/09/2023 which has been rejected by the Commissioner of Income Tax(Exemption). 5.2) The Commissioner of Income Tax (Exemption) in his order rejecting the application of the assessee observed in para 11 as under : Quote, “ 11. Considering the above facts, the present application filed in Form 10AB under clause (iii) of First proviso to section 80G(5) of the Act is liable to be rejected without going into the merits since the assessee has not filed the present application within the time limit allowed under clause (iii) of first proviso to section 80G(5) of the Income Tax Act 1961 ” Unquote 5.3) Thus, the CIT(E) held that the assessee‟s application was filed beyond the statutory time limit. Therefore, the question tobe decided by us is that whether the Application of the Assessee was beyond the time limit prescribed by the Act ? 5.4) In this case assessee have provisional approval u/s80G(5) of the Act upto AY 2024-2025. In this scenario the Assessee was to apply before six months of expiry of provisional registration as per Section 80G(5) of the Act. Thus, the assessee had applied well in advance . 5.5)The relevant part of Section 80G(5) is reproduced here as under : 80G. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,— (i) … (ii) ….. (2) The sums referred to in sub-section (1) shall be the following, namely :— (a) any sums paid by the assessee in the previous year as donations to— ……….. or (v) the Government or any local authority, to be utilised for any charitable purpose other than the purpose of promoting family planning; or (vi) ………….. (via) ………. (vii) ………. (b) ………….. (c) ………………… (d)…………. (4) ………………………. (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 if it fulfils the following conditions, namely :— (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10 : Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if— (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; A.Y.2024-25 (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 2571 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; (vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Principal Commissioner or Commissioner; (vii)………… (viii) ………. (ix)………….. 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; A.Y.2024-25 (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; (emphasis supplied) 72[(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) [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,–– (I) in a case referred to in clause (ii) or clause (iii) of the first proviso, rejecting such application and cancelling its approval; or A.Y.2024-25 (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 [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: 5.6) Therefore, apparently, as per the Proviso to Section 80G(5) the time limit is Six months before the expiry of the provisional approval or within Six months of Commencement of its activities whichever is earlier. 5.7) The Commissioner of Income Tax (Exemption) in the case of the Assessee held that the Activities of the Assessee had commenced in 1952 , hence the assessee was liable to make application for Approval u/s 80G of the Act on or before 30/June /2021 which was extended to 30/9/2022 by various circulars of CBDT. Since assessee made application in Sep 2023, the CIT(E) held it to be time barred. 5.7.1) However, the CIT(E) had erred in ignoring the most important fact in this case that the Assessee had received valid Provisional Approval and it was valid till AY 2024-25. Therefore, in this case when we read the sub clause (iii) of the Proviso, we have to understand that „within six months of commencement of activities‟ is applicable only for those newly formed trusts which have received the provisional approval without commencement of activities. If we interpret it in this way then the sub clause (iii) will be harmoniously interpreted otherwise it will defeat the purpose of the Section itself.
5.7.2) We derive the same understanding from the Budget Speech of Hon‟ble Finance Minister and Memorandum of Finance Bill 2020. 5.8) It was in the Finance Bill 2020 the concept of “Provisional Registration ” was introduced. It was in Finance Bill the validity of the registration granted was restricted to five years. As, a result all the existing Trust/Institutions which were already having registration u/s12AA or 80G(5) was asked to re-apply for registration as per the amendment brought in 2020. 5.9) 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. 5.10) 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” 5.11) Thus, when we read the Budget Speech of 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. 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 A.Y.2024-25 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 subclause (iii) of the Proviso to Section 80G(5) of the Act. 5.11.1) If we agree with the interpretation of the 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. 5.11.2) Even otherwise, the Provisional Approval is upto AY 2024-25, and it can be cancelled by the CIT(E) only on the specific violations by the assessee. 5.11.3) In this case there is gross non application of mind by the CIT(E), as he has not considered the reply filed by the assessee in response to show cause notice and not followed the binding decision of ITAT Pune in the case of T.B.Lulla Charitable foundation (supra) . Hon‟ble Supreme Court in the case of Union Of India And Others vs Kamlakshi Finance CorporationAIR 1992 SC 711 has held that the Collector has to follow the binding precedence of jurisdictional Tribunal. However, the 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 CIT(E) to treat the application as filed within statutory time and verify assessee‟s eligibility as per the Act. The CIT(E) shall grant opportunity to the assessee. Assessee shall be at liberty to file all the necessary documents before the CIT(E). 5.12) Accordingly, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on 15th October, 2024 6)