Application for registration under section 80G(5)(iii) can be considered even if filed after six months.

ORDER

Sudhir Pareek, Judicial Member.- The aforetitled appeal arising out of the order dated 26.03.2024 passed by the Learned Commissioner of Income Tax (Exemption), Delhi (for the sake of convenience, hereinafter referred in short as “Ld. CIT(E)”] by which the application filed by the assessee / appellant in form 10 AB under clause (iii) of first proviso to sub section (5) of Section 80G of the Income Tax Act, 1961 (in short “the Act”) rejected as non maintainable by stating that the activities of the appellant Trust has commenced prior much before obtaining provisional approval and the aforesaid application has not been filed within the time limit prescribed therein and not even within the extended time limit provided by relevant circular of CBDT.

2. In this appeal, the assessee/ appellant raised five grounds of appeal and all grounds relates to common issue of rejection of application for final approval u/s. 80(G) (iii) as not maintainable alleging beyond limitation, so solitary issue exi

sts in this appeal for adjudication that whether the Ld. CIT(E) rejected Form10AB dated 26.03.2024 in which approval under clause (iii) of first proviso to section 80G of the Act was sought by assessee, filed belatedly or not ?

3. Heard rival submission and carefully scanned the material available on record.

4. While reiterating the grounds of appeal, the Ld. AR submitted that Ld. CIT(E) has not considered the information/ evidence brought on record in correct prospective and denied the registration u/s.80G(5)(iii) of the Act.

5. In the course of hearing the learned AR submitted that the assessee / appellant trust was initially registered on 05.09.1980 and was granted original approval vide order dated 06.09.2007, U/s 80G(5)(vi) for the period from 01.04.2006 to 31.03.2009 which was expired on 31.03.2009. Thereafter, the appellant trust did not applied for renewal of approval and afterwards the proviso of Section 80G(5)(vi) was omitted by the Finance (No.2) Act, 2009 w.e.f. 01.10.2010 and effect of the said omission of the proviso was that the Trust who held valid approval as on 01.10.2010 will continue to be approved till such approval was withdrawn. It means that the approval u/s. 80G(5)(vi) will have perpetual effect till withdrawn. Proviso of Section 80G(5)(iv) was as follows before omission :

“Provided that any approval shall have effect for such assessment year or years, not exceeding five AY, as may be specified in the approval.”

6. The learned AR further submitted that the Taxation and other laws (relaxation and amendments of certain provisions) Act, 2020 w.e.f. 01.04.2021 inserted four provisions in section 80G(5) of the Act, in which first proviso provided the law and procedure for approval and renewal of approval u/s. 80(G)(5) of the Act. He was also submitted that the clause (i) of the first proviso deals with migration of Trusts who were already been approved under clause (vi) as on 31.03.2021 and clause (ii) of the first proviso deals with renewal of approval of Trust who are approved w.e.f. 01.04.2021 under the new procedure and also clause (ii) of the first proviso deals with renewal of approval of Trust which are provisionally approved w.e.f. 01.04.2021 under the new procedure.

7. He further argued that vide the Finance Act, 2023 clause (iv) was substituted w.e.f. 01.10.2023, which provided following two situations: firstly trust who have not commenced its activities on or after 01.04.2021 and secondly Trusts who have commenced its activities on or after 01.04.2021. In this regards, the learned AR submitted that since the trust was not migrating from old regime to new regime as its approval had lapsed on 31.03.2009, therefore, was allowed provisional approval on 02.10.2009, which was not renewed upto 31.03.2021, so it was allowed provisional approval on 02.10.2021 for the period from 02.10.2021 to AY 2024-25 (which is well placed at page 7 and 8 of the PB). Then the Trust applied for final approval on 21.09.2023 under clause (iii) of the 1^st proviso of Section 80G(5) which was within the limitation of 6 months provided therein.

“Provided that the institution or fund referred to in caluse (vi) shall make an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for grant of approval- (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.”

8. The learned AR vehemently argued that the application for final approval rejected as non-maintainable on the ground that it was filed beyond the time limit prescribed in clause (iii) i.e. within six months of commencement of activities, which were already commenced on 05.09.1980, but above bar of limitation does not apply to the Trust, as it was not possible to apply for final approval of the Trust within six months of commencement of the authorities of the Trust. He also emphasized that the Trust was granted original approval vide order u/s. 80G (5)(vi) dated 06.09.2007 (placed on page No.6 of the PB) for the period from 01.04.2006 to 31.03.2009 and was granted provisional approval under clause (iv) of 1^st proviso of Section 80G(5) of the Act on dated 02.10.2021 and since the Trust was allowed provisional approval on 02.10.2021 for the period from 02.10.2021 to A.Y. 2024-25, so the Trust was covered by the 1^st limb of clause (iii) i.e. at least six months prior to expiry of the period of the provisional approval and accordingly the Trust had applied for final approval on 21.09.2023 i.e. six months for AY 2024-25 and the Trust was not covered by the 2^nd limb of clause (iii), as the activities had started on 05.09.1980.

9. The Ld. DR relied upon the order passed by the Ld. CIT(E).

10. In the impugned order, the Ld. CIT(E) observed that activities of the applicant Trust has commenced prior much before obtaining provisional approval and the present application has not filed within time prescribed. The relevant part of para no.6.4 of impugned order is reproduced as below :

“6.4. From the above, it is evident that the activities of the applicant has commenced prior much before obtaining provisional approval u/s 80G(5) of the Act and the present application filed in Form No.10AB under Clause (iii), of first proviso to sub-section (5) of section 80G of the Act has not been filed within the time limit prescribed therein and also the assessee has not filed its application within the extended time limit provided by CBDT vide its circular No. 12 of 2021 dated 25.06.2021, circular No. 16 of 2021 dated 29.08.2021 and circular No. 8 of 2022 dated 31.03.2022. Therefore the above application is liable to be rejected as non maintainable, without going into the merits.”

11. The Ld. AR further submitted that the solitary dispute involved in this appeal for adjudication that whether the aforesaid application for final approval filed by the assessee in Form 10AB on 21.09.2023 had been filed within the prescribed time or not ? In this regards it is submitted by the Ld. AR that in the foregoing fact situation the application filed on Form 10AB on 31.03.2023 could not be treated as time barred, as the same had been filed within prescribed time limit.

12. In support of submissions, the learned AR relied upon the order of co-ordinate Bench of ITAT, Pune ITA No.1177/PUN/2024 dated 05.01.2024 Shri Kailash Math Trust u/s The CIT(E), Pune of which relevant para 10.3 to 13 is being reproduced as below :

“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.

11. 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.

13. 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).”

13. From the bare perusal of the impugned order, the learned CIT(E) mentioned that the originally the appellant Trust was registered on 05.09.1980 and has obtained order of provisional approval in form NO. 10 AC issued on 02.10.2021 under clause (iv) of 1^st proviso to section 80G(5) for the period commencing from 02.10.21 to AY 2024-25 and also specifically gave finding of the effect that the trust had commenced its activities prior much before obtaining provisional certificate. Even in the about fact situation, the learned CIT(E) rejected the application filed on behalf of appellant/ assessee without giving cogent reason by disposing the matter in hyper technical manner without discussing on merits, which was supposed to him as per law.

14. Foregoing fact situation enables us to reach this conclusion that there is material substance in the submissions advanced on behalf of the assessee/ appellant that the trust was not migrating from old regime to new regime as its approval had lapsed on 31.03.2009, which was not renewed upto 31.03.2021, so it was allowed provisional approval on 02.10.2021 for the period from 02.10.2021 to AY 2024-25 and then the trust filed application for final approval on 21.09.2023 under clause (iii) of the first proviso to Section 80G(5), which was definitely within prescribed time limit as it is covered by the first limb of clause (iii) i.e. at least six months prior to expiry of the period of the provisional approval and not covered by the 2^nd limb of clause (iii), as the activities already been commenced on 05.09.1980.

15. Upon hearing rival submissions, we are of the considered opinion that rule of procedure are just to handmade to administration of justice and not to penalise anybody and object of procedure only for interest of justice and same should be dealt with in just manner in order to fulfil the end’s of justice. In conclusion, we are inclined to accept the plea of assessee / appellant and remitting the matter back to the file of the CIT(E) to decide the issue afresh on merit, in accordance with law.

16. Consequently, the impugned order of the Ld. CIT(E) is hereby set aside and quashed on this point and matter be remitted back to file of the Ld. CIT(E) with the direction to decide expeditiously afresh in accordance with law treating the application as filed within statutory time limit and with providing effective and meaningful opportunity of being heard to assessee/appellant within a period of three months from receiving this order as far as possible. The present appeal is allowed as indicated above for statistical purpose.

17. In the result, appeal of the assessee is allowed for statistical purposes.

18. Before parting, we may make clear that our decision to restore the matter back to the file of the learned CIT(E) shall in no way to construed as having any reflection or expression on the merits of the case, which shall adjudicated by the learned CIT(E) independently in accordance with law.