Case Law Details
Anudip Foundation for Social Welfare Vs CIT(Exemption) (ITAT Kolkata)
In a significant ruling by the Income Tax Appellate Tribunal (ITAT) Kolkata, the case of Anudip Foundation for Social Welfare vs. Commissioner of Income Tax (CIT) (Exemption) highlights the complexities involved in obtaining final approval under Section 80G of the Income Tax Act, 1961. The judgment, dated 22nd November 2023, revolves around the rejection of the foundation’s application for final approval under Section 80G(5)(iii) of the Act. This article provides a detailed analysis of the case, the legal provisions involved, and the Tribunal’s decision.
Background of the Case
Anudip Foundation for Social Welfare, already registered under Section 80G(5) of the Income Tax Act since 2008, faced a legal hurdle following the amendments introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Effective from 1st April 2021, these amendments required institutions with existing approvals to reapply for approval under the amended provisions.
The foundation, instead of reapplying for the final approval under Clause (i) of the First Proviso to Section 80G(5), applied for provisional approval under Clause (iv). This provisional approval was granted, valid until the Assessment Year 2024-25. However, when the foundation applied for final approval, the CIT (Exemption) rejected the application citing the expiration of the prescribed time limit.
Legal Provisions and Amendments
Section 80G(5) pertains to the conditions under which donations to charitable institutions qualify for tax deductions. The 2020 amendment mandated that institutions with existing approvals reapply within three months from 1st April 2021. Provisional approvals were meant for new applications and not for revalidations of existing ones.
The CIT (Exemption) rejected Anudip Foundation’s application for final approval based on two primary reasons:
1. The foundation applied under the wrong clause for provisional approval.
2. The application for final approval was submitted after the extended deadline of 30th September 2022, as per CBDT Circular No. 18/2022.
ITAT Kolkata’s Ruling
The ITAT Kolkata, referencing the case of “Tomorrow’s Foundation vs. CIT (Exemption)” and “Vivekananda Mission Asram vs. CIT,” provided clarity on the matter. The Tribunal observed that the CIT (Exemption) misinterpreted the provisions and the CBDT circulars regarding the deadlines for applications.
The Tribunal highlighted that:
1. Institutions already approved under Section 80G(5)(vi) before the amendment needed to reapply for fresh registration under Clause (i) and could be granted provisional approval without any enquiry.
2. Both institutions applying under Clause (i) or Clause (iv) for provisional approval must apply for final registration at least six months prior to the expiry of the provisional approval or within six months of commencement of activities, whichever is earlier.
In Anudip Foundation’s case, despite the foundation applying under Clause (iv), the Tribunal noted that the provisional approval granted allowed the foundation to apply for final registration. The Tribunal ruled that the CIT (Exemption) should have considered the provisional approval’s validity and allowed the application for final approval within the extended deadlines.
Key Observations and Implications
The Tribunal’s decision underscored several important points:
- Misinterpretation of legal provisions by tax authorities can lead to unjust denials of valid applications.
- The role of CBDT circulars is to facilitate compliance and provide extensions where necessary, not to impose further restrictions.
- Provisional approvals are designed to allow institutions to continue their activities while the final approval process is completed.
Conclusion
The ITAT Kolkata’s ruling in the case of Anudip Foundation vs. CIT (Exemption) reinforces the importance of accurate interpretation of legal provisions and the need for clarity in administrative processes. This judgment not only provides relief to Anudip Foundation but also sets a precedent for other charitable institutions facing similar issues. The decision emphasizes the significance of provisional approvals and the conditions under which final approvals must be granted, ensuring that charitable activities are not unduly hampered by procedural complexities.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against the order dated 22.11.2023 of the Commissioner of Income Tax (Exemption), Kolkata [hereinafter referred to as ‘CIT(Exemption)’] rejecting the application of the assessee for final approval as per the provisions of section 80G(5)(iii) of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. The brief facts of the case are that the assessee was already registered/approved u/s 80G(5) of the Act as a charitable institution since 2008. However, an amendment was brought into the relevant provisions of Section 80G of the Act vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as ‘Amendment Act of 2020’) with effect from 01.04.2021 whereby, an institution, which has already been approved before the aforesaid amendment, was required to re-apply for grant of approval under Clause (i) of the First Proviso to section 80G(5) of the Act within three months from the 1st day of April, 2021. The assessee, however, applied for provisional approval under Clause (iv) to First Proviso to section 80G(5) of the Act, which was meant for the institutes who have to apply for the first time and not for revalidating the existing approval prior to amendment. The assessee was granted provisional approval u/s Clause (iv) to First Proviso to section 80G(5) of the Act in Form 10AC vide order dated 28.05.2021 for a period from 28.05.2021 to AY 2024-25. The assessee thereafter applied for final approval under Clause (iii) to First Proviso to section 80G(5) of the Act. However, ld. CIT (Exemption) rejected the application of the assessee observing that the time limit prescribed for making an application for final approval u/s 80G of the Act was at least six months prior to the expiry of the period of the provisional approval or within six months of the commencement of its activities, whichever is earlier. He observed that the assessee had already commenced its activities since long even prior to grant of provisional registration, and since the time period for making application mentioned in Clause (iii) to First Proviso to section 80G(5) of the Act had already expired, therefore, the assessee could not be granted final registration u/s 80G(5) of the Act. He also observed that vide CBDT Circular No. 18/2022 the date for submitting the application for final approval was extended up to 30.09.2022. However, the fresh application by the assessee was filed on 17.05.2023 which was after the extended date of 30.09.2022. He, therefore, rejected the application of the assessee for final approval u/s 80G of the Act.
3. The issue is squarely covered by the decision of the Coordinate Kolkata Bench of the Tribunal in the case of “Tomorrow’s Foundation vs. CIT(Exemption)” in ITA No.367/Kol/2024 order dated 27.02.2024 (the Judicial Member herein being the author the said order also). The relevant part of the order of the Coordinate Bench is reproduced as under:
“3. We have heard the rival submissions and gone through the record. Before proceeding further, it will be relevant to reproduce here the relevant provisions of section 80G(5) of the Act:
“80G(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:-
[(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;]
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, at least one month prior to commencement of the previous year relevant to the assessment year from which the said approval is sought:
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) 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”
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.
4. A perusal of the above provisions would reveal that the institutions which stood already approved u/s 80G(5)(vi) on the date of Amendment brought to section 80G of the Act by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 have to re-apply for fresh registration under Clause (i) to the First Proviso to section 80G(5) of the Act and those institutions have to be granted provisional registration for five years by the ld. CIT(Exemption) without any enquiry. The prescribed date for final application for approval under Clause (i) to the First Proviso to section 80G(5) of the Act was stipulated as three months from 1st Day of April 2022. However, the CBDT from time to time extended the date for filing of the said application under Clause (i) to the First Proviso to section 80G(5) of the Act and finally vide Circular No.6 of 2023 dated 24.05.2023, the said date was extended upto 30.09.2023. Further, the institutions which had to apply for the first time or the institutions which did not stand approved on the date of Amendment i.e. 01.04.2021 brought by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, they could apply under Clause (iv) of the First Proviso to section 80G(5) of the Act. In that case, the ld. CIT(Exemption) is supposed to make necessary enquiries and if found satisfied regarding the genuineness of the activities of such an institution would grant provisional approval for five years. In both the cases i.e. institutions which have been granted approval under Clause (i) or the institutions which have been granted approval under Clause (iv) to First Proviso to section 80G(5) of the Act have to apply for final registration under Clause (iii) of First Proviso to section 80G(5). Such institutions are required to apply for final registration at least six months prior to expiry of the period of provisional approval or within six months of commencement of its activities, whichever is earlier. In the case in hand, it appears that the assessee-institution instead of applying for renewal of registration under Clause (i) to First Proviso to section 80G(5) of the Act has applied for fresh provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and incidentally, the said fresh provisional registration has also been granted to the assessee-institution from 10.03.2023 to A.Y 2025-26. If the assessee-institution would have applied for renewal of the registration under Clause (i), then its approval u/s 80G(5) would have continued without any break. The last date for making such an application was upto 30.09.2023 as per the extended date from time to time vide Circular no.6 of 2023. However, since the assessee-trust has applied for fresh approval under Clause (iv) to First Proviso to section 80G(5) of the Act, therefore, the assessee-trust was entitled to apply for final registration and there was no bar to the institution for making such application. This issue has already been adjudicated upon by the Coordinate Bench of the Tribunal in the case of “Vivekananda Mission Asram vs. CIT” in ITA No.995/Kol/2023 decided on 08.12.2023 (Judicial Member herein being the author of the said order) while deliberating upon the provisions of section 80G(5) of the Act, has held as under:
“6. So far as the observation of the ld. CIT(E) that the assessee had already commenced its activities since long and that as per Clause (iii) of 1st Proviso to section 80G(5) of the Act, the application for final registration was to be filed within six months from the commencement of its activities and therefore, the application of the assessee for final registration was time-barred, is concerned, we note that the issue has already been discussed and adjudicated by the Coordinate Bench of the Tribunal in the case of West Bengal Welfare Society vs. CIT(Exemption), Kolkata vide order dated 13.09.23 [one of us i.e. the Judicial Member herein, being the author of the said order], wherein, it has been held that the assessee, who has been granted provisional registration, is eligible to apply for final registration irrespective of the fact that the assessee had already commenced its activity even prior to the date of grant of provisional approval. The relevant part of the order of the Coordinate Bench is reproduced as under:
6. We note that the ld. CIT(E) has misconstrued the aforesaid proviso to section 80G(5) of the Act. As per the provision, an application for final registration cannot be filed until and unless an assessee/trust has been given provisional approval u/s 80G(5)(iv) of the Act. The assessee was granted provisional approval on 30.11.2022 only, and within a few days i.e. on 03.12.2022, the assessee applied for final registration u/s Clause (iii) of 1st Proviso to section 80G(5) of the Act. Though the assessee might have commenced its activities prior to grant of provisional registration but that does not mean that the assessee in that event will be precluded from applying for final registration even after the grant of provisional registration. The assessee as per statutory provision could not have directly applied for final registration without grant of provisional registration. The aforesaid proviso, therefore, is to be read as that after the grant of provisional registration, if the assessee has not commenced its activities, he may apply for registration within six months of the commencement of its activities or within the six months prior to the expiry of the period of provisional approval, whichever is earlier. In any case, the assessee is eligible to apply for final registration only after the grant of provisional approval. Therefore, we hold that there is no delay on the part of the assessee in filing application in the prescribed form for grant of final registration under Clause (iii) of 1st Proviso to section 80G(5) of the Act.
In view of the above observations, the matter is restored the file of the CIT(E) for decision afresh in the light of the observations made above.”
5. It is to be further noted here that the ld. CIT(Exemption) firstly misconstrued about the CBDT Circulars regarding the exemption of date for final applications for approval. The said Circular/time limits are applicable only for the institutions who stood already registered on the date of Amendment and have made application for renewal of the registration without any time break. However, the said last date which has been extended to 30.09.23 by CBDT Circular No.6 of 2023 is not applicable for the institutions who have filed application for fresh provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and thereafter for making application under Clause (iii) to First Proviso to section 80G(5) of the Act.
5.1 We deem it appropriate to mention here that CBDT has extended the date upto 30.09.2023 for making application under Clause (i) to First Proviso to section 80G(5) of the Act, which means that the institutions, which were already registered prior to the amendment brought to section 80G(5) by Amendment Act of 2020 w.e.f. 01.04.2021, if an institution for some reasons could not make an application for renewal/continuance of registration under Clause (i) to First Proviso to section 80G(5) of the Act within the stipulated period of three months, it could still apply under Clause (i) upto 30.09.2023. However, once an institution has applied under Clause (i) to First Proviso to section 80G(5) of the Act on or before 30.09.2023, it will be further governed by the statutory provisions of Clause (iii) of First proviso to section 80G(5) of the Act and not by the CBDT Circular for the purpose of limitation. CBDT Circular is for extension of date to help the institutions which could not apply under Clause (i) within stipulated period of three months, and not for curtailing limitation or barring institutions for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act.
5.2 As observed above, for making application for final registration under Clause (iii) to First Proviso to section 80G(5) of the Act, the institution must have been provisionally registered either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act.
5.3 In our humble understanding, if the view of the ld. CIT(Exemption) is accepted to be correct, then no institution which has already been into charitable activities before seeking provisional approval under Clause (iv) to First Proviso to section 80G(5) of the Act would ever be entitled to grant of final registration under Clause (iii) to First Proviso to section 80G(5) of the Act even after grant of provisional approval, which would make the relevant provisions of section 80G(5) otiose and defeat the object and purpose of these statutory provisions.
6. In view of the above discussion, it is held that after grant of provisional approval, the application cannot be rejected on the ground that the institution had already commenced its activities even prior to grant of provisional registration. Under such circumstances, the date of commencement of activity will be counted when an activity is undertaken after the grant of provisional registration either under Clause (i) or Clause (iv) to First Proviso to section 80G(5) of the Act.
7. In the case in hand, the assessee admittedly has applied for final registration after grant of provisional registration under Clause (iv) to First Proviso to section 80G(5) of the Act and therefore, the application filed by the assessee is within limitation period. The issue is otherwise squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Vivekananda Mission Asram vs. CIT (supra) and in the case of “West Bengal Welfare Society vs. CIT(Exemption)” (supra) and further by the decision in the case of “Sri Aurobindo Bhawan Trust, Krishnagar vs. CIT(Exemption)” order dated 20.02.2024 (Judicial Member herein being the author of the said orders). Therefore, the impugned order of the CIT(Exemption) is set aside and the ld. CIT(Exemption) is directed to grant provisional approval to the assessee under Clause (iii) to First Proviso to section 80G(5) of the Act, if the assessee is otherwise found eligible. The ld. CIT(A) will decide the application for final registration within three months of the receipt of copy of this order.
4. The facts and issues involved in this case in hand are identical to that of the above referred to decision, the appeal of the assessee is allowed accordingly and the ld. CIT(Exemption) is directed to grant provisional 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 ld. CIT(E) 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.
4.1. It is further directed that, if the assessee is granted final approval by the ld. CIT(E) then, the benefit of approval u/s 80G of the Act, available to the assessee prior to the Amendment brought vide Amending Act of 2020, will be deemed to be 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., 28/05/2021, 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(E) in properly interpreting the relevant provisions.
5. With the above observations, the appeal of the assessee is treated as allowed for statistical purposes.
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