Case Law Details
West Bengal Welfare Society Vs CIT(Exemption) (ITAT Kolkata)
Introduction: The recent appeals filed by West Bengal Welfare Society at ITAT Kolkata address concerns related to registration under sections 12AA and 80G of the Income Tax Act. The society challenged the orders dated 27.06.2023, issued by the Commissioner of Income Tax (Exemption), Kolkata (CIT(E)), rejecting their applications for final registration. The appeals, ITA No.730/Kol/2023 and ITA No.731/Kol/2023, focus on issues pertaining to charitable institution status and eligibility for tax exemption.
Detailed Analysis:
1. Application for Final Registration u/s 12AA: The society, seeking recognition as a charitable institution, faced rejection by the CIT(E). The counsel for West Bengal Welfare Society argued that the order was ex parte, emphasizing the lack of proper opportunity granted by the CIT(E) to present the case. The Tribunal acknowledged the inadequacy of the opportunity given and set aside the order, restoring the matter to the CIT(E) for a fresh decision.
2. Appeal for Registration u/s 80G: West Bengal Welfare Society’s appeal (ITA No.731/Kol/2023) pertains to the rejection of its application for final registration under section 80G. The CIT(E) incorrectly interpreted the time frame for filing the application under Clause (iii) of the first proviso to section 80G(5) of the Act. The Tribunal clarified that the society, having obtained provisional approval on 30.11.2022, could apply for final registration within six months of activity commencement or six months prior to provisional approval expiration. The Tribunal restored the matter to the CIT(E) for a fresh decision.
Conclusion: The ITAT Kolkata’s decision in the West Bengal Welfare Society appeals emphasizes the importance of providing adequate opportunities for a fair hearing. The rejection of applications under sections 12AA and 80G is set aside, with both matters being sent back to the CIT(E) for a fresh decision. The ruling clarifies the correct interpretation of the time frame for filing applications under section 80G, ensuring a fair assessment of the society’s eligibility for tax benefits. These appeals, significant for charitable institutions, highlight the need for procedural adherence and careful consideration in matters of tax exemption.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The captioned appeals have been preferred by the assessee against the separate orders both dated 27.06.2023 of Commissioner of Income Tax (Exemption), Kolkata (hereinafter referred to as the ‘CIT(E)’). ITA No.730/Kol/2023 has been preferred agitating against the rejection of the application of the assessee for final registration u/s 1 2A( 1) (ac) (iii) of the Income Tax Act (hereinafter referred to as the ‘Act’) as a charitable institution, whereas, vide ITA No.73 1/Kol/2023, the assessee has contested the rejection of application for final registration u/s 80G of the Act.
At the outset, the ld. counsel for the assessee has invited our attention to the order dated 27.06.2023 of the ld. CIT(E) passed in relation to the application of the assessee for grant of final registration u/s 12AA/ 12A(1)(ac)(iii) of the Act to submit that the same is an ex parte order. The ld. counsel has submitted that as per the order of the ld. CIT(E), notice of hearing was issued to the assessee vide letter dated 16.06.2023 fixing the hearing for 21.06.2023. However, the assessee did not receive any communication regarding hearing from the CIT(E). The ld. counsel has submitted that the assessee has already been granted provisional registration u/s 12A of the Act. That the assessee has not given proper and adequate opportunity by the ld. CIT(E) to present its case.
3. The ld. DR, on the other hand, has relied upon the impugned order of the ld. CIT(E).
4. We have heard the rival contentions and gone through the record. We find that only a single opportunity has given by the ld. CIT(E) to the assessee to present its case. The time period of issue of notice/letter and the date of fixing of hearing was very short. The proper opportunity in this case has not been granted by the ld. CIT(E) to the assessee. In view of this, the impugned order of the CIT(E) is set aside and the matter is restored to the file of the CIT(E) for decision afresh on the application of assessee for final registration u/s 12AA/ 12A(1)(ac)(iii) of the Act.
5. Now, coming to the assessee’s appeal ITA No.731 /Kol/2023 for final registration u/s 80G of the Act. The assessee was granted provisional approval under Clause (iv) of first proviso to section 80G(5) of the Act on 30.11.2022. Thereafter, the assessee applied for final approval Clause (iii) of first proviso to section 80G(5) of the Act on 03.12.2022. The ld. CIT(E) however, referred to the said clause (iii) of proviso to section 80G(5) of the Act, which reads 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 earlier.”
The ld. CIT(E) concluded from the above proviso that the assessee has already commenced its activities in the financial year 2020-21 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. He, therefore, held that the application of the assessee for final registration was time-barred.
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. However, since we have restored the matter to the ld. CIT(E) for decision afresh on merits on the application for final registration u/s 12A of the Act and since the registration u/s 80G(5) is dependent upon the registration u/s 12A of the Act, therefore, the application of the assessee for registration u/s 80G(5) is also restored to the ld. CIT(E) subject to the observations made above.
7. In the result, both the appeals of the assessee are treated as allowed for statistical purposes.
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