The Calcutta Bench of Income Tax Appellate Tribunal ( ITAT ) has held that exemption under Section 80G (5)(iv) of the Income Tax Act, 1961 allowable as an application filed within the extended time limit prescribed by CBDT ( Central Board of Direct Taxes ) notification allowed the exemption registration to the income tax bar association as the registration application was not time-barred.
Income Tax Bar Association Calcutta, the appellant/assessee is a registered society under the Registrar of Firms, Societies, and Non-Trading Corporations, West Bengal. It is also affiliated with the West Bengal Bar Council. It was established in the year 1924, before the enactment of the Income Tax Act of 1961. The society has been enjoying registration under Section 12A of the Income Tax Act. It was also granted a certificate for exemption under Section 80G(5)(vi) of the Income Tax Act.
The amendments were notified to the Income Tax Act regarding the award of registration under Section 12A and certification under Section 80G(5), effective April 1, 2021, as per the Taxation and Others Law (Relaxation and Amendment of Certain Provisions) Act, 2020.
The assessee has applied for a grant of registration under Section 80G(5)(iv) of the Income Tax Act in Form No. 10AC. The application was allowed for a period from September 23, 2021, to April 25, 2024–25. The assessee applied Form No. 10AB under Rule 17A of the Income Tax Rules, 1962, for a grant of regular registration under Section 80G(5)(iii) of the Income Tax Act. The commissioner has rejected the application of the assessee.
The Commissioner viewed that the time limit for the grant of registration under Section 80G(5)(iii) of the Income Tax Act ought to have been moved to Form 10AB of the Income Tax Act, at least six months before the expiry of the period of the provisional approval or within six months of the commencement of its activities, whichever is earlier.
It was found that since the assessee has commenced its activities and the application for regular registration has been moved beyond six months of the commencement of activities, the application is not maintainable.
The CIT ( Exemption ) rejected the application of the assessee and denied the regular registration under Section 80G(5)(iii) of the Income Tax Act. He further cancelled the provisional registration granted to the assessee.
The appellant contended that the institution, being an existing institution, is duly approved under Section 12AA of the Act, and its donation enjoyed exemption under Section 80G of the Income Tax Act. Due to the insertion of section 12AB(l)(a) by the Taxation and Others Law (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 01.04.2021, the appellant-institution was entitled to be registered for a period of five years up to A.Y. 2025–26.
Likewise, due to the insertion as per Proviso 1 to Section 80G(5), the appellant had applied for exemption under Section 80G and was granted exemption from April 1, 2021, until March 31, 2024, being the A. Ys 2021-22 to 2024-25. As per the requirement of Section 80G(5) provisos (i) to (iii), i.e., six months before the date of expiry of the approval, the appellant was to make an application to the CIT seeking renewal of permanent exemption, which was duly done and was well within time.
The department pointed out that CBDT has extended the time limit for applying Form No. 10A/10AB from time to time since the inception of the new scheme of grant of registration under Section 12A/80G. The CIT (Exemption) failed to comprehend the true procedure required to be followed. Unnecessary and huge litigation has been generated on account of the failure of the authorities to understand the new scheme.
The two-member bench of Rajpal Yadav ( Vice President ) and Sanjay Awasthi ( Accountant Member ) has observed that the procedure adopted by the CIT ( Exemption ) was incorrect to grant a provisional certificate to the assessee at the first stage and then to deny the regular certificate under Section 80G(5)(iii) of the Income Tax Act. Section 80G of the Income Tax Act provides tax exemptions for donations made to specified charitable institutions and funds.
While allowing the appeal, the ITAT held that the assessee’s case fell under Clause (i) to the first proviso to Section 80G(5) since it was already approved under Section 80G(5)(vi) prior to the amendment and that CBDT had extended the deadline for registration from time to time.
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