Gender Lab Foundation, Thane V. Commissioner of Income Tax (Exemption), Pune

ITA 193/PUN/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7491 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-04-2024
• Assessment Year: misc
• Appeal Filed On: 01-02-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard; Capital Gains
• Section: 11; 80G; 119(2)(b); 12AA

Judgement Text

।आयकर अपीलीय अिधकरण ”बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “A” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.193/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year :- Gender Lab Foundation, Flat No.2203-4, A Wing, Tribeca Building, Hiranandani estate, G B Road, Chitalsar Manpada, B.O., Thane. Maharashtra – 400607. PAN: AAJCG4122B Vs The Commissioner of Income Tax, Exemption, Pune. Appellant/ Assessee Respondent /Revenue Assessee by None. Revenue by Shri Keyur Patel – CIT(DR) Date of hearing 29/04/2024 Date of pronouncement 30/04/2024 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This is assessee’s appeal against the order of ld.Commissioner of Income Tax(Exemption), Pune under section 80G of the Act, dated 15.12.2023. The ld.CIT(E) dismissed the application of the assessee on the ground that the application is time barred. The assessee has raised the following ground(s) of appeal : “1. The CIT E, failed to appreciate that the appellant, Gender Lab ITA No.193/PUN/2024 Gender Lab Foundation [A] 2 Foundation was incorporated on 16.11.2021 as a charitable company and commenced its activities gradually from 01.04.2022 by setting up a small team of 10 staff members and appointing fellows and professionals to assist in its programmes. 2. The CIT(E) failed to consider that the delay in filing was due a misinterpretation of the legal provision by the financial advisor and that the appellant was being penalized for no fault of the appellant. There were no malafides and there was no willful default as any a default would be against the interest of the assessee. 3. The CIT(E) failed to consider that as soon as it was pointed out in June 2023 during the statutory audit that the application for final approval was required to be made within 6 months of commencement of activities and / or 6 months of provisional approval whichever was earlier, the appellant filed its application in Form no. 10AB for registration under section 12AB as well as section 80G on 04.07.2023. 4. The CIT(E) failed to consider that the delay in filing under section 80G was due to oversight and misinterpretation by the financial advisor, of the CBDT Circular No. 06/2023 dated May 24, 2023, extending the deadline until September 30, 2023. 5. The applicant submits that its application for approval has been rejected merely on technical ground of submission beyond the due date and as stated by the CIT(E) not on the merits of the application and the genuineness of the activities. In fact if the activities were not genuine then the approval under 12AB itself would not have been granted. 6. The CIT(E) failed to appreciate that without approval under section 12AB any approval under section 80G is not possible. 80G approval cannot be issued without approval under 12AB. 7. The CIT(E) failed to appreciate that due procedure and time line was not followed and the appellant's 80G application was considered and rejected on 15.12.23 while the application under 12AB was approved on 18.12.23. In the correct order of things the application for registration under 12AB should have been considered before the application under 80G. 8. The CIT(E) failed to appreciate that while Circular 6/2023 dated 24.05.2023 extended the time for submission under 12AA, 12AB, 10(23)(C} to 30.03.23 it by inadvertent omission left out extending the date for applications under 80G. The registration and approval under 80G is not permissible or possible in the absence of approval under ITA No.193/PUN/2024 Gender Lab Foundation [A] 3 section 12AB. i. The assessee prays that the CIT(E) be directed to recall / stay the order dated 15.12.23 and also to consider the appellant's application for registration under 80G afresh. j. The appellant further prays that the delay in filing Form 10AB under section 119(2)(b) of the Income Tax Act, 1961 be condoned and the application for final registration under section 80G be considered on merits. k. The applicant has made an application under section 119(2)(b) to the CBDT pointing out the facts of the case and asking for both a condonation and / or clarification that Circular 6/2023 also be extended to cover Section 80G 9. The appellant craves leave to add, to amend, delete and/or withdraw any of the above grounds of appeal and also to submit additional documents and facts as may be necessary for the purpose of disposal of the appeal.” 2. There has been delay in filing of appeal by the assessee before this Tribunal. We have gone through reasons for delay and we find that there was sufficient reason for delay. Accordingly, delay is condoned. Findings &Analysis : 3. The ld.CIT(E) rejected the application of the assessee on the ground that assessee filed the application for 80G beyond the time mentioned in section 80G(5) of the Act. According to the ld.CIT(E), assessee’s activity had commenced on 01.04.2022. The assessee should have filed application for 80G within six months ITA No.193/PUN/2024 Gender Lab Foundation [A] 4 from the date of commencement of activities. Since CBDT had extended the date vide Circular No.08/2022, assessee was required to file the application on or before 30.09.2022. However, the ld.CIT(E) observed that assessee filed application for 80G on 04.07.2023 which was beyond the time limit. Hence, the ld.CIT(E) rejected the application. 4. In this case, the ld.Commissioner of Income Tax(Exemption) has rejected the application of the assessee filed in Form 10AB for approval u/s 80G of the Act, only on one ground that the application is not maintainable as the assessee failed to file the present application within the time limit allowed under clause (iii) of first proviso to section 80G(5) of the Income Tax Act. Basic facts : 4.1 Date of provisional approval u/s. 80G - 21.01.2022. Period of provisional approval – from 21.01.2022 to A.Y.2024-25. Date of filing application for permanent registration u/s.80G – 04.07.2023. 5. The question before us is whether the application of the assessee was time barred or not? ITA No.193/PUN/2024 Gender Lab Foundation [A] 5 To decide this question, we have to first understand the relevant statutory provisions of the Income Tax Act. 5.1 The relevant part of Section 80G(5) of the Income tax Act 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) ........ (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; (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; ITA No.193/PUN/2024 Gender Lab Foundation [A] 6 (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 25 71 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; (emphasis supplied) (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; (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,— ITA No.193/PUN/2024 Gender Lab Foundation [A] 7 (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 (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) ....... New Procedure for registration: 6. The new provision for Registration was introduced by Finance Act, 2020. There was amendment in the registration procedure by Finance Act, 2020. For the first time the Finance Act, 2020 introduced the concept of “Provisional Approval”. Also due to the amended, all the existing Trust/Institutions which were already having registration u/s.12AA or 80G(5) were asked to re-apply for registration as per the amendment brought in 2020 and a date was specified before which all those Trust/Institutions already having Registration was required to make a fresh application as per the amendment procedure. The said date was repeatedly extended due to Covid-19 Pandemic. ITA No.193/PUN/2024 Gender Lab Foundation [A] 8 7. In this background we have to interpret the relevant provisions. To interpret the provisions, we shall refer to the Budget Speech of the Hon’ble Finance Minister. 7.1 The Hon’ble Supreme Court in the case of K P Varghese Vs. ITO [1981] 131 ITR 597 (SC) has observed as under regarding use of Speech of a Minister as a tool in interpretation: Quote , “ Now it is true that the speeches made by the Members of the Legislature on the floor of the House when a Bill for enacting a statutory provision is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for the introduction of the Bill can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is an accord with the recent trend in juristic thought not only in western countries but also in India that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. In fact there are at least three decisions of this Court, one in Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234, the other in Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 and the third in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR l/[1980] 2 Taxman 501, where the speech made by the Finance Minister, while introducing the exclusionary clause in section 2(15) of the Act, was relied upon by the Court for the purpose of ascertaining what was the reason for introducing that clause.” ITA No.193/PUN/2024 Gender Lab Foundation [A] 9 7.2 The Hon’ble Supreme Court has approved use of the Hon’ble Minister’s speech as tool of interpretation to understand the intent of the Statute. Extract of relevant part of Speech of Hon’ble Finance Minister: 8. The 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. 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” ITA No.193/PUN/2024 Gender Lab Foundation [A] 10 9. Thus, these amendments were introduced to simply the procedure of registration of Charitable Trusts/Institutions. The amendment made to simplify a procedure cannot be interpreted in a way that it causes prejudice to the Trust/institutions. 10. Thus, when we read the Budget Speech of the 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. The parliament in its wisdom has decided to differentiate between the Trust which were newly formed and the trust which were already doing charitable activities. In the second category of cases, there are again two possibilities, one trust was already doing charitable activities and was already having Registration u/s 12AA or 80G(5) of the Act, such trust were directed to re-apply for registration under new procedure on or before 30 th August, 2020 but due to Covid-19 pandemic this date was subsequently extended. There is Second category of trust/institutions which were already doing Charitable Activities but had never applied for registration u/s.80G(5) of the Act. It is not mandatory that every ITA No.193/PUN/2024 Gender Lab Foundation [A] 11 charitable trust/institution has to apply for registration u/s.80G(5) of the Act. However, there is no bar in the Act that such trust or institutions cannot apply for registration u/s.80G in the new procedure. In these kinds of cases, the Trust/Institute though doing charitable activity may apply first for the ‘Provisional Registration ‘under the Act. After getting the Provisional Registration the Trust/Institution have to apply for Regular Registration. These kind of Trust/Institutes will fall under sub clause (iii) of the Proviso to Section 80G(5) of the Act, since they have obtained Provisional registration. 10.1 In this background, we need to read the sub-clause (iii) of the Proviso to Section 80G(5) of the Act. For ready reference it is again reproduced here 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” 10.2 The sub-clause says that the Institution which have provisional registration have to apply at-least six months prior to expiry of the provisional registration or within Six months of commencement of activities, whichever is earlier. ITA No.193/PUN/2024 Gender Lab Foundation [A] 12 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. 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 the Hon’ble Supreme Court 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 ITA No.193/PUN/2024 Gender Lab Foundation [A] 13 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 ITA No.193/PUN/2024 Gender Lab Foundation [A] 14 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. 11.1 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 ITA No.193/PUN/2024 Gender Lab Foundation [A] 15 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, assessee had received provisional approval under section 80G(5) on 21.01.2022 and it was valid uptoA.Y.2024-25.The assessee had applied for registration under section 80G on 04.07.2023, which was before A.Y.2024-25. Thus, assessee had applied for permanent registration under section 80G before the expiry of provisional approval. Therefore, the application of the assessee was not time barred. 13. In these facts and circumstances, we set-aside the order under 80G to ld.CIT(E) for denovo adjudication. The ld.CIT(E) shall give opportunity to the assessee of being heard. Accordingly, grounds of appeal are allowed for statistical purpose. ITA No.193/PUN/2024 Gender Lab Foundation [A] 16 14. In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on 30 th April, 2024. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 30 th April, 2024/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.