MEDICAL COLLEGE DEVELOPMENT SOCIETY,SURAT V. COMMISSIONER OF INCOME TAX (EXEMPTION), AHMEDABAD

ITA 344/SRT/2024

AI Insights

The case involves the Medical College Development Society, which appealed against the decision of the Commissioner of Income Tax (Exemption), Ahmedabad, rejecting their application for approval of funds under Section 80G(5) of the Income Tax Act, 1961. The rejection was based on the grounds that the application was time-barred as per the extended deadline provided in CBDT Circular No.8/2022. The Tribunal examined whether the application was indeed filed within the stipulated time and considered the impact of CBDT Circular No.7/2024, which extended the deadline for filing applications for final approval under Section 80G(5). The Tribunal concluded that the application was timely and directed the CIT(E) to grant the approval.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106849 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 18-11-2024
• Assessment Year: misc
• Appeal Filed On: 28-03-2024
• Other Referred Cases: Vallabhdas Valji Jilha Vachanalaya Vs CIT(E) [2024] 162 taxmann.com 678 (Pune-trib.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Assessee Lawyers: HIREN M. DIWAN; PINAZ R
• Keywords: Condonation of delay; Bonafide belief; Rectification of order; Charitable institution
• Section: 154; 80G

Judgement Text

"आयकर अपीलीय अिधकरण, सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आ.अ.सं./ITA No.344/SRT/2024 (Hearing in Physical Court) Medical College Development Society, Government Medical College, New Civil Hospital, Majura Gate, Surat-395001 [PAN No. AACTM 5854 E] Vs Commissioner of Income Tax(Exemption) Ahmedabad Room No. 609, Floor-6, Aayakar Bhawan (Vejalpur), Nr. Sachin Tower, 100 Foot Road, Anandnagar-Prahladnagar Road, Ahmedabad-380015 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Hiren M. Diwan, Ms Pinaz R Bhagat & Dhruwang H Diwan CA’s राजˢ की ओर से /Revenue by Shri Ravi Kant Gupta, CIT-DR अपील पंजीकरण/Appeals instituted on 29.03.2024 सुनवाई की तारीख/Date of hearing 18.11.2024 उद ्घोषणा की तारीख/Date of pronouncement 25.11.2024 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-Tax (Exemption), Ahmedabad [for short, “Ld. CIT(E)”] passed under section 80G(5) of Income Tax Act, 1961 (‘the Act’) in rejecting application for approval funds dated 27.05.2023. The assessee has raised following grounds of appeal; 1) The ld CIT(E) has erred in law on the facts in treating the application for grant of approval under clause (iii) of first proviso to sub-section 80G of the Act, as time barred. 2) The ld CIT(E) has erred in law on the facts in rejecting the application for grant of approval under clause (iii) of first proviso to sub-section 80G of the Act. 3) The appellant craves leave to add, amend, alter, modify, substitute, delate change or very all or any of the ground or grounds of appeal. ITA No.344/SRT/2024 Medical College Development Society 2 2. Rival submission of both the parties have been heard and record perused. The Ld. Authorized Representative (Ld.AR) for the assessee submits that impugned order was passed by Ld. CIT(E) on 27.05.2023 and this appeal was filed before Tribunal on 29.03.2024. The Registry of this Tribunal has issued a defect memo pointing out 246 days of delay in filing appeal. The assessee has filed application for condonation of delay. The application for condonation of delay is supported by affidavit of Dr. Ragini Verma, Professor of assessee-trust (Medical College). The Ld. AR of the assessee submits that there is no deliberate or intentional delay in filing appeal before Tribunal. The Ld.CIT(E) rejected the application of assessee on 27.05.2023 by taking view that application is time barred and it should have been made on or before 30.09.2022. After rejection of application for approval of funds, the assessee- trust filed application under section 154 of the Act for rectification of mistake in the order dated 27.05.2023, vide application dated 28.11.2023. In the application, under section 154 dated 28.11.2023, the assessee explained that application for regular approval of fund was made well within time and prayed for rectification of the order, pointing out the mistake apparent on record. The assessee also filed a reminder letter dated 05.11.2024 before Ld.CIT(E), when no intimation about the outcome of said application was informed. The applicant-trustee was under hope of positive outcome of their rectification application. Unfortunately, the rectification application was rejected vide order dated 08.11.2024 by ld CIT(E) in holding that there is no mistake in the order. It was also held that he has no power to review his own order passed in Form10AD. The applicant/trustee was under bonafide belief that of rejection of ITA No.344/SRT/2024 Medical College Development Society 3 their application under section 154 they were required to file within 60 days. On receipt of order of rejection of rectification application, applicant/trustee approached their consultant in the month of February,2024 for filing appeal. However, their consultant in consultation with present Authorized Representative (AR) found that in the present case an appeal needs to be filed against the order of rejection dated 27.05.2023. The applicant/trustee immediately filed appeal after taking necessary instruction of consultant. Thus, delay in filing appeal is neither intentional nor deliberate. The assessee/trust was pursuing alternative remedy under bona fide belief that they are likely to succeeds on the application under section 154 of the Act, as application for approval of fund was filed well within time of six months prior to expiry of provisional approval which was valid upto AY 2023-24. The Ld. AR of the assessee submits that assessee has good case on merit and is likely to succeeds, if their appeal is heard on merit. The Ld. AR of the assessee submits that assessee/trust set up by State Government for imparting medical education. The assessee-trust is having valid registration under section 12AB. The assessee/trust would suffer prejudice, if their appeal is not heard on merit. The Ld. AR of the assessee submits that when technical considerations and cause of justice are kept against each other, the cause of substantial justice, may be preferred. On merit, Ld. AR of the assesse submits that the assessee/trust was applied for provisional approval under section 80G(5) and the provisional approval was granted / allowed vide order dated 09.07.2021 for assessment years 2021-22 to 2023-24. The assessee/trust is an old trust and was incorporated/set up in ITA No.344/SRT/2024 Medical College Development Society 4 March, 2010. The assessee/trust applied for regular approval of fund under section 80G(5) on 24.11.2022, the said application was filed well within time i.e., six prior to expiry of provisional approval which was available to assessee upto assessment year 2023-24. As per provisional approval which is valid upto AY 2023-24, the assessee could apply for regular approval upto 30.09.2023. The Ld. AR of the assessee reiterate that assesse/trust was allowed provisional approval upto assessment year 2023-24. Thus, six months prior to expiry of provisional approval, in case of assessee was available till 30.09.2023. The Ld.CIT(E) rejected the application of assessee by taking view that as per various Central Board of Direct Taxes (in short, ‘CBDT’) Circulars, the assessee was required to apply for regular approval of fund within extended time upto 30.09.2022, as per Circular No.8/2022 dated 31.03.2022, whereas assessee filed application on 24.11.2022, which is not within time limit prescribed and application of assessee was held as “not maintainable”. The Ld. AR for the assessee by referring the First Proviso to section 80G(5), and would submits that where institution or fund is approved and the period of such approval is due to expire, the final approval is to be applied six months prior to expiry of said period. Thus, assessee applied well within six months prior to expiry of their approval. Thus, the application filed by assessee/trust was not beyond the time limit. To support his submission, Ld. AR of the assessee relied upon the decision of Pune Bench in the case of Vallabhdas Valji Jilha Vachanalaya Vs CIT(E) [2024] 162 taxmann.com 678 (Pune-trib.), wherein it was held that when assessee has received provisional approval under section 80G(5) on 27.05.2021 and it was valid up to assessment year 2023-24, the said assessee ITA No.344/SRT/2024 Medical College Development Society 5 had applied for registration under section 80G on 24.05.2023, which was before assessment year 2023-24, the application was not time barred. The Ld. AR of the assessee reiterated that his application for approval of fund under section 80G was not at all time barred and the assessee/trust be allowed approval under 80G(5) of the Act. 3. In alternative and in without prejudice submissions, the Ld. AR of the assessee submits that CBDT in its Circular No.7/2024 has extend the time limit for filing application for final approval under Section 80G(5), in general cases till 30.06.2024. The applicant-trustee may also be allowed to avail benefit of said circular as the appeal of assessee is pending before Tribunal which is in continuation of original proceedings, therefore, assessee is entitled to the benefit of Circular No.7/2024 dated 25.04.2024 issued by CBDT. 4. On the other hand, Ld. Commissioner of Income-tax Departmental Representative (Ld.CIT-DR) for the Revenue submits that assessee has not explained the delay in filing appeal before Tribunal. As per assessees own averment, in the affidavit, the application under section 154 for rectification of order dated 27.05.2023, was filed after eight months from passing of impugned order. The applicant-trustee was very well aware about exercising their right of rectification, so they are very well aware about filing of appeal. Still on dismissal of their application under section 154 on 05.01.2024, again the appeal is not filed within 60 days. The assessee is relying on self-serving story without having any reasonable and sufficient cause. The Ld. CIT-DR submits that delay may not be condoned and appeal may be dismissed as unadmitted. ITA No.344/SRT/2024 Medical College Development Society 6 On merit, Ld. CIT-DR for the Revenue fairly accepted the alternative submissions of the ld AR of the assessee that CBDT’s Circular No.7/2024 dated 27.05.2024 has extended time period for filing application under section 80G(5) upto 30.06.2024, therefore, he has no objection if matter is restored for consideration it on merit. On the primary contention of Ld. AR of the assessee that his application for regular approval under section 80G(5) was within time as they were having provisional approval up to AY 2023-24, the ld CIT-DR of the revenue submits that assessment year is notional concept with reference to the previous year relevant to assessment year. Thus, six months prior to the end of this month would be on or before 30.09.2022. The assessee was allowed provisional approval upto financial year 2022-23. Thus, assessee was required to file application on or before 30.09.2022. Admittedly, assessee filed application on 24.11.202, which is beyond the time limit prescribed in the statute. Thus, the application of assessee was not maintainable. On the reliance on the case law in the case of Vallabhdas Valji Jilha Vachanalaya (supra), Ld. CIT-DR for the Revenue submits that said decision is not in accordance with law in the spirit of statutory provision. 5. The ld CIT-DR for the revenue also filed his written submissions on 20.11.2024 bearing date of 19.11.2024, without seeking permission of this Bench. In his written submissions, the ld CIT-DR of the revenue retreated almost similar contention, which we have already recorded. The ld CIT-DR of the revenue in additions to his earlier submissions while referring substance of decision of Pune Tribunal in Vallabhdas Valjijilha Vachnalaya Vs CIT(E) (Supra) contended that on reading the Budget Speech of Finance Minister 2020 and Memorandum ITA No.344/SRT/2024 Medical College Development Society 7 of Finance Bill,2020 together, it became 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 trusts which were newly formed and the trusts 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 having registration under section 12AAA or 80G(5), such trust were directed to re-apply for registration under new procedure on or before 30.08.2020 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 have never applied for registration under section 80G(5). It is not mandatory that every charitable trust/ institution has to apply for registration under section 80G(5). But there is no bar in the Act that such trust or institutions cannot apply for registration under section 80G in the new procedure. In these kinds of cases, the trust/ institution though doing charitable activities may first apply for ‘provisional registration’ under the Act. After getting the provisional registration, they are require to apply for regular registration. These kind of Trust/ institute will fall under sub-clause (iii) of the Proviso to section 80G(5), since they have obtained provisional registration. The sub- clause prescribed that institutions which have provisional registration have to apply at least six months prior to expiry of provisional registration or within six months of commencement of activities, whichever is earlier. In continuation of this, when one read the sub-clause (iii) of proviso of Section 80G (5) it is clear that intention of the Parliament in putting the word ‘or within six months of ITA No.344/SRT/2024 Medical College Development Society 8 commencement of its activities, whichever is earlier’ is in the context of newly formed trust/institutions for the existing trust/institution, for the time limit of applying for regular registration is within six months of expiry of provisional registration if they are applying under sub-clause (iii) of the proviso of Section 80G(5). This will be the harmonious interpretation. The words, ‘within six months of commencement of its activities’ has to be interpreted that it applies for those institutions/trust which have not started charitable activities at the time of obtaining provisional registration, and not for those trust/institution which have already started charitable activities before obtaining provisional registration. The assessee trust had applied for registration within time allowed under the Act. Hence application of assessee was valid and maintainable. Even otherwise, assessee has received provisional approval under Section 80G(5) on 27/05/2021 and was valid up to A.Y. 2023-24. The assessee had applied for registration under Section 80G on 24/05/2023 which was before Assessment year 2023-24. Thus, the assessee had applied for permanent registration under Section 80G before expiry of provisional approval, therefore, application of assessee was not time barred. 6. After referring the aforesaid contents of decision of Pune Tribunal in Vallabhdas Valjijilha Vachnalaya Vs CIT(E) (Supra), the ld. CIT-DR has contended in his submission that there is ten months’ delay in filing present appeal. The assessee failed to provide sufficient cause for a significant delay of ten months. The only reason is pendency of rectification application before the ld. CIT(E) which cannot be accepted as a valid reason for the delay as the rectification application is also filed after six months. On merit, the ld. CIT-DR for the ITA No.344/SRT/2024 Medical College Development Society 9 revenue reiterated that if the provisional registration of assessee is supposed to end in A.Y. 2013-14, as per case law, the last date for registration would be 30/09/2023. However, A.Y. 2023-24 referred to the registration being applicable until F.Y. 2022-23. Six months prior to end of this period would be on or before 30/09/2022. The provision should be interpreted in this manner to maintain continuity in the applicability of exemption. Otherwise, if, as per the judgment, the last date for registration is considered to be on or before 30/09/2023, then in such scenario, the trust would not have registration for first six months of A.Y. 2023-24. The intention of law is that registration should be approved within six months to ensure continuity of concerned trust and to avoid any hardship. The law should be interpreted according to legislature intention. The application for regular approval is time barred. Order of ld. CIT(E) is correct with respect to circulars issued by the CBDT at the time of passing of the order. Relief may be granted if applicable as per circular No. 7 of 2024 dated 25/04/2024. In case, interpretation of law is decided, his submission and written submission be taken into consideration. 7. In response to written submission of Revenue, the ld. AR of assessee also filed his rejoinder through e-mail on 22/11/2024 bearing date of 21/11/2024. In the rejoinder, the assessee objected of filing such written submission without seeking permission of the Bench as neither such permission was sought nor there was any direction to file such submission. The assessee stated that rectification under Section 154 could be filed within a period of four years from the end of the financial year in which order sought to be amended was passed. The order was passed during F.Y. 2023-24, rectification application could be ITA No.344/SRT/2024 Medical College Development Society 10 filed on or before 31/03/2028, rectification was filed on 28/11/2023 which is well within time limit. The assessee reiterated that provisional approval was granted till A.Y. 2023-24 and assessee was allowed for making application for renewal up to 30/09/2023 as per the judgement of Pune Bench of Tribunal. The ld. CIT-DR for the revenue has mistakenly concluded that the approval was valid up to A.Y. 2023-24, would mean that validity of approval would end on 31/03/2023, whereas a matter of fact, the validity of approval in such case would be up to 31/03/2024 and hence it would not be case that the concerned trust would be without approval for initial six months of A.Y. 2023-24. The submission of ld. AR of the assessee that the term “assessment year” is used, it is a notional concept with reference to previous year relevant to assessment year. Assessment year is not a notional concept and that is candidly defined by Section 2(9) of the Act. The observation of ld. CIT-DR in written submission are contradictory to each other, on one hand, the ld. CIT-DR mentioned that term Assessment year is a notional concept which means the term assessment year does not refer to any specific time frame. On the other hand, in last para on page No. 5 of his written submission mentioned that if judgment of the Pune Bench is followed, the assessee concerned would be without approval for initial six months for A.Y. 2023-24. It is beyond comprehension that if the term assessment year is a notional concept without reference to any time frame, how it can have an initial period of six months. The ld. AR of the assessee also prayed that if written submission of ld. CIT-DR is considered then his rejoinder be also considered while deciding the appeal. ITA No.344/SRT/2024 Medical College Development Society 11 8. We have considered the rival submission of both the parties and perused record carefully. First we are considering the plea of condonation of delay. We find that the assessee in its application for condonation of delay categorically contended that after passing of impugned order, the assessee filed application for rectification of the order. The application under Section 154 was filed on 28/11/2023 which followed the reminder application dated 05/01/2024 and that rectification application was ultimately rejected on 18/01/2024. The ld. AR vehemently argued that the assessee under bonafide belief was pursuing alternative remedy before the ld. CIT(E). We find that filing of application under Section 154 and rejection thereof is not disputed by the Revenue. We find that after rejection of application on 18/01/2024, the assessee was required to file appeal before Tribunal within sixty days that is on or before 17th March, 2024. However, this appeal is filed on 29/03/2024. Thus, there is only 12 days of delay in filing appeal from the date of rejection. Similarly, the assessee was required to explain the period between 07/05/2023 till 28/11/2023 when application under Section 154 was filed. The assessee has explained that they were under hope of positive outcome of their rectification application filed before the ld. CIT(E). Considering the overall facts and circumstances of the case and the fact that the assessee trust is an instrument of State Government and they are required to take permission/approval of administrative head, therefore, keeping in view that the assessee was pursuing alternative remedy under bonafide belief, therefore, taking a lenient view, the delay in filing appeal is condoned. Now adverting to the merits of the case. ITA No.344/SRT/2024 Medical College Development Society 12 9. The assessee was incorporated/set up in March 2010. The assessee is registered with Charity Commissioner, Surat with the object of imparting medical education and medical relief. The assessee is having registration under Section 12AB of the Act. We find that assessee for the first time applied for provisional approval under section 80G(5), which was allowed vide order dated 09/07/2021 and is valid upto AY 2023-24. We further find that the assessee on obtaining provisional approval, again filed application for regular approval under section 80G(5) vide application dated 24/11/2022 which was rejected by Ld.CIT(E) on 27/05/2023 by taking view that application is not filed within extended period as prescribed in Circular No.8/2022 dated 31.03.2022 and that the assessee was required to file application on or before 30.09.2022, however, the assessee has applied for approval only on 24/11/2022. Thus, the application is time barred. 10. Considering the fact that the assessee is having registration under Section 12AB. Moreover, objects and activities of the assessee trust is not disputed. The assessee trust is established and managed, financially and administratively by the State Government. The sole ground for rejection of approval of fund is that it was filed beyond time period extended by the CBDT vide its Circular No. 8/2022, wherein time period for filing application for regular approval of fund under Section 80G(5) was extended up to 30/09/2022. We find that the CBDT in its Circular No. 7/2024 dated 25.04.2024 extended the time period upto 30.06.2024 for seeking approval under section 80G(5). When the CBDT issued Circular dated 25/04/2024, the application of assessee was pending consideration before the ld. CIT(E). Thus, the ld. CIT(E) should have allowed ITA No.344/SRT/2024 Medical College Development Society 13 the relaxation of time period as per CBDT Circular No.7/2024 dated 25.04.2024. Considering the peculiar facts of the case and the fact that the assessee trust is an instrument of State Government and fulfilled all the conditions for availing approval under Section 80G(5), therefore, the ld. CIT(E) is directed to issue approval of fund under Section 80G(5) in favour of assessee. In the result, the grounds of appeal raised by the assessee are allowed. 11. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 25/11/2024. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) [लेखा सद˟/ACCOUNTANT MEMBER] [Ɋाियक सद˟ JUDICIAL MEMBER] सूरत / Surat Dated: 25/11/2024 *Ranjan आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT(E)  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File By order/आदेश से, सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "