Top Stories Trust cannot be Barred from getting the benefit of Income Tax Deduction because of not Opting for it Previously: ITAT [Read Order] The ITAT held that trust cannot be barred from getting the benefit of income tax deduction because of not opting for it previously By Yogitha S. Yogesh – On February 16, 2024 5:03 pm – 3 mins read The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the trust cannot be barred from getting the benefit of income tax deduction because of not opted for it previously.

Diamond Cares, the assessee trust has already been duly registered under section 12A(1)(ac)(iii) of the Income Tax  Act, 1961 for Assessment Year 2023-24 to 2027-28. The assessee trust has also applied for provisional approval under section 80G(5)(iv) of the Act which was granted by the CIT(E) for the period from 26/05/2022 to Assessment Year 2025-26. The assessee moved an application for final approval under section  80G(5)(iii) of the Act. However, the CIT(E) has rejected the said application. The CIT(E) in this respect referred to the said clause (iii) of proviso to section 80G(5) of the Act. The 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.

As observed by the Co-ordinate Bench of the Tribunal in the case of West Bengal Welfare Society (supra) though the assessee may have commenced its activities before applying for provisional approval under section 80G(5) of the Act, that does not mean that once the assessee has commenced its activities or already has been doing charitable activities and it has not opted for getting benefits under the Income-tax Act, then such an assessee trust/charitable institution is barred in future from applying from registration/approval under the relevant provision of the Income-tax Act. The assessee might have commenced its activities in the F.Y. 2020-21 as observed by the CIT(E), however, the assessee for the first time, applied for a grant of provisional registration under section 80G(5) of the Act from Assessment Year 2023-24 onwards only. The CIT(E) taking note of the past activity of the assessee has granted a provisional registration. The assessee did not carry out any activity after the grant of provisional registration on 26/05/2022. The assessee for the first time started its activity after the grant of provisional registration on 15/09/2022, on which date the trust received donations.

The assessee made a donation and the assessee trust thereafter applied for final registration on 30/12/2022 which was well within six months from the commencement of its charitable activity after the date of provisional registration. If the view of the CIT(E), under such circumstances, is considered to be correct then, any trust which is or has been already into charitable activities and has been granted provisional registration, the same will never be entitled to grant of final registration. Such an interpretation of the provisions of Section 80G(5) of the Act will defeat its purpose. A two-member bench comprising of Shri Sanjay Garg, Judicial Member & Shri Girish Agrawal, Accountant Member viewed that taking the reasonable construction of the said provision, the assessee is well within the prescribed limitation period to apply for the final approval Under section 80G(5) of the Act. While allowing the appeal, the ITAT set aside the impugned order of the CIT(E) and directed to grant final approval to the assessee under section 80G(5)(iii) of the Act, if the assessee is otherwise found eligible, irrespective of the date of application.