The title also claims other time-tracking apps were removed, so was is the reason?
UPD. I see the title was edited, and they have retracted the others apps claim now. The first question still stands though.
This similar to how they ban apps that do cryptocurrency mining in the background.
With the exception of a few specific Apple apps (Mail is actually the only one I know of now, and I believe it is more that the Mail app is a renderer of the system mail process) and apps which use particular API (such as VOIP and navigation-related location), you cannot have your app run persistently in the background to preserve power and resources. Using these API has always required you actually be an app in these categories.
Independent of draining battery and tying up the CPU/memory - it sounds like the primary purpose of this app (tracking your phone usage) broke if you didn't consent to a secondary feature (reporting where you were when you used your phone). Which means the app was fundamentally broken. Which isn't a surprise, because the API doesn't let you make this sort of app.
Apple has dozens of daemons that run continuously that handle everything from push notifications to fetching calendars to performing backups.