2018 (8) TMI 2134 - AT - Income Tax

Exemption u/s 11 disallowed - intimation u/s. 143(1) - AO disallowed the claim of assessee for exemption u/s. 11(2) for the reason of non-filing of Form 10 u/s 11(2) as 85% of the income of a charitable trust has to be applied for charitable purposes - assessee filed an application u/s. 154 seeking to rectify the intimation u/s. 143(1) contended that in the original return filed for the A.Y 2014-15 the fact of accumulation of income u/s 11(2) was mentioned. The appellant had already prepared an application for accumulation in Form 10 - assessee submitted that since intimation u/s. 143(1) is not an assessment the request of the assessee to accept Form 10 and allow accumulation ought to have been accepted and intimation u/s. 143(1) rectified - HELD THAT - As relying on Bagalkot Town Development Authority 2014 (7) TMI 91 - ITAT BANGALORE following NAGPUR HOTEL OWNERS ASSOCIATION case 2000 (12) TMI 99 - SUPREME COURT that intimation required u/s 11 has to be furnished before the assessing authority completes the concerned assessment. In the present case there was no assessment proceeding and there is only intimation u/s. 143(1) of the Act. An intimation u/s. 143(1) is not an assessment as laid down in the case of Rajesh Jhaveri Stock Brokers 2007 (5) TMI 197 - SUPREME COURT - In view of the legal position as explained above we are of the view that the AO ought to have accepted the application for rectification u/s. 154 of the Act. We accordingly direct the AO to allow application u/s. 154 of the Act and rectify the intimation. Appeal by the assessee is allowed.

Summary

Issues:
Appeal against disallowance of exemption u/s. 11(2) for non-filing of Form 10 for charitable trust in AY 2014-15.

Analysis:
1. The assessee, a charitable trust, filed a NIL return for AY 2014-15. The AO disallowed the claim for exemption u/s. 11(2) due to non-filing of Form 10, required for accumulation of income for charitable purposes. The assessee contended that Form 10 was prepared but not submitted with the return due to online filing constraints.

2. The assessee sought rectification u/s. 154, stating the trust's resolution for income accumulation. The AO rejected the rectification request, citing belated filing of Form 10 and its mandatory requirement for accumulation benefit u/s. 11(2). The CIT(A) upheld the AO's decision, emphasizing the mandatory nature of filing Form 10 before the return due date for claiming the benefit.

3. The Tribunal considered the appeal, noting that filing Form 10 before the assessment proceedings' conclusion was sufficient. Referring to a previous decision, the Tribunal highlighted the necessity of informing the AO via Form 10 for income accumulation under s. 11(2). It emphasized that the assessing authority must have this information before completing the assessment.

4. The Tribunal held that since there were no assessment proceedings, only an intimation u/s. 143(1) existed, which is not an assessment. Citing legal precedents, the Tribunal directed the AO to accept the rectification application u/s. 154 and rectify the intimation, allowing the accumulation of income for charitable purposes.

5. The Tribunal's decision favored the assessee, emphasizing the importance of informing the assessing authority about income accumulation under s. 11(2) before assessment completion. The Tribunal's ruling highlighted the distinction between intimation u/s. 143(1) and a formal assessment, ensuring the trust's entitlement to accumulate income for charitable purposes was upheld.