2020 (6) TMI 570 - AT - Income Tax

Exemption u/s 11 - Assessee did not file Form-10 along with the return of income but filed the same before the AO during the assessment proceedings - AO rejected the plea of the Assessee for accumulation for the reason that Form-10 did not specify the purpose for which the surplus income which is not spent will be utilized in future - HELD THAT - It is a fact that along with the appeal memo filed in Form-36 the Assessee has also attached a copy of Form-10 filed before the AO. It is therefore, not correct on the part of the Tribunal to observe in the impugned order that Form-10 was not filed before the Tribunal. Apart from the above, also find that along with Form-10, a copy of the Board Resolution of the Assessee trust has been enclosed in which the purpose for which the accumulation is sought is clearly set out as for construction of temple, Upashraya, Dharmashala and objects of the trust . It is thus, clear that the order of the Tribunal suffers from an error apparent on the face of the record which requires to be rectified. The claim of assessee for accumulation ought to have been accepted by the revenue authorities. Even in the order of assessment the AO has accepted that Form-10 was filed by the assessee and the only grievance was that the purpose for accumulation was not mentioned. When the purpose of accumulation as contained in the Board Resolution annexed along with Form-10 was brought to the notice of the ld. CIT(A), he also overlooked the same and concurred with the findings of the AO. Thus, the order of revenue authorities cannot be sustained and the assessee is therefore, entitled to the benefit of accumulation. - Decided in favour of assessee.

Summary

Issues involved:
Rectification of apparent error in the Tribunal's order regarding the Assessee's charitable trust's accumulation of funds without specifying the purpose in Form-10.

Analysis:
1. The Assessee, a charitable trust, filed a miscellaneous petition under section 254(2) of the Income Tax Act, 1961 seeking rectification of an error in the Tribunal's order related to the accumulation of funds without specifying the purpose in Form-10.

2. The Assessee's return of income for the assessment year 2012-13 declared total income as 'nil', with gross receipts of ?4,54,023. The Assessee applied ?2,27,026 for charitable purposes, leaving a balance of ?2,25,997. The Assessee was entitled to carry forward 15% of this balance for future charitable purposes, subject to filing Form-10 to avoid taxation. However, the Assessee did not file Form-10 along with the return but submitted it during assessment proceedings.

3. The Assessing Officer (AO) rejected the Assessee's plea for accumulation as Form-10 did not specify the purpose for which the surplus income would be utilized in the future. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this decision despite the Assessee providing a Board Resolution outlining the purpose of accumulation.

4. The Tribunal, on appeal by the Assessee, concurred with the CIT(A)'s decision, noting that the Assessee did not file a copy of Form-10 during the appeal. The Tribunal emphasized that Form-10 must specify the purpose for which surplus income is set aside, and as the Assessee failed to do so, the benefit of filing Form-10 was denied.

5. In a subsequent miscellaneous application, the Assessee argued that the Tribunal's order contained an error as Form-10, along with the Board Resolution specifying the purpose of accumulation, was indeed filed before the Tribunal. The Tribunal's observation that Form-10 was not submitted was found to be incorrect.

6. Upon careful consideration, the Vice President rectified the Tribunal's order, acknowledging that Form-10 was filed with the AO and CIT(A) along with the Board Resolution detailing the purpose of accumulation for constructing a temple, 'Upashraya,' and 'Dharmashala.' The Vice President held that the Assessee's claim for accumulation should have been accepted, directing that the Assessee is entitled to the benefit of accumulation.

7. Consequently, the Vice President allowed the Assessee's appeal, rectifying the error in the Tribunal's order and granting the Assessee the benefit of accumulation for charitable purposes as per the Board Resolution submitted with Form-10.