2024 (1) TMI 1192 - HC - Income Tax

Exemption u/s 11 - delayed submission of Form 10B - mandatory v/s discretionary requirements - requirement of furnishing declaration for claiming exemption - audit report in Form No. 10B was not e-filed along with the return of income - non reliance of Supreme court decision - as submitted assessee ought to have filed the audit report in Form 10B before the due date of filing of the return to claim the exemption - ITAT allowed exemption - HELD THAT - Reliance placed on the decision of M/s. Wipro Limited 2022 (7) TMI 560 - SUPREME COURT would not be applicable as in the facts of the present case, the assessee has claimed the exemption u/s 11 read with Section 12A(1)(b) of the Act which required the assessee to file audit report in Form of 10B which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B. Section 10B(8) requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 before the AO in writing that the provision of Section 10B may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year. Considering the language of the provision of Section 10B(8) of the Act, the Hon ble Supreme Court in M/s. Wipro Limited supra held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under sub-section (1) of Section 139 of the Act, whereas in the facts of the said case the assessee filed such undertaking along with the revised return under sub-section (5) of Section 139 and in such facts the Hon ble Supreme Court held that the twin conditions prescribed under Section 10B(8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under sub-section (1) of Section 139 would be directory. Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust 2021 (1) TMI 214 - GUJARAT HIGH COURT as well as Social Security Scheme of GICEA 2022 (12) TMI 1172 - GUJARAT HIGH COURT to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious and respondent No. 2 might be justified in denying the exemption under Section 11 of the Act being a technical in nature by rejecting such application. But, in the facts of the case, when the assessee has already uploaded the audit report in Form 10B as required under Section 10(23)C r.w.s. 12A(1)(b) of the Act before the Assessing Officer prior to the original assessment order under Section 143(3) passed on 06th April, 2021. Decided in favour of assessee.

Summary

Issues:
The issues involved in this case are:
- Whether the furnishing of audit report in Form No. 10B along with the return of income filed is a procedural requirement?
- Whether the denial of exemption under Section 11 of the Income Tax Act due to non-filing of audit report in Form No. 10B was justified?

Summary:

Issue 1:
The appellant-revenue challenged the decision of the Income Tax Appellate Tribunal (ITA) upholding the view that filing of audit report in Form No. 10B along with the return of income filed is a procedural requirement. The appellant contended that the tax effect involved exceeded the prescribed monetary limit specified by the CBDT.

The assessee, a registered charitable Trust, declared total income for Assessment Year 2018-19, including a voluntary contribution. The Central Processing Centre disallowed the exemption claim under Section 11 as the audit report in Form No. 10B was not e-filed with the return of income. The CIT (Appeals) allowed the claim, considering the filing of the audit report as a procedural requirement and noting that it was submitted before the Assessing Officer during assessment proceedings.

The Tribunal, following a previous decision of the High Court, dismissed the appeal, emphasizing the equitable and judicious approach required in such cases.

Issue 2:
The appellant relied on a Supreme Court decision regarding the mandatory nature of filing declarations for claiming exemptions under specific sections of the Income Tax Act. However, the Court differentiated the case at hand, which involved claiming exemption under different sections that did not require the same declaration as in the cited case.

The Court upheld the Tribunal's decision, stating that the Tribunal correctly followed previous High Court decisions emphasizing the need for substantial compliance and equitable treatment in such matters. The Court found no error in the Tribunal's decision and dismissed the appeal, stating that no substantial question of law arose from the Tribunal's order.