2024 (10) TMI 99 - HC - Income Tax

Denial of exemption u/s 11 - procedural delay in furnishing Form 10B - as per assessee delay was on account of various technical issues. HELD THAT - Considering the language of the provision of Section 10B (8) of the Act, the Hon ble Supreme Court in M/S WIPRO LIMITED 2022 (7) TMI 560 - SUPREME COURT held that it was mandatory on part of the assessee to file declaration before the due date of filing of return u/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 u/s 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 of the Act would be directory. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) 2021 (1) TMI 214 - GUJARAT HIGH COURT as well as the decision of 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. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal. We are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s. Wipro Limited (supra) as referred to and relied upon by learned advocate for the appellant-Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra). Appeal dismissed - No substantial question of law arises.

Summary

Issues:
1. Interpretation of provisions under Section 12A of the Income Tax Act, 1961 regarding the filing of audit report in Form 10B.
2. Validity of allowing exemption under Section 11 of the Act based on the timing of filing the audit report.
3. Condonation of delay in filing Form 10B and its impact on exemption claims.

Analysis:
1. The case involved a dispute over the interpretation of Section 12A of the Income Tax Act, specifically regarding the filing of audit reports in Form 10B. The Tribunal had to determine whether the provision was procedural or mandatory, considering the decision in the case of Wipro by the Supreme Court. The Tribunal, following the decision of the High Court in a similar case, held that substantial compliance with the requirement was sufficient, and the delay in filing the audit report could be condoned if the conditions for exemption were substantially satisfied.

2. The issue of allowing exemption under Section 11 of the Act was raised based on the timing of filing the audit report. The CIT(A) had allowed the exemption claim after the audit report was filed during the appellate proceedings, despite missing the due date. The Tribunal upheld this decision, citing the equitable approach taken in previous judgments. The Tribunal emphasized that the substantial satisfaction of conditions for exemption should not be denied solely based on procedural delays.

3. The appellant argued that the decision in the Wipro case by the Supreme Court regarding the mandatory nature of filing declarations under Section 10B did not apply to the present case. The appellant contended that the requirements under Section 10B were different from those under Section 11 and 12A, and the timing of filing declarations was crucial. However, the Tribunal, supported by the High Court's previous judgments, held that the delay in filing the audit report in Form 10B was properly condoned, considering the overall compliance with exemption conditions.

In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's decision. The Court affirmed the Tribunal's decision to uphold the exemption claim under Section 11 of the Act, despite the delay in filing the audit report, based on the principle of substantial compliance and the equitable approach in such cases.