2020 (1) TMI 1675 - AT - Income Tax

Exemption u/s 11 12 - deduction of corpus donations disallowed on the ground that audit report in Form 10B was not filed along with the return of income - assessee filed rectification petition u/s 154 and had enclosed audit report in Form 10B - AO rejected the same on the ground that, the audit report was not attached with the return of income - HELD THAT - As per CBDT Circular vide No. 10 F.NO.197/55/2018-ITA-I held the delay in filing of Form no. 10B for the AY 2016-17 should have been condoned by the AO or by the ld. CIT(A) and the benefit should have been granted to the assessee. Thus we condone the delay in filing Form No. 10B and delete the addition made of corpus donations - Appeal of the assessee.

Summary

Issues:
- Appeal against the order of the Commissioner of Income Tax (Appeals) disallowing deduction of corpus donations.
- Dispute regarding the requirement of filing audit report in Form 10B along with the return of income.
- Interpretation of Circular No. 10[F.NO.197/55/2018-ITA-I] regarding condonation of delay in filing Form No. 10B for charitable trusts.

Analysis:
The appeal before the Appellate Tribunal ITAT Kolkata involved a charitable Trust registered under section 12A of the Income Tax Act, 1961, disputing the disallowance of deduction for corpus donations. The Trust had filed its return of income declaring total income and claimed deductions under sections 11 & 12 of the Act, along with exemption under section 11(1)(d) on the grounds of specific direction for corpus donations. However, the Central Processing Centre disallowed the deduction due to the absence of the audit report in Form 10B filed along with the return of income.

The Trust subsequently filed a rectification petition under section 154 of the Act, enclosing the audit report in Form 10B. Despite this, the Assessing Officer rejected the rectification petition, leading to an appeal before the Commissioner of Income Tax (Appeals) who upheld the AO's decision. The main contention revolved around the necessity of attaching the audit report with the return of income for claiming the deduction of corpus donations.

During the Tribunal proceedings, the Trust's representative referred to Circular No. 10[F.NO.197/55/2018-ITA-I] issued by the CBDT, which directed the Income Tax Authorities to condone the delay in filing Form No. 10B for charitable trusts for years preceding Assessment Year 2018-19. Relying on this Circular, the Tribunal concluded that the delay in filing Form No. 10B for the relevant assessment year should have been condoned by the AO or the CIT(A), thereby granting the benefit to the assessee.

As a result, the Tribunal allowed the appeal of the assessee, deleting the addition made on account of corpus donations. The judgment highlighted the significance of the Circular in interpreting the procedural requirements for charitable trusts and emphasized the need for authorities to adhere to such directives in granting reliefs to taxpayers.