2022 (9) TMI 583 - AT - Income Tax

Exemption u/s 11 - Application of income - amount is shown under the heading sundry debtors but no capital expenditure was incurred as stated by the assessee - assessee has also not filed Form-10 to claim accumulation U/s. 11(2) of the Act while filing the return of income U/s. 139(1) - assessee has not filed condonation of delay petition before the Ld. CIT as per the Circular No. 7 of 2018, dated 20/12/2018 - HELD THAT - Even though the claim of the assessee is that there is an expenditure incurred during the impugned assessment year and considered as advances since the invoices for the supply of materials have been received in the subsequent financial year. The invoices are also accounted in the AY 2017-18 only. The assessee has also failed to upload Form-10 within the due date prescribed U/s. 11(2) r.w.s 139(1) of the Act. The Ld. AR also failed to demonstrate before us whether the same expenses have been claimed in the AY 2017-18 also. No documentary evidences are produced before us for non-claiming of the same expenditure in the AY 2017-18. The Hon ble High Court of Kerala in the case of CIT vs. Shree P. Subramoniam Religious Trust 2008 (12) TMI 374 - KERALA HIGH COURT has laid down that merely an advance cannot be treated as the actual application of funds that this advance would be utilized for the purchase of cement later. In view of the above discussions, we are of the considered view that since the assessee has neither expended the money during the relevant assessment year nor filed Form-10 within the due date prescribed U/s. 139(1) of the Act, the exemption claimed by the assessee is not valid in law and hence the grounds raised by the assessee are dismissed.

Summary

Issues Involved:
Appeal against order of Ld. CIT(A) dated 27/02/2019, Condonation of delay in filing appeal before Tribunal, Assessment under Income Tax Act, 1961, Claim of exemption U/s. 11, Non-filing of Form-10, Treatment of advances as expenditure, Legal grounds raised in appeal.

Detailed Analysis:

1. Condonation of Delay in Filing Appeal:
The appeal was filed by the assessee against the order of the Ld. CIT(A) dated 27/02/2019, which was actually supposed to be dated 27/02/2020. The delay of 533 days in filing the appeal before the Tribunal was condoned due to the COVID Pandemic Situation and the direction of the Hon'ble Supreme Court to exclude the period of limitation. The Tribunal proceeded to adjudicate the case on merits after condoning the delay.

2. Assessment and Claim of Exemption U/s. 11:
The assessee, a charitable organization, filed its return of income for AY 2016-17 claiming exemption U/s. 11 of the Act. The Ld. AO made an addition of Rs. 19,25,733, citing non-filing of Form-10 within the stipulated time and discrepancies in reporting income and expenditure. The Ld. CIT(A) dismissed the appeal based on additional evidence and remand report, referring to relevant case laws. The grounds raised by the assessee in the appeal included errors in the Ld. CIT(A)'s order and non-consideration of amounts spent for charitable purposes.

3. Treatment of Advances as Expenditure:
The assessee claimed that advances made to suppliers should be considered as amounts spent for charitable purposes, even though the invoices were received in the subsequent year. However, the Tribunal observed that the assessee failed to upload Form-10 within the prescribed time and did not provide evidence of claiming the same expenses in the following year. The Tribunal referred to relevant case laws to support the decision that advances cannot be treated as actual application of funds without proper documentation and compliance with statutory requirements.

4. Legal Grounds Raised in Appeal:
The Ld. AR argued that the belated submission of Form-10 should not deprive the assessee of claiming exemption U/s. 11. However, the Ld. DR contended that as per the Act, failure to furnish Form-10 within the due date would disallow the exemption. The Tribunal considered the arguments, evidence presented, and relevant legal precedents before dismissing the appeal of the assessee.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the decision of the Ld. CIT(A) regarding the disallowance of exemption U/s. 11 due to non-compliance with statutory requirements and lack of proper documentation. The detailed analysis of the issues involved in the judgment provides a comprehensive overview of the legal proceedings and decisions made by the Tribunal.