2024 (10) TMI 79 - AT - Income Tax

Denial of exemption u/s 11 - appellant has not filed Form 10 indicating the reasons for accumulation of income - as per CIT(A) mere investments in FD is not sufficient to claim exemption but the appellant needs to accumulate income in terms of section 11(2) by filing Form 10 - HELD THAT - The appellant is a Trust managed by Endowment Department, State Govt. of Telangana. The appellant manages a temple called Sri Laxmi Narsimha Swamy Temple. As per the objects of the appellant Trust, the surplus, if any, is fully applied for the benefit of general public at large and no part of the income has been used or given for the benefit of any Trustees or Executive Committee Members. As admitted fact that the assessee itself has declared surplus income and has not paid any tax which is evident from ITR Form filed for the impugned A.Y. The appellant argues that by mistaken of law and also in absence of necessary staff who can do the relevant work, the appellant could not exercise the option u/s 11(2) and filed Form 10 along with return of income. We find that the appellant has filed Form 10 on 17.06.2024 along with resolution dated 1/8/2019. The appellant has also filed petition for condonation of delay on 27.06.2024 before the concerned authority and the said application is pending for disposal. Therefore, appellant Trust is managed by Endowment Department, Govt. of Telangana and the sole objective of the appellant is to provide benefit to the general public at large, in my considered view, an opportunity should be given to the assessee to see the outcome of the petition filed by the appellant for condonation of delay in filing Form 10. Thus, set aside the order passed by the learned CIT (A) and restore the issue back to the file of the Assessing Officer and direct the Assessing Officer to reconsider the issue in light of Form 10 filed by the assessee along with resolution of executive committee, after disposal of application filed by the appellant for condonation of delay in filing Form 10 before the Pr. CIT (Exemption) New Delhi. Assessee appeal allowed for statistical purposes.

Summary

Issues:
1. Interpretation of provisions of section 11(2) and 11(5) of the Income Tax Act, 1961.
2. Requirement of filing Form 10 for accumulation of income.
3. Condonation of delay in filing Form 10.
4. Assessment of income and tax liability for a Trust managed by the Endowment Department.

Analysis:

The judgment by the Appellate Tribunal ITAT Hyderabad dealt with the appeal filed by a Trust managed by the Endowment Department, Govt. of Telangana, regarding the assessment order for A.Y. 2020-21. The Trust, Sri Laxmi Narsimha Swamy Temple, had earned income from various sources, including Hundi collection, and had invested a portion in FDs of Nationalized Banks. The Assessing Officer determined the total income and passed an order under section 143(3) of the Income Tax Act, 1961.

Upon appeal, the learned CIT (A) upheld the addition made by the Assessing Officer, emphasizing the necessity of filing Form 10 to accumulate income under section 11(2) of the Act. The Trust had not filed Form 10 or provided details of the investment in FDs, leading to the sustained addition by the CIT (A).

The assessee contended that Form 10 was belatedly filed along with a resolution indicating the accumulation of income for the Trust's objectives and a petition for condonation of delay. The Tribunal considered the Trust's objectives, the belated filing of Form 10, and the pending application for condonation of delay. It noted the Trust's declaration of surplus income and its intention to benefit the general public, ultimately setting aside the CIT (A)'s order and directing the Assessing Officer to reconsider the issue post the disposal of the condonation of delay application.

The Tribunal granted the assessee an opportunity to address the delay issue and reevaluate the Trust's compliance with section 11 provisions, emphasizing the Trust's public welfare objectives. The appeal was allowed for statistical purposes, highlighting the importance of adherence to procedural requirements under the Income Tax Act, 1961.