2024 (11) TMI 143 - AT - Income Tax

Denial of exemption u/s 11(2) - trust has not filed Form No. 10 within the due date specified u/s 139(1) due to technical issues - HELD THAT - Under the provisions of section 11(2) of the Act, any charitable trust has to apply certain specified percentage of income (which was 85% during relevant period) for charitable purpose, but if income to that extent is not applied to the prescribed percentage, then the assessee can accumulate or set apart said income for application to such purposes in India subject to the conditions prescribed in section 11(2) of the Act. Whether for availing exemption u/s 11(2) of the Act, the requirement of furnishing statement in prescribed form No. 10 on or before the due date of the filing of the return of income is mandatory in nature or directory in nature? - We find that in judgement of the Hon ble SC in the case of PCIT Vs Wipro Ltd. 2022 (7) TMI 560 - SUPREME COURT has held that for claiming the benefit under Section 10B(8) of the IT Act, the following twin conditions are Mandatory, firstly, furnishing a declaration to the assessing officer in writing that the provisions of Section 10B (8) are applicable to him; and secondly, the said declaration has been furnished on before the due date of filing the return of income under sub-section (1) of Section 139 of the IT Act. The Hon ble Supreme Court observed that the wording of the Section 10B (8) is very clear and unambiguous, therefore the audit report prescribed in form 10CCB of the Income-tax Rules, 1962 must be furnished before the due date of filing the return of income under sub-section (1) of section 139. Thus, in view of the decision of Hon ble Supreme Court, it is mandatory for the assessee to file the prescribed form No. 10 along with the return of income filed for the relevant year. The assessee has filed a copy of the grievance petition, which was filed on Income-tax Portal on 21.03.2022 where he has submitted that assessee could not file the form due to technical glitches on the portal of the Income-tax Department. Thus it is evident that delay is within the period of 365 days and the assessee was prevented by sufficient and reasonable cause in filing the Form No. 10. Thus, we set aside the order of the CIT(A) and restore the matter back to the file of the AO with the direction to the assessee for applying to the concerned commissioner of Income-tax (Exemption) and seek condonation for delay in filing Form No. 10. After condonation of delay in filing for No. 10 by the CIT (E), the AO shall decide the claim of exemption u/s 11(2) of the Act in accordance with law. The grounds allowed for statistical purposes.

Summary

Issues Involved:

1. Validity of the order passed by the Joint Commissioner of Income Tax (Appeals).
2. Disallowance of exemption claim under Section 11(2) due to late filing of Form No. 10.
3. Nature of the requirement to file Form No. 10: mandatory or directory.
4. Jurisdiction of the Assessing Officer to disallow exemptions under Section 11 & 12.
5. Application of CBDT circulars for condonation of delay.

Detailed Analysis:

1. Validity of the Order Passed by the Joint Commissioner of Income Tax (Appeals):

The appellant contested the order dated 12.04.2024 by the Joint Commissioner of Income Tax (Appeals), arguing that it was "bad in law" and not in accordance with the provisions of the Income-tax Act. The appellant's primary contention was that the decision to disallow the exemption claim under Section 11(2) was erroneous, given the circumstances of the case.

2. Disallowance of Exemption Claim Under Section 11(2) Due to Late Filing of Form No. 10:

The appellant, a registered trust, claimed an exemption under Section 11(2) for an accumulation of income amounting to Rs. 51,21,991. The claim was disallowed because Form No. 10, required for claiming this exemption, was filed after the due date specified under Section 139(1). The appellant argued that the delay was due to technical issues with the Income-tax Portal, which was substantiated by a grievance filed on 31.03.2022.

3. Nature of the Requirement to File Form No. 10: Mandatory or Directory:

A critical issue was whether filing Form No. 10 by the due date is mandatory or directory. The appellant cited the Supreme Court decision in CIT v. Nagpur Hotel Owners' Association, which suggested that subsequent filing of Form No. 10 before the completion of assessment proceedings should not negate the exemption. However, the Tribunal referred to the Supreme Court's decision in PCIT Vs Wipro Ltd., which clarified that certain conditions, including timely filing, are mandatory for claiming exemptions. The Tribunal concluded that timely filing of Form No. 10 is mandatory.

4. Jurisdiction of the Assessing Officer to Disallow Exemptions Under Section 11 & 12:

The appellant challenged the jurisdiction of the Assessing Officer to disallow exemptions under Sections 11 and 12, arguing that the issue is debatable. The Tribunal did not find merit in this argument, as the procedural requirements under the Act were clear and unambiguous.

5. Application of CBDT Circulars for Condonation of Delay:

The Tribunal noted that the CBDT had issued circulars authorizing Commissioners of Income-tax to condone delays up to 365 days in filing Form No. 10. Given that the appellant had filed a grievance due to technical issues and the delay was within this period, the Tribunal set aside the order of the CIT(A) and remanded the matter back to the Assessing Officer. The appellant was directed to apply for condonation of delay, and upon such condonation, the Assessing Officer was instructed to reassess the exemption claim under Section 11(2) in accordance with the law.

Conclusion:

The appeal was allowed for statistical purposes, with the Tribunal directing the Assessing Officer to re-evaluate the exemption claim following the condonation of delay. The judgment underscores the importance of adhering to procedural timelines while also recognizing the potential for technical issues to cause delays.