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TMI Blog2021 (8) TMI 753X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings which was not considered by the A.O . - HELD THAT:- In the present case it is not in dispute that as per section 11(2) of the Act read with Rule 17 of the Income Tax Rules, as mandated with effect from A.Y. 2016-17 the assessee was required to e-file Form No. 10 by due date mentioned under section 139 of the Act. However, in the present case the assessee filed Form No. 10 on 17/11/2018 i.e. during the course of assessment proceedings. The A.O. denied the claim of the assessee since the Form No. 10 was not furnished before filing the return of income under section 139 of the Act. Form No. 10 furnished by the assessee during the course of assessment proceedings before completion of the assessment should have been considered by the A.O. while considering the claim for benefit under section 11(2) of the Act. We order accordingly. - ITA No. 1412/Chd/2019 - - - Dated:- 30-7-2021 - N.K. Saini, Vice President and R.L. Negi, Member (J) For the Appellant : Sudhir Sehgal, Advocate For the Respondents : Ashok Khanna, Addl. CIT ORDER Per N.K. Saini, Vice President This is an appeal by the assessee against the order dt. 14/08/2019 of Ld. CIT(A)-4, Ludhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(2) of the Income Tax Act, 1961 (for short the 'Act') for the earlier years. 5. The facts related to this issue in brief are that the assessee has been established and is functioning since August 2003 with primary object of providing technical education in the field of Civil Architectural Engineering. The Assessee is registered under section 12AA(1)(b)(i) of the Act vide order dt. 11/09/2009 of CIT-III, Ludhiana. The assessee filed its return of income on 01/09/2016 declaring NIL income. Later on the case was selected for scrutiny. 5.1. During the course of assessment proceedings the A.O. noticed that in the computation of income as well as in Form No. 10 submitted, the assessee mentioned that the new assets acquired during the year amounting to ₹ 73,47,393/- were out of accumulated funds of the earlier years, the bifurcation of which was as under: A.Y. 2012-13 ₹ 52,59,279/- A.Y. 2613-14 ₹ 20,88,114/- TOTAL ₹ 73,47,393/- The A.O. observed that the assessee had taken the above amount as application of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of the entire income derived from the property held under the assessee trust/society even if the amount accumulated or set apart is more than 15% of the income. If the assessee is allowed benefit of application of income out of accumulated funds, it will amount to giving double benefit for the same amount. 7. In view of the above, capital expenditure of ₹ 73,47,393/- out of old accumulated funds is disallowed from being claimed as application of income during the year under consideration. 6. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and furnished the written submissions which have been incorporated in para 3 of the impugned order and read as under: In support of ground of appeal furnished we place on record as follows:- Both Grounds are linked to Form 10 filed u/s. 11(2) read with Rule 17 of the Income Tax Act 1961 (hereinafter called the 'Act') on 17.11.2018 viz. submitted during assessment to the Ld. Assessing officer ACIT-Exemption circle-1. Chd. (hereinafter called the 'AO'). Vide submission dt. 21-11-2018 it was emphasized that electronically filing of Form 10 utility being new for previous year under a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable purpose in that year. And when those funds are actually utilized so in next years it is called utilization of those accumulated funds. In such case how there will be double deduction? and how there is double benefit claimed as alleged by Ld. AO in para 6 of the order. The Ld. AO has literally erred on facts, in misinterpreting the computation of income and table given in Form 10 submitted. (Interestingly indirectly she had accepted the Form 10 filed belatedly but she wrote an opposing order just in haste). The computation and Form 10B report, as attached, clearly reflect that capital expenses of ₹ 73,47,393/- are part of income applied for charitable purpose and which fact the LD. AO has also accepted. Moreover they are reduced from income available for application viz., 3,57,98,654/- of previous year under assessment and only the balance portion of ₹ 2,54,51,265/- is considered deemed application under provisions of Sec. 11(1) (2). The tables presented just showing the utilization of accumulated funds for statistical purposes only as accumulated funds can not be carried forward for more than five years. Further if applying the contention of Ld. AO, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied for charitable purposes - ₹ 73,47,393/-. However, while determining total income only revenue expenditure was taken into account and capital expenditure was not taken into account. The claim of the assessee out of application of capital expenditure out of funds accumulated u/s. 11(2) of the Income Tax Act, 1961 for earlier years is without basis. The funds accumulated u/s. 11(2) of the Income Tax Act, 1961 are required to be utilized for charitable purposes in the specified period within the subsequent five years. The application out of accumulated funds is separate from application of current year's funds for capital and revenue expenditure for charitable purposes of the trust. The assessee cannot be allowed deduction on account of application of funds on capital expenditure which have been spent out of the accumulated funds u/s. 11(2) of the Income Tax Act, 1961 during the earlier years. In view of the above, the disallowance made by the assessee is upheld. This ground of appeal is dismissed. 7. Now the assessee is in appeal. 8. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quested to remand this issue back to the file of the A.O. to be decided afresh after verification and taking into consideration the correct figures. The reliance was placed on the following case laws: Vijay Vishin Meghani Vs. DCIT, Circle-23(2), Mumbai [2017] 86 Taxmann.com 98 (Bom.) Premier Motor Garage Vs. Commissioner, Central Excise Commissionerate, Chandigarh [2016] 70 taxmann.com 18 (P H) Manoj Ahuja and Anr. Vs. Inspecting Assistant [1984] 150 ITR 696 (P H) Mukesh Jesangbhai Patel Vs. ITO, [2013] 29 taxmann.com 389 (Gujarat) M/s. Bhagwati Colonizers Pvt. Ltd. Vs. ITO ITAT, Amritsar Tribunal (Third Member) [2019] 57 CCH 0274 Tek Ram (Dead Through Lrs.) Vs. CIT [2013] 357 ITR 133 (SC) 9. In his rival submissions the Ld. DR strongly supported the orders of the authorities below and further submitted that the Ld. Counsel for the Assessee furnished a chart first time before the ITAT and the same was not available to the A.O. as well as the Ld. CIT(A) for their consideration, therefore, it should not be admitted at this stage. 10. We have considered the submissions of both the parties and perused the material available on the rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e she concluded the Assessment vide her Assessment Order dated 08.12.2018 passed u/s. 143(3) of the Act. 7. That my client ICES had provided all the information relating to Form 10 to the undersigned in due time and such informal was also furnished in due time in the Audit Report in Form 10B. 8. That the delay in filing of Form 10 was only on account of the above reasonable cause and is liable to be condoned in terms of CBDT Circular No. 7/2018 dated 20,12.2018. 9. That besides the above, the figures of funds accumulated brought forward from the past years [A.Y. 2013-14 and 2014-15] and utilization made in the A.Y. 2016-17 amounting to ₹ 73,47,393 as mentioned in the computation of income have been wrongly presented whereas there was no such brought forward accumulated funds except for ₹ 13,06,689 pertaining to the A.Y. 2015-16 and as such no double benefit has been claimed by ICES in its ITR. 10.1. The Ld. Counsel for the assessee also furnished a chart (copy of which is placed at page No. 28) which had been reproduced in the former part of this order, mentioning therein the amount of accumulated funds utilized under section 11(2) of the Act. The sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with the department. 11. Vide ground Nos. 5 6 the grievance of the assessee relates to the submissions of the Form No. 10 during the course of assessment proceedings which was not considered by the A.O. 12. The facts related to this issue in brief are that the A.O. during the assessment proceedings observed that for claiming the benefit under section 11(2) of the Act the assessee filed Form No. 10 on 17/11/2018 i.e., during the assessment proceedings and claimed the benefit of accumulation of ₹ 1,44,17,439/- for the purpose of Construction of Research and Training and Examination Centre Buildings . He also observed that as per Section 11(2) of the Act read with Rule 17 of the Income Tax Rules as amended w.e.f. A.Y. 2016-17, the assessee was required to e-file Form No. 10 by the due date mentioned under section 139 of the Act, i.e. 30th September but extended to 17th October 2016 for the A.Y. 2016-17. As the assessee had failed to do so, therefore, the assessee was asked by the A.O. to show cause as to why in view of non fulfillment of the conditions laid down in section 11(2) of the Act, this income should not be included in the total income. In response th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded. 11. The manner has been prescribed in Rule 17 of the Income-tax Rules which is reproduced hereunder:- Exercise of option etc under section 11. 17. (1) The option to be exercised in accordance with the provisions of the Explanation to sub-section (1) of section 11 in respect of income of any previous year relevant to the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iling return of income. These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. 13. The above makes it absolutely clear that e-filing of form 10 by the due date specified u/s. 139 of the Act is a mandatory condition for claiming benefit u/s. 11(2) of the Act w.e.f. A.Y. 2016-17. 14. In view of the above, the assessee is denied the benefit claimed u/s. 11(2) of the Act as the mandatory condition of filing form 10 by the due date mentioned u/s. 139 of the Act has not been fulfilled. 13. Being aggrieved the assessee carried the matter to the Ld. CIT(A) who confirmed the action of the A.O. by observing in para 5.2 of the impugned order as under: 5.2 I have carefully considered the facts of the case and submissions of the appellant. The assessing officer has denied the benefit claimed u/s. 11(2) of the Income Tax Act, 1961 because w.e.f. A.Y. 2016-17 it was mandatory for the assessee to file form 10 by due date mentioned u/s. 139 of the Income Tax Act, 1961. During the appeal proceedings the Ld. Counsel has argued that considering the problems faced by general publi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions made before the authorities below and further submitted that the legal consultant of the assessee prepared the statutory audit report in Form No. 10B and the said report was electronically uploaded on the Income Tax Portal on 25/08/2016 i.e., before filing of the return by the assessee. It was also submitted that prior to A.Y. 2016-17 the Form No. 10 was being manually filed with the department and for the A.Y. 2016-17, it was the first year when the facility of e-filing of Form No. 10 was mandated by the law and this requirement skipped the attention of the Ld. Counsel for the assessee. However, as soon as the counsel realized this lapse the Form No. 10 (declaring the same particulars as already declared by the statutory Auditor in his audit report) were uploaded by him on 17/11/2018 during the course of assessment proceedings. 15.1. It was further submitted that the assessee also filed the copy of Form No. 10 before the A.O. for his consideration before the conclusion of the assessment proceedings and also reiterated the above fact before the Ld. CIT(A), however no cognizance was given to the same even though the assessee had proved its bona fide intention and also es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per section 11(2) of the Act read with Rule 17 of the Income Tax Rules, as mandated with effect from A.Y. 2016-17 the assessee was required to e-file Form No. 10 by due date mentioned under section 139 of the Act. However, in the present case the assessee filed Form No. 10 on 17/11/2018 i.e. during the course of assessment proceedings. The A.O. denied the claim of the assessee since the Form No. 10 was not furnished before filing the return of income under section 139 of the Act. 17.1. In this regard the CBDT has issued Circular No. 6/2020 dt. 19/02/2020 which read as under: Circular No. 6/2020 F. No. 197/55/2018-ITA-I Government of India, Ministry of Finance Department of Revenue Central Board of Direct Taxes ***** New Delhi, the 19 February, 2020 Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Return of Income for A.Y. 2016-17, 2017-18, and 2018-19 and Form No. 9A and Form No. 10.-Reg. Representations have been received seeking condonation of delay in filing Return of Income by the Charitable institutions for the Assessment Year 2016-17 onwards on the grounds of hardship. The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section. 2. The Finance Act, 2015 amended section 11 and section 13 of the Act with effect from 1-4-2016 (A.Y. 2016-17). Consequently, Income-tax Rules, 1962 (hereafter 'Rules') were also amended vide the Income-tax (1st Amendment) Rules, 2016. As per the amended provisions of the Act read with rule 17 of the Rules, while 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions, inter alia, that such person submits the prescribed Form No. 10 electronically to the Assessing Officer within the due date specified under section 139(1) of the Act. 3. Further, where the income from the property held under trust and applied to charitable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been received during that year or any other reason, then on exercise of the option by submitting in Form No. 9A electronically by the trust/institution on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time it completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules, even then it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of the income, the assessing authority cannot entertain the claim of the assessee under section 11. Therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings. 17.5. Similarly their Lordships of the Hon'ble Bombay High Court in the case of CIT Vs. Sakal Relief Fund (supra) observed in para 13 as under: 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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