Case Law Details
CIT (Exemptions) Vs Shri Laxmanarayan Dev Shrishan Seva Khendra (Gujarat High Court)
The Gujarat High Court dismissed the Revenue’s appeal under Section 260A of the Income Tax Act, 1961, holding that no substantial question of law arose from the Income Tax Appellate Tribunal’s order allowing exemption under Section 11 despite delayed filing of audit report in Form 10B. The assessee, a public charitable trust registered under Section 12AA and approved under Section 80G, filed its return for AY 2017–18 declaring nil income but failed to upload Form 10B along with the return. Consequently, the Centralised Processing Centre processed the return under Section 143(1) and denied Section 11 exemption, raising a tax demand.
During appellate proceedings before the CIT(A), the assessee uploaded Form 10B electronically, explaining that the delay occurred due to technical issues. The CIT(A) accepted the explanation and held that filing of Form 10B is a procedural requirement which, if complied with before completion of assessment or even at the appellate stage, should not result in denial of exemption. The Revenue’s appeal before the Tribunal was dismissed, with the Tribunal relying on earlier Gujarat High Court decisions holding that substantial compliance with procedural requirements suffices for charitable trusts.
Before the High Court, the Revenue argued that the audit report must be filed within the prescribed due date, relying on the Supreme Court’s ruling in the Wipro case. The High Court rejected this contention, distinguishing Section 10B (dealing with export-oriented undertakings) from Section 12A(1)(b) applicable to charitable trusts. It held that the Supreme Court ruling on strict timelines under Section 10B had no application to the present facts. The Court reaffirmed its earlier view that delay in filing Form 10B is a procedural lapse that can be condoned, particularly where the assessee otherwise satisfies the substantive conditions for exemption. Finding no legal infirmity in the Tribunal’s decision, the Court dismissed the Revenue’s appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned Senior Standing Counsel Ms. Maithili D. Mehta for the appellant and learned advocate Mr. B.S.Soparkar through video conference with learned advocate Mr.Manya Anjaria for the respondent.
2. By this Appeal under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’), the appellant-Revenue has proposed the following questions as substantial questions of law arising out of order dated 19th May, 2023 passed by the Income Tax Appellate Tribunal-Ahmedabad, ‘C’ Bench (for short ‘the Tribunal’) in ITA No.410/Ahd/2022 for Assessment Year 2017-18:
“(i) Whether in the law and facts and circumstances of case, Hon’ble Income Tax Appellate Tribunal was right in holding that furnishing of audit report in form 10B is a procedural provision in spite of specific provisions of clause (b) of subsection (1) of Section 12A of the Income Tax Act, 1961 and in view of the decision of Hon’ble Supreme Court of India in the case of Wipro in Civil Appeal No. 1499 of 2022 where in it has been held that “That Section 10B of the Income Tax Act is an exemption provision and the condition for seeking an exemption is required to be complied with strictly with the provision.
(ii) Whether on the facts and in the circumstances of the case and in law, the Hon’ble Tribunal is justified in upholding the order of CIT(A) admitting report in form 10B filed during the course of appellate proceedings and allowing the benefit of Section 11 of Rs.3,57,53,725/- to the assessee ignoring the fact that the assessee had not filed the audit report in Form No. 10B before due date as prescribed under the Act/ notified by the CBDT.”
3. The brief facts of the case are as under:
3.1. The assessee is a public charitable trust engaged in various educational activities and running of Schools and Yogashram. The assessee-Trust is registered as a charitable Organization under Section 12AA of the Act with effect from 01.04.2004 and also approved for the purpose of Section 80G of the Act.
3.2. The assessee filed its return of income for the Assessment Year 2017-18 on 11.10.2017 declaring income of Rs. ‘NIL’. However, the assessee had not uploaded the Audit Report in Form 10B along with the Return of Income. The assessee was sent a communication from Centralised Processing Centre (for short ‘the CPC’), however, the assessee did not respond to the same.
3.3. The CPC processed the return under Section 143(1) of the Act on 24.03.2019 denying the benefit of exemption under Section 11 of the Act to the assessee and determined the tax of Rs.1,52,42,281/-.
3.4. Being aggrieved by this, the assessee filed Aappeal before the CIT(A). After filing of the Appeal, the assessee electronically uploaded Form 10B on 27.02.2021. During the appellate proceedings, the assessee admitted that there was a procedural delay in furnishing Form 10B and the delay was on account of various technical issues.
3.5. The CIT(A) vide order dated 02.09.2022 allowed the Appeal of the assessee stating that if audit report under Section 12(1)(b) of the Act is filed at any stage before the completion of assessment or even at the appellate stage, then the CPC cannot deny exemption under Section 11 of the Act and directed Assessing Officer to allow claim of exemption under Section 11 of the Act as claimed in the return of income.
3.6. Being aggrieved by the decision of the CIT(A) dated 02.09.2022, the Revenue preferred Appeal before the Income Tax Appellate Tribunal, Ahmedabad, ‘C’ Bench (for short ‘the Tribunal’) being ITA No.410/Ahd/2022.
3.7. The Tribunal, after considering the submissions of both the sides, referred to and relied upon the decision of this Court in the case of Social Security Scheme of GICEA v. Commissioner of Income Tax (Exemptions), Ahmedabad dated 21st December, 2022 in Special Civil Application No.17612 of 2022 wherein, this Court has held as under.
“5. Having heard learned advocates for the respective parties and having gone through the material on record, the only question which falls for consideration is whether respondent committed an error in passing the order by not condoning the delay in filing Form No.10B along with the return filed. In the decision of this Court in Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption), this Court has observed that furnishing of audit report along with return filed is to be treated as a procedural requirement. It is though mandatory in nature the substantial compliance is required to be made. In the case of Sarvodaya Charitable Trust vs. Income Tax Officer (Exemption) the assessee had produced the audit report after processing the return under Section 143(1). This Court in the said order has observed that the approach of the authority in these type of cases should be equitable, balancing and judicious. Technically speaking, respondent No.2 might be justified in denying the exemption under Section 11 of the Act by rejecting such condonation application, but an assessee, which is a public charitable trust for past 30 years which substantially satisfies the conditions for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay . Applying the said principle, the petition is allowed. The impugned order passed by respondent dated 12.3.2021 is quashed and aside. The impugned order of rectification under Section 154 of the Act dated 25.1.2019 is also quashed and set aside. The application for condonation of delay filed by the petitioner before the respondent is allowed.”
3.8. Following the above decision of this Court, the Tribunal dismissed the Appeal.
3.9. Being aggrieved and dissatisfied with the decision of the Tribunal, the appellant preferred this Appeal before this Court.
4. Learned Senior Standing Counsel Ms.Maithili Mehta for the appellant submitted that in case of Principal Commissioner of Income Tax-III, Bangalore v. M/s.Wipro Limited of the Hon’ble Supreme Court rendered on 11th July, 2022 in Civil Appeal No.1449 of 2022 it was held that requirement of Section 10B(8) of the Act which provides for requirement of furnishing declaration for claiming exemption under Section 10B of the Act is mandatory but the time limit within which such declaration is to be filed is also held to be mandatory. Relying upon the aforesaid decision, it was submitted that the assessee ought to have filed the audit report in Form 10B of the Act before the due date of filing of the return to claim the exemption under Section 12A of the Act.
5. Reliance placed by the learned Senior Standing Counsel Ms.Maithili Mehta for the appellant on the decision of the Hon’ble Supreme Court in case of The Principal Commissioner of Income Tax-III and Others versus M/s. Wipro Limited in Civil Appeal No.1499 of 2022 would not be applicable in the facts of the case, as in the facts of the present case, the assessee has claimed the exemption under Section 11 read with Section 12A(1)(b) of the Act which required the assessee to file Audit Report in Form of 10B of the Act which has nothing to do with claiming 100% exemption of total income in respect of newly established 100% Export Oriented Undertakings under Section 10B of the Act. Section 10B(8) of the Act requires the assessee to file an undertaking before the due date of furnishing of return of income under sub-section (1) of Section 139 of the Act before the Assessing Officer in writing that the provision of Section 10B of the Act may not be made applicable to him, otherwise the provision of this Section shall not apply to him for any of the relevant assessment year.
6. Considering the language of the provision of Section 10B(8) of the Act, the Hon’ble Supreme Court held that it was mandatory on part of the assessee to file declaration before the due date of filing of return under Sub-section (1) of Section 139 of the Act, whereas, in the facts of the said case the assessee filed such undertaking along with the revised return under Sub-section (5) of Section 139 of the Act and in such facts, the Hon’ble Supreme Court held that the twin conditions prescribed under Section 10B(8) of the Act was mandatory to be fulfilled and it cannot be said that though the declaration is mandatory, the filing of such declaration within the due date of filing of return under Sub-section (1) of Section 139 of the Act would be directory.
7. Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) in Special Civil Application No.6097 of 2020 decided on 09th December, 2020 as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case, when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal.
8. In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s.Wipro Limited (supra) as referred to and relied upon by learned advocate for the appellant-Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra).
9. In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed.
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