Nandurbar Nagar Parishad Vs ITO (ITAT Pune)
Municipal Body’s Section 10(20) Exemption Cannot Be Denied Due to Wrong Claim in Return
In a significant ruling, the Pune ITAT held that a local authority cannot be denied exemption under section 10(20) merely because it mistakenly claimed a deduction under another provision while filing its return. The Tribunal granted relief to Nandurbar Nagar Parishad and deleted an addition of ₹56.32 crore, observing that the assessee was admittedly a local authority entitled to exemption under section 10(20) and that the mistake in the return was only a procedural error.
The Assessing Officer had denied the exemption because the assessee, while filing its return, had claimed deduction under section 57 instead of claiming exemption under section 10(20). Although the assessee subsequently furnished a revised computation during assessment proceedings and explained that the wrong claim was due to an inadvertent error, the Revenue authorities refused relief on the ground that a fresh claim could be made only through a revised return.
The Tribunal noted that the Department itself had accepted the assessee’s status as a local authority and had granted exemption under section 10(20) in scrutiny assessments for earlier as well as subsequent years, including AYs 2007-08, 2018-19 and 2024-25. It further observed that audited accounts, budget approvals and details of municipal receipts such as taxes, transfer fees, market fees and other statutory collections had been furnished before the Assessing Officer.
Holding that substantive tax relief cannot be denied merely because of an inadvertent mistake in the return, the Tribunal ruled that the assessee was fully eligible for exemption under section 10(20). Accordingly, it set aside the orders of the lower authorities and directed deletion of the entire ₹56.32 crore addition, allowing the appeal of the Nagar Parishad.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 26.11.2025 passed by Ld. CIT(A)/NFAC for the assessment year 2022-23.
