Belated Form 10B Before CPC Processing Sufficient for Section 11 Exemption: ITAT Chennai

Victoria Educational Trust Vs ITO (ITAT Chennai)

Summary: ITAT Chennai allowed the appeal of Victoria Educational Trust for AY 2022-23 and directed deletion of the disallowance of exemption under Section 11 of the Income Tax Act, 1961, holding that a 33-day delay in filing the audit report in Form No.10B could not, in the circumstances, justify denial of exemption. The trust had registration under Section 12AA with effect from 01.04.2006 and was provisionally registered on 27.05.2021. For AY 2022-23, it filed its return and Form No.10B on 09.11.2022, claiming Rs.63,53,306/- as tax exempt under Section 11 while reporting taxable total income of Rs.8,45,492/-. The due date for Form No.10B was 07.10.2022 and consequently the audit report was delayed by 33 days. CPC, while processing the return under Section 143(1), disallowed the entire Section 11 exemption through intimation dated 02.06.2023. The assessee’s parallel application under Section 119(2)(b) for condonation of delay was subsequently rejected by CIT(Exemptions), Chennai on 11.01.2025, while the first appellate authority also sustained CPC’s adjustment.

The Tribunal found it significant that Form No.10B, though belated, had been filed on 09.11.2022 and was available with CPC well before the intimation dated 02.06.2023. Relying on Commissioner of Income-tax, Maharashtra v. G. M. Knitting Industries (P.) Ltd., the Tribunal held that filing the required form before completion of assessment constituted sufficient compliance and applied that principle to the belated Form No.10B. It further relied on CIT v. Xavier Kelavani Mandal (P.) Ltd., Associated Chambers of Commerce and Industry of India v. Deputy Commissioner of Income-tax and Sarvodaya Charitable Trust v. ITO (Exemption) for the proposition that furnishing the audit report is procedural/directory and substantial compliance suffices. The Tribunal also relied upon Association of Indian Panelboard Manufacturer v. Deputy Commissioner of Income-tax to hold that Section 119(2)(b) provides an additional remedy and rejection of a condonation application does not extinguish the statutory appellate remedy. The assessee had alternatively relied upon Sree Venkateswara Educational Trust v. The Income Tax Officer, Exemptions Ward, Salem to contend that entire gross receipts could not be taxed without allowing related expenditure. The Tribunal ultimately granted the principal relief itself: CPC’s disallowance of the Section 11 exemption was held erroneous because Form No.10B was already available when the return was processed. Accordingly, the AO was directed to delete the disallowance and allow the Section 11 exemption.