ACIT (Exemptions) Vs Karnataka Institute of Diabetology (ITAT Bangalore)
The Income Tax Appellate Tribunal (ITAT) Bangalore dismissed appeals filed by the revenue against orders of the CIT(A) concerning exemptions claimed by the Karnataka Institute of Diabetology for assessment years 2017-18 and 2018-19. The core issue was whether the institute was eligible for exemptions under Section 10(23C)(iiiac) and Section 11(2) of the Income Tax Act, 1961, given the alleged delayed filing of Form 10 and the quantum of government grants received.
The Assessing Officer (AO) had denied the exemptions, arguing that the institute received less than 50% of its funding from the government, a requirement for Section 10(23C)(iiiac) exemption, and that Form 10, necessary for Section 11(2) exemption, was not filed within the due date. The CIT(A), however, allowed the institute’s appeal. The CIT(A) determined that the institute received more than 50% of its funds from government grants, including interest accrued on unspent grant funds. Regarding the late filing of Form 10, the CIT(A) relied on a judgment of the Calcutta High Court, which held that filing the audit report with the return is a procedural requirement, and the exemption cannot be denied if the report is available before assessment completion.
The ITAT upheld the CIT(A)’s decision. The tribunal observed that the institute’s total government funding, including grants and interest earned on unspent grant funds, exceeded the 50% threshold stipulated in Section 10(23C)(iiiac). The ITAT agreed with the CIT(A)’s reliance on the Calcutta High Court’s judgment, confirming that the late filing of Form 10 was a procedural irregularity and not a sufficient reason to deny the exemption under Section 11(2), especially since the form was available to the AO during the assessment process.
The ITAT emphasized that the revenue had failed to present any new evidence to contradict the institute’s submissions. The tribunal concluded that the CIT(A)’s order was based on the available records and legally sound. Consequently, the ITAT dismissed the revenue’s appeals, affirming the institute’s eligibility for the claimed exemptions.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
