Form 10BB Validation Delay: ITAT allows Section 10(23C)(vi) Exemption

Krantidevta Savitribai Phule Shikshan Sanstha Vs ITO (Exemption) (ITAT Mumbai)

The Income Tax Appellate Tribunal (ITAT), Mumbai, has ruled in favor of Krantidevta Savitribai Phule Shikshan Sanstha, granting a tax exemption of ₹4.07 crore under Section 10(23C)(vi) of the Income Tax Act, 1961. The tribunal overturned the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], Faridabad, which had denied the exemption due to a procedural delay in validating Form 10BB. ITAT found that the delay in verification did not justify the denial of exemption, as the form was obtained and uploaded before the due date.

The case involved the assessment year 2022-23, where the assessee, a public charitable trust, claimed exemption on its total income. The trust obtained Form 10BB on September 29, 2022, and filed its income tax return on September 30, 2022. However, the form was validated on December 5, 2022, beyond the prescribed deadline of October 7, 2022. The Centralized Processing Centre (CPC) disallowed the exemption, assuming non-compliance with procedural requirements. CIT(A) upheld the disallowance, stating that the delay in Form 10BB validation rendered the exemption claim invalid.

Upon review, ITAT noted that Form 10BB was digitally signed and uploaded along with the income tax return within the deadline. The tribunal observed that procedural delays in validation should not overshadow substantive compliance. ITAT emphasized that minor procedural lapses should not result in denial of legitimate tax benefits, especially when the intent of compliance is evident.

ITAT ruled that the procedural delay in Form 10BB validation did not impact the trust’s eligibility for exemption. The tribunal directed the Assessing Officer to grant the exemption and overturned the CIT(A)’s decision. This ruling highlights the necessity of a pragmatic approach in tax administration, ensuring that charitable institutions do not face undue hardships due to technical lapses.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal by the assessee is preferred against the order dated 22/08/2024 by the Commissioner of Income Tax (Appeals), Addl. / JCIT (A), Faridabad [hereinafter ‘the ld. CIT(A)’], pertaining to AY 2022­23.

2. The assessee has raised the following grounds of appeal:-

“1. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in denied the exemption of Rs. 4,07,21,961 under section 10(23C)(vi) of Income Tax Act, 1961.

2. On the facts and circumstances of the case and law, the Ld. CIT(A) erred in denying the exemption of Rs. 4,07,21,961 under section 10(23C)(vi) of Income Tax Act, 1961 on mere procedural delay in validating form 10BB on 05.12.2022 i.e. after filling of return of income on 30.09.2022, even though the form 10BB obtained on 29.09.2022 i.e. before filling the return of income.

3. On the facts and circumstances of the case and law, the Ld. CIT(A) failed to considered that Ld. CIT(A) has inherited power to condone the delay in filling Form 10BB and CBDT Circular is not binding in appellate authority.

4. On the facts and circumstances of the case and law and without prejudice to ground no 1 and 2, the Ld. CIT(A) erred in not allowing the expenses of Rs.4,06,07,733 against the receipt when the exemption of section 10(23C) of Income Tax Act, 1961 was not granted.

5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming charging of Interest under section 234B and 234C of Income Tax Act, 1961.”

3. Briefly stated the facts of the case are that the assessee is a public charitable trust duly approved under section 10(23C)(vi) of the Income Tax Act, 1961 (hereinafter ‘the Act’) and registered under new provision also vide Registration Certificate dated 09.07.2021. During the year, the assessee has filed its return of income of Rs.4,07,21,961/- and the same was claimed to be exempt under section 10(23C)(vi) of the Act. The assessee had obtained Form 10BB on 29.02.2022 and filed its return of income on 30.09.2022 in which the details of Form 10BB report was mentioned. However, Form 10BB was validated on 05.12.2022 and therefore, the CPC while processing the return of income disallowed the claim of exemption under section 10(23C)(vi) of the Act on assumption that Form 10BB was not filed.

4. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidences brought on record duly considered in the light of Rule 18(6) of the ITAT Rules.

5. For the year under consideration, the due date was extended to 07.11.2022 and the due date for filing Form 10BB was 07.10.2022. The assessee had obtained Form 10BB on 29.09.2022 and the same was uploaded on 30.09.2022 along with return of income. Form 10BB was undoubtedly verified on 05.12.2022 but as per the acknowledgement it has been specifically mentioned that Form 10BB has been digitally signed on 30.09.2022. The notings are as under:

6. It can be seen from the above that Form 10BB was uploaded along with return of income and was duly verified, therefore, we do not find any reason to deny the exemption claimed by the assessee. The AO is directed to allow the same.

7. In the result, the appeal by the assessee is allowed.

Decision announced in the open Court on 13.01.2025