People’s Mobile Hospitals Vs CIT (Exemption) and Ors. (Bombay High Court)
Denial of Benefits of Section 11 on Account of Delay in Filing Audit Report – Procedural Lapse or Substantive Default?
1. Introduction
A recurring controversy in the taxation of charitable and religious trusts is whether a delay in furnishing the audit report in Form No. 10B disentitles such trusts from claiming the benefit of exemption under Section 11 of the Income-tax Act, 1961 (“the Act”). While the statutory mandate under Section 12A(1)(b) requires the audit report to be filed on or before the specified date, courts have consistently examined whether such requirement is mandatory or directory in nature.
The recent judgment of the Bombay High Court in People’s Mobile Hospitals v. CIT (Exemption) & Ors. reaffirms the principle that procedural lapses should not frustrate substantive exemption, particularly when the delay is bona fide and does not result in revenue loss.
2. Statutory Framework
1. Section 11 – Grants exemption to income from property held under trust wholly for charitable or religious purposes, subject to application of income to such purposes.
2. Section 12A(1)(b) – Requires the accounts to be audited and the report in Form 10B furnished by the specified date.
3. Section 139(1) & 139(4) – Prescribe due dates for filing return of income; belated return permitted under Section 139(4).
4. Section 119(2)(b) – Confers discretionary power on CBDT/authorities to condone delay to mitigate genuine hardship.
