Case Law Details
Mulki Sundar Ram Shetty Nagar Ayyappa Swamy Temple Trust Vs ITO (Exemptions) (ITAT Bangalore)
ITAT Bangalore held that delay in filing Form 10B in the relevant period was condoned as per Circular No.10 (F.No.197/55/2018) dated 22.5.2019, accordingly, deduction towards application and accumulation of funds is duly allowable.
Facts- The CPC while processing the return denied the claim towards application of funds amounting to Rs.97,48,271/- towards the objects of the trust and denied the deduction towards accumulation u/s 11(1) of the Act also. The reason for the denial was stated to be the delay in furnishing the Form 10B and that the same ought to have been filed on or before filing the return of income.
Aggrieved, the assessee preferred an appeal before the CIT(A). The assessee submitted that the Form 10B thought not filed along with the return of income, was filed well before the due date for filing the return of income i.e. 31.10.2017 for the relevant AY. The assessee submitted that the CBDT has issued a Circular No.10 (F.No.197/55/2018) dated 22.5.2019, condoning the delay in filing the audit report provided the same is filed before the due date for filing the return of income u/s 139(1) of the Act. Accordingly, the assessee submitted before the CIT(A) that the assessee should be allowed deduction towards application and accumulation of funds as claimed.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that it is clear that for AY 2016-17 & AY 2017-18, the delay in filing Form 10B is condoned where the audit report is obtained before filing the return of income and filed before the date specified u/s 139 of the Act. Hence, the delay is condoned by the circular and that there is no requirement to file condonation application. Accordingly, we hold that the ld. CIT(A) denying the deduction claimed on this ground is not correct. Further, the assessee has obtained the audit report dated 1.6.2017 and has filed the same, though not along with the return of income, on 28.8.2017 which date is well before the due date u/s 139(1) i.e. 31.10.2017. Therefore, in our view, assessee’s case is covered under para 4(i) of the CBDT Circular (supra) where by the delay in filing Form 10B is condoned. We therefore, of the opinion that assessee cannot be denied the deduction claimed towards application and accumulation of funds. The addition made in this regard is deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is against the order of CIT(A)/NFAC, Delhi dated 1.8.2022 for the assessment year 2017-18.
2. The assessee has raised the following grounds of appeal:-
1. The intimation issued under the provisions of section 143(1 ) of the Act in as is against the Appellant, is opposed to law, weight of evidence, natural justice, probabilities on facts and circumstances of case.
2. The Appellant denies itself liable to be assessed at Rs.99 08,785 as against the returned nil income on facts and circumstances of case.
3. The CPC has erred in law in denying the Appellant’s claim towards the application of sum of Rs. 97,48,271 towards the objectives of the trust holding that the Appellant has delayed in furnishing the Form-106 and further the learned CIT(A) has erred in upholding the same under the facts and circumstances of the case.
4. The learned CIT(A) has erred in law by upholding the denial of the Appellant’s claim towards the accumulation within the meaning of the provisions of section 11(1) of the Act at Rs.8,94,452 by CPC and further without affording the Appellant a reasonable opportunity of being heard under the facts and circumstances of the case.
5. The learned CIT(A) erred in law in denying the Appellant’s claim towards the Voluntary contribution forming part of Corpus fund of Rs. 39,45,774 holding that the Appellant has delayed in furnishing the Form-1 OB under the facts and circumstances of the case.
6. The learned CIT(A) is not justified in upholding the action of CPC in denying the Appellant’s claim of exemption under section 11(1) of the Act wherein the return of income has been filed on 22/08/2017 relying on Form 10B dated 01/06/2017 issued by the Accountant.
7. Without prejudice, the learned C!T(A) ought to have considered the rectification order issued under section 1 54 of the Act for the impugned assessment year under the facts and circumstances of the case.
8. Without prejudice, the learned CIT(A) has failed to consider the Circular No. 10 dated 22/05/2019 issued by CBDT condoning the delay caused in filing of Form 10B for the impugned assessment year.
9. Without prejudice, the learned Assessing Officer is not justified in determining the income at Rs.99,08,785 failing to apply the commercial principles under the facts and circumstances of the case. Further, the learned Assessing Officer failed to appreciate that the capital receipts of Rs.39,45,774 comes with an obligation to utilise for the specified purpose and does not form part of the income under the facts and circumstances of the case.
10. The CPC has erred in law in levying interest under the provisions of section 234B and 234C of the Act at Rs.6,91,560 and Rs.1,45,517 respectively under the facts and circumstances of the case. The CPC has further erred in law in determining the tax liability of the Appellant at Rs. 37, 18, 643 under the facts and circumstances of the case.
11. The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above.
3. The assessee is a Trust and for the AY 2017-18, the assessee filed the return of income on 22.8.2017 declaring Nil income. During the impugned year, the assessee has received a sum of Rs.59,63,011/- and also corpus receipts of Rs.39,45,774/-aggregating to Rs.99,08,785/-. Out of this, the assessee claimed Rs.58,02,497/- as application towards the objects of the trust and Rs.39,45,774/- towards capital expenses. The assessee accumulated an amount of Rs.8,94,452/- u/s 11(1) of the Income-tax Act,1961 [‘the Act’ for short]. The assessee had obtained the certificate towards application of funds from a Chartered Accountant in Form 10B which the assessee filed separately on 28.8.2017.
4. The assessee’s return was processed by the Centralized Processing Centre (CPC) u/s 143(1) of the Act. The CPC while processing the return denied the claim towards application of funds amounting to Rs.97,48,271/- towards the objects of the trust and denied the deduction towards accumulation u/s 11(1) of the Act also. The reason for the denial was stated to be the delay in furnishing the Form 10B and that the same ought to have been filed on or before filing the return of income.
5. Aggrieved, the assessee preferred an appeal before the CIT(A). The assessee submitted before the ld. CIT(A) that the Form 10B thought not filed along with the return of income, was filed well before the due date for filing the return of income i.e. 31.10.2017 for the relevant AY. The assessee in this regard relied on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Nagpur Hotel Owners’ Association (247 ITR 201) and the decision of the Hon’ble Calcutta High Court in the case of CIT Vs. Hardeodas Agarwalla Trust (1992) 198 ITR 511 (Cal.). The assessee further submitted that the CBDT has issued a Circular No.10 (F.No.197/55/2018) dated 22.5.2019, condoning the delay in filing the audit report provided the same is filed before the due date for filing the return of income u/s 139(1) of the Act. Accordingly, the assessee submitted before the ld. CIT(A) that the assessee should be allowed deduction towards application and accumulation of funds as claimed.
6. The ld. CIT(A) dismissed the appeal of the assessee by stating that as per the above-mentioned circular, the Commissioner (Exemptions) is authorised to condone the delay in filing of Form No.10B up to 365 days for the AY:2017-18 and subsequent assessment years. In the present case, the assessee did not mention anything about condonation petition in its written -submission. It is not known whether the assessee has filed a petition for condonation of delay before the Commissioner (Exemptions) requesting to condone the delay of 6 days in filing of Form No.10B. It is not known whether the delay in filing audit report in Form 10B was condoned by the Commissioner of Income Tax (Exemptions) or not.
7. The assessee is in appeal before the Tribunal against the order of ld. CIT(A).
8. The ld. A.R. reiterated the submissions made before the lower authorities. The ld. A.R. drew our attention to para 4(i) of the CBDT Circular (supra) and submitted that the delay in filing Form 10B for AY 2016-17 and 2017-18 is condoned as the same is furnished before the due date u/s 139 of the Act. The ld. A.R. submitted that the assessee whose accounts are subject to audit, the due date for filing the return u/s 139(1) of the Act is 31.10.2017 for AY 2017-18. The ld. A.R. further submitted that the assessee has filed the Form 10B well before the said date i.e. filed the Form 10B on 28.8.2017.
Therefore, as per the Circular the delay is condoned and accordingly, the assessee cannot be denied deduction claimed towards application and accumulation on this ground.
9. The ld. D.R. on the other hand supported the order of the ld. CIT(A). The ld. D.R. submitted that the assessee should have made an application for condonation of delay failing which, the ld. CIT(A) has correctly denied the deduction.
10. We heard the rival submissions and perused the materials available on record. We will first look at the relevant extract from the CBDT circular which is as given below:
“3. Representations have been received by the Board/field authorities stating that Form No. 10B could not be filed along with the return of income for AY 2016 17 and AY 2017-18. It has been requested that the delay in filing of Form No. 10B may be condoned. Previously, vide instruction in F.No. 267/482/77-IT(part. dated 9-2-1978. the CBDT had authorized the ITO to accept a belated audit report after recording reasons in cases where some delay has occurred for reasons beyond the control of the assessee.
4. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, and with a view to expedite the disposal of applications filed by such trusts or institutions for condoning the delay in filing Form No. I OB and in exercise of the powers conferred under section 119(2) of the Act, the Central Board of Direct Taxes hereby directs that;
(i) The delay in filing of Form No. I0B for AY 2016-17 and AY 2017-18, in all such cases where the Audit Report for the previous year has been obtained before the filing of return of income and has been furnished subsequent to the filing of the return of income but before the date specified under Section 139 of the Act is condoned
(ii) In all other cases of belated applications in filing Form No. 10B for years prior to AY 2018-19, the Commissioners of Income-tax are authorized to admit such applications for condonation of delay under section 119(2)(b) of the Act. The Commissioners will while entertaining such belated applications in filing Form No. 10B shall satisfy themselves that the assessee was prevented by reasonable cause from filing such application within the stipulated time.”
10.1 From the above, it is clear that for AY 2016-17 & AY 2017-18, the delay in filing Form 10B is condoned where the audit report is obtained before filing the return of income and filed before the date specified u/s 139 of the Act. The circular also states that in all other cases i.e. for AYs other than AY 2016-17 & 2017-18 prior to AY 201819, if there is a delay, then an application for condonation to be made and the CIT is authorized to admit the application and condone if satisfied that there was a reasonable cause for the delay.
10.2 In assessee’s case the year under consideration is AY 2017-18 and therefore, we see merit in the argument of the ld. A.R. that the delay is condoned by the circular and that there is no requirement to file condonation application. Accordingly, we hold that the ld. CIT(A) denying the deduction claimed on this ground is not correct. Further, the assessee has obtained the audit report dated 1.6.2017 and has filed the same, though not along with the return of income, on 28.8.2017 which date is well before the due date u/s 139(1) i.e. 31.10.2017. Therefore, in our view, assessee’s case is covered under para 4(i) of the CBDT Circular (supra) where by the delay in filing Form 10B is condoned. We therefore, of the opinion that assessee cannot be denied the deduction claimed towards application and accumulation of funds. The addition made in this regard is deleted.
11. In the result, the appeal is allowed in favour of the assessee. Order pronounced in the open court on 8th Feb, 2023.
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