Case Law Details
Fatima High School Vs ITO (ITAT Mumbai)
The Mumbai ITAT granted major relief to Fatima High School by holding that once the delay in filing Form 10 is condoned and the return is filed within the due date under section 139(1), exemption under section 11(2) cannot be denied merely on technical grounds.
The Assessing Officer had denied accumulation of ₹1.28 crore under section 11(2) on the ground that Form 10 was filed belatedly along with the revised return. The CIT(A) further proceeded on the incorrect assumption that the original return itself was filed belatedly under section 139(4A).
However, the Tribunal noted that the assessee had in fact filed its original return on 17.10.2016 within the due date prescribed under section 139(1) and the delay in filing Form 10 had already been condoned by the CIT(E) vide order dated 11.03.2020.
The ITAT held that once the technical delay stood condoned, the claim for accumulation under section 11(2) ought to be examined on merits instead of being rejected mechanically. The matter was therefore restored to the AO for fresh adjudication after verifying the relevant details.
The Tribunal also gave relief on the issue of voluntary donations wrongly treated as taxable, observing that even if a donation is not a corpus donation, it still requires examination whether the amount was applied towards the charitable objects of the trust and therefore eligible for exemption under section 11.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The assessee has filed the present appeal against the impugned order dated 21.11.2025, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2016-17.
2. In this appeal, the assessee has raised the following grounds: –
“1. The Ld. CIT(A) failed to note that the Appellant assessee had file its return u/s. 139, within the prescribed time, on 17th October 2016.
2. The Ld. CIT(A) was not justified in proceeding on the erroneous basis that the Appellant had filed original return, belatedly.
3. The Ld. CIT(A) was not justified in holding that the Appellant was not entitled to exemption u/s. 11(2) of the Act.
4. The Ld. CIT(A) erred in not considering that the Appellant had been denied the benefit of the provisions of section 11(2) of the Act on the ground that no specific purpose was mentioned in Form No .10, which is unsustainable.”
3. Vide its application dated 16.04.2026, the assessee raised the following additional ground of appeal:-
“The Ld. CIT(A) fell in error of law in not appreciating that even if the donations to the tune of Rs. 3,25,980/- are to be construed as “voluntary contributions u/s. 12 and not as forming part of the corpus, still the same can be brought to tax only if the said amounts are not applied/accumulated. It is prayed that the Ld. AO be directed to verify whether the said amounts are applied / accumulated.”
4. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that the assessee is a charitable trust registered under section 12A of the Act. For the year under consideration, the assessee filed its original return of income on 17.10.2016, declaring a total income of Rs. Nil after claiming exemption under section 11 of the Act. The assessee claimed accumulation under section 11(2) of the Act for an amount of Rs.1,28,95,705/-. As Form 10 was not filed with the original return of income, and the same was filed along with the revised return of income on 14.03.2018, the return filed by the assessee was selected for scrutiny through CASS for the reason “Form 10 filed after due date and large amount accumulated or set apart under section 11(2) of the Act”. Accordingly, statutory noticea under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee filed its revised return of income under section 139(4A) of the Act on 14.03.2018 and accumulated or set apart income of Rs.1,28,95,705/- for the purpose “Pursuance on the Objects of the Trust” under section 11(2) of the Act, read with Rule 17(2) of the Income Tax Rules, 1962. As Form 10 was filed on 24.03.2018, i.e., after the due date of filing the return of income, which is the primary condition to avail the benefit of accumulation under section 11(2) of the Act, the assessee was asked to explain as to why the exemption under section 11(2) of the Act should not be denied. In response, the assessee submitted that filing of Form 10 within the extended time limit under section 139(4) of the Act ought to be treated as sufficient compliance with the provisions of section 11(2) of the Act.
5. The Assessing Officer (“AO”), vide order dated 15.12.2018 passed under section 143(3) of the Act, disagreed with the submissions of the assessee and held that the assessee is not eligible for exemption under section 11(2) of the Act, as the assessee has not filed its Form 10 before the due date of filing the return of income for the year under consideration. Therefore, the accumulation made by the assessee under section 11(2) of the Act was denied.
6. In its appeal filed before the learned CIT(A), the assessee submitted that the delay in filing Form 10 has been condoned by the learned CIT(E), vide order dated 11.03.2020. A copy of the said order was also furnished by the assessee before the learned CIT(A). However, the learned CIT(A), vide impugned order, held that the assessee is not eligible for accumulation of income as per section 11(2) of the Act, as the assessee did not file income on or before the due date specified under section 139(1) of the Act and filed its income only on 14.03.2018 under section 139(4A) of the Act. Being aggrieved, the assessee is in appeal before us.
7. During the hearing, the learned Authorized Representative (“learned AR”) by referring to the order dated 11.03.2020 passed by the learned CIT(E), condoning the delay in filing Form 10, submitted that the learned CIT(E) in the very first paragraph of its order has noted that the assessee filed its original return of income for the year under consideration on 17.10.2016. In support of its contention, the learned AR also placed on record the acknowledgement of the income tax return filed for the year under consideration under section 139(1) of the Act, on 17.10.2016, which forms part of the paper book at page 30. Accordingly, the learned AR submitted that since the assessee filed its return of income on or before the due date specified under section 139(1) of the Act and the delay in filing Form 10 has also been condoned by the learned CIT(A), the accumulation of income to an extent of Rs.1,28,95,705/- towards objects of the trust under section 11(2) of the Act be allowed to the assessee.
8. On the other hand, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the learned CIT(A).
9. Having considered the submissions of both sides and perused the material available on record, in the present case, it is undisputed that the due date for filing the return of income under section 139(1) of the Act was 17.10.2016. From the perusal of the acknowledgement of income tax return for the year under consideration filed by the assessee, as placed in the paper book at page 30, we find that the assessee filed its return of income for the year under consideration in form ITR – 7 on 17.10.2016. It is further evident from the record that the learned CIT(E) vide order dated 11.03.2020, while condoning the delay in filing Form 10, also took into consideration the fact that the original return of income was filed by the assessee on 17.10.2016. Since the delay in filing Form 10 has already been condoned by the learned CIT(E) and the assessee has filed its return of income on or before the due date specified under section 139(1) of the Act, we are of the considered view that the assessee’s claim of accumulation of income under section 11(2) of the Act be considered on merits. Since none of the lower authorities had examined the assessee’s claim on merits and rejected the same on a technical aspect, we deem it appropriate to restore the issue of claim of exemption under section 11(2) of the Act to the file of the Jurisdictional AO for de novo adjudication after taking into consideration the relevant details. Since this issue is restored to the file of the AO, the assessee is directed to fully cooperate in the assessment proceedings and furnish all the details as may be sought by the AO. With the above directions, the impugned order is set aside, and Grounds No. 1-4 raised in the assessee’s appeal are allowed for statistical purposes.
10. As regards the additional grounds raised by the assessee vide its application dated 16.04.2026, we find that during the year under consideration, the assessee received an earmarked fund of Rs. 3,25,980/-, which was declared by the assessee in its balance sheet. As the said fund was received without any specific direction from the donor, the AO, vide assessment order passed under section 143(3), held that it could not be treated as corpus donation. Accordingly, the donation of Rs. 3,25,980/-received by the assessee was treated as a voluntary donation and added to its total income. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue. Thus, it is evident that the issue now raised before us vide additional ground emanates from the findings of the lower authorities and has been consistently contested by the assessee. Accordingly, the said additional ground is admitted for adjudication.
11. During the hearing, the learned AR submitted that the assessee, being a Trust registered under section 12A, is entitled to exemption under section 11 of the Act in respect of the income which was applied towards the object of the Trust. Thus, the donation of Rs.3,25,980/-, even though not directed to be for any specific purpose, cannot be added in its hands and it needs to be examined whether the same was applied towards the objects of the Trust. From the perusal of the record, we find that this contention was raised for the first time and thus has not been verified by any of the lower authorities. Therefore, in the interest of justice and fair play, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication after verifying if the amount of voluntary donation amounting to Rs. 3,25,980/- was utilised/applied by the assessee towards the objects of the Trust. We further direct that if the contention of the assessee is found to be correct, then the AO is directed to give necessary relief to the assessee, as per law. With the above direction, the impugned order on this issue is set aside, and the additional ground raised by the assessee is allowed for statistical purposes.
12. In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 11/05/2026
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