Mahudi Madhupuri Jain NSM Bhojanshala & Prashadi Bhavan Vs ITO (ITAT Ahmedabad)
Summary: The Income Tax Appellate Tribunal, Ahmedabad Bench, in Shri Mahudi Madhupuri Jain NSM Bhojanshala & Prashadi Bhavan Vs ITO, allowed the appeal of a charitable trust for Assessment Year 2020-21 and directed the Revenue to grant exemption under Section 11 of the Income-tax Act, 1961, notwithstanding the filing of its income-tax return after the original due date under Section 139(1). The assessee filed its return on 31 March 2021, declaring nil income, and furnished the audit report in Form 10B. While processing the return under Section 143(1), the Centralized Processing Centre, Bengaluru, disallowed ₹4,28,49,304 representing application of income towards the trust’s objects and ₹59,61,768 representing income accumulated or set apart for charitable purposes. The aggregate disallowance of ₹4,88,11,072 arose because the return and audit report were considered belated.
The Commissioner of Income Tax (Exemptions), Ahmedabad, had condoned the delay in filing Form 10B by an order dated 10 January 2023. Nevertheless, the JCIT(A) sustained the disallowance because the income-tax return had been filed on 31 March 2021 instead of the original due date of 15 February 2021. The assessee contended that the return had been filed within the permissible period under Section 139(4), which had been extended for the relevant assessment year, and that Section 12A(1)(ba) did not restrict the exemption exclusively to returns filed within Section 139(1). The Revenue, however, argued that charitable trusts claiming exemption under Sections 11 and 12 were required to furnish their returns within the original statutory deadline.
The Tribunal examined Section 12A(1)(ba), Section 139(4A) and the amendment introduced through the Finance Act, 2023, which expressly recognised returns filed within the time permitted under Section 139(1) or Section 139(4). Although the amendment took effect from 1 April 2023, the Tribunal considered its purpose and the accompanying Finance Bill Memorandum, particularly the intention to exclude updated returns from the exemption framework. The Tribunal concluded that the reference to the time allowed under Section 139 in the earlier provision was sufficiently broad to include a valid belated return filed under Section 139(4).
The Tribunal also relied on CBDT clarification F.No. 173/193/2019-ITA-I dated 23 April 2019 and Circular No. 2/2018 dated 15 February 2018. These clarified that registered trusts claiming Section 11 exemption were required to file their returns within the time allowed under Section 139 and directed rectification of demands raised during processing on account of an unduly restrictive interpretation of the return-filing requirement. The Tribunal further referred to Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (ITAT Rajkot), which had recognised eligibility for exemption where the return was filed after the Section 139(1) deadline but within the time permitted under Section 139(4).
Accordingly, the Tribunal reversed the findings of the JCIT(A) and directed the Department to allow the assessee’s exemption claim under Section 11. The decision establishes the Tribunal’s interpretation of the return-filing condition applicable to the particular assessment year. Its application to other years requires examination of the relevant statutory provisions, applicable due-date extensions and amendments. The original order also contains an apparent reference to Section 139(8) while discussing updated returns; this has been preserved in the full judgment below without editorial alteration.
Cases Discussed:
1. Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot – Trib.), ITAT Rajkot: Relied upon by the Tribunal for the proposition that Section 11 exemption should not be denied merely because the return was furnished after the original due date under Section 139(1), where it was filed within the permissible time under Section 139(4). The date of this decision is not specified in the supplied judgment.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeal), ADDL/JCIT (A)-2, Mumbai, (in short ‘the JCIT(A)’)dated 05.12.2023for the Assessment Year 2020-21
2. The brief facts of the case are that the assessee is a Trust and had filed its return of income for the A.Y. 2020-21 on 31.03.2021 declaring Nil income. The Trust had also uploaded the audit report u/s 12A(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in Form 10B on the IT Portal alongwith submission of the return. The return of income was processed u/s 143(1) of the Act on 24.12.2021 after disallowing exemption of Rs.4,28,49,304/- being amount applied for the purpose of the object of the Trust (revenue expenditure) and an amount of Rs.59,61,768/- accumulated or set apart for application to charitable purpose u/s11 of the Act. The assessee had filed an appeal before the CIT(A) against the adjustments made while processing the return. The Ld. JCIT(A) has upheld the adjustments vide the impugned order for the following reason:
“6.7 The CPC, Bengaluru processed return u/s 143(1) disallowing revenue expenditure of Rs. 4,88,11,072/- u/s.11 of the Income Tax Act, 1961, as the Return of Income and Form 10B was filed late. The due date for filing of Form 10B was 15.02.2021. Delay was condoned by CIT(Exemption), Ahmedabad vide order No. ITBA/COM/F/17/2022-23/1048595203(1) dated 10.01.2023. However the Return of Income has also been filed late on 31/3/2021 against the due date of 15/2/2021, which has not been condoned. It is a trite law that if a thing is said to be done in a particular manner, it shall be done in that manner and its performance in any other mode or fashion shall be of no consequence. Therefore, in application of the above decisions of the apex court and also the mandated provisions of the statute, the Assessing Officer has rightly disallowed the exemption claimed and made addition of the same to the total income of the appellant as per the provisions of section 143(1)(a)(ii). Accordingly, I am not inclined to interfere with the decision of the Assessing Officer. These grounds of appeal are hereby dismissed.”
3. Aggrieved with the order of the ld. JCIT(A), the assessee is in appeal before us and has taken following grounds in this appeal:
“1. In law and in the facts and circumstances of the appellant’s case, the order passed by the learned CIT(A) u/s 250 of the Income-tax Act is ab initio void being bad in law.
2. In law and in the facts and circumstances of the appellant’s case, the Ld. CIT(A) has erred in passing appellate order u/s 250 of the Act without providing “Video hearing” as envisaged in Faceless Appeal Procedure.
3. In law and on the facts and in the circumstances of the case of appellant, the ld. CIT(A) has erred in upholding the contention of AO-CPC in not granting exemption of Rs.4,28,49,304 being amount applied for the purpose of the object of the Trust (Revenue Expenditure) and amount accumulated or set apart for application to charitable purpose (restricted to 15% of total receipts) for Rs.59,61,768 under Section 11 of the Act when no such adjustment is called for.
4. In law and on the facts and in the circumstances of the case of appellant, the ld. CIT(A) has erred in holding that appellant has not filed the return within time even when there is no such requirement for claiming exemption u/s 11 and 12.”
4. Shri M. K. Patel, ld. Advocate for the assessee submitted that the delay in filing the Form No.10B for A.Y. 2020-21 was condoned by the ld. CIT(E), Ahmedabad vide his order u/s. 119(2)(b) of the Act dated 10.01.2023. Further, the assessee had filed its return for A.Y. 2020-21 within the time limit as available u/s.139(4) of the Act. He submitted that the time limit of filing belated return u/s. 139(4) of the Act for A.Y. 2020-21 was extended till 31st May, 2021 by the CBDT vide Circular No. 8 of 2021 dated 30.04.2021. According to ld. AR, as the return was filed within the due date as applicable u/s.12A(1)(ba) of the Act, the assessee was entitled for benefit of exemption u/s 11 of the Act and the adjustments made by the CPC while processing return was not correct.
5. Shri Aarsi Prasad, ld. CIT-DR., on the other hand, submitted that as per provision of Section 12A(1)(ba) of the Act, the return of income was required to be furnished within the time limit as available u/s. 139(1) of the Act only. As the assessee did not file the return within this time limit, the adjustment made by the CPC and the disallowance of exemption u/s.11 of the Act was correctly made.
6. We have carefully considered the rival submissions. The provision of Section 12A of the Act stipulates that the provision of section 11 & section 12 of the Act will not be applicable in relation to the income of any trust or institution, unless the conditions as prescribed u/s 12A are fulfilled. One of the condition as mentioned in Section 12A(1)(ba) of the Act is that return of income has to be furnished in accordance with the provisions of sub-section (4A) of Section 139 of the Act, within the time allowed under that section. The provision of Section 139(4A) of the Act is applicable to charitable trust who are required to furnish the return of income; as if it were a return required to be furnished under sub-section (1). It is on the strength of this provision that the contention of the department is that in order to claim exemption u/s 11 or 12 of the Act, the return of income has to be filed within the time limit as per Section 139(1) of the Act.
7. The provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as ‘within the time allowed under sub-section (1) of sub-section (4) of that section’. Thus, there is no doubt that for A.Y. 2023-24 onwards the time limit for filing of return of the trust includes not only the time limit for filing the original return u/s 139(1) of the Act but also the time as available for filing belated return u/s 139(4) of the Act.
8. The contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s 139(4) of the Act also gets this benefit. On the other hand, the Ld. CIT-DR has contended that for the years prior to A.Y. 2023-24 the benefit of exemption u/s11 of the Act is available only to returns filed within the time limit as available u/s 139(1) of the Act.
9. In order to resolve this controversy, it will be relevant to examine the Memorandum of the Finance Bill, 2023 which is found to be as under:
9. Denial of exemption where return of income is not furnished within time
9.1 As per the provisions of twentieth proviso to clause (23C) of section 10 of the Act, if the return of income is not furnished by a trust or institution under first regime within the time under section 139 of the Act, exemption under sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act shall not be available to such trust or institution.
a. Similarly, as per the provisions of clause (ba) of sub-section (1) of section 12A of theAct, if the return of income is not furnished by a trust or institution under the secondregime within the time under section 139 of the Act, exemption under section 11, 12 of theAct shall not be available to such trust or institution.
b. Section 139 of the Act was amended by the Finance Act, 2022 providing for an option to the taxpayers to furnish updated return of income up to 2 years from the end of assessment year.
c. This resulted in unintended consequences of allowing exemption under section 11, 12 of the Act and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available to the trusts where they furnish updated return of income. Accordingly, it is proposed to clarify that the exemption under section 11, 12 and sub-clause (iv)/(v)/(vi)/(via) of clause (23C) of section 10 of the Act will be available only if the return of income has been furnished within the time allowed under sub-section (1) or sub- section (4) of section 139 of the Act.
d. Hence, it is proposed to,
a) amend the twentieth proviso of clause (23C) section 10 of the Act to provide that the fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall furnish the return of income for the previousyear in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section.
b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section.
e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.”
10. It is apparent from the above clarification that this amendment was introduced to exclude the category of updated returns of income u/s 139(8) of the Act. The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act. In order to exclude the category of updated return of income, this amendment was brought in to exclude the revised/updated category of returns and specific mention of section 139(1) & 139(4) of the Act was made in Section 12A(1)(ba) of the Act. It is apparent from the Memorandum that time limit for belated return u/s 139(4) of the Act was available for the earlier years as well which was continued and made specific vide this amendment. There is no dispute to the fact that the assessee has filed its return of income for this year within the time limit of section 139(4) of the Act. Therefore, the department was not correct in denying the exemption u/s11 of the Act while processing the return.
11. The Circular F No. 173/193/2019 –ITA-1, dated 23.04.2019 issued by the CBDT and relied upon by the assessee refers to Memorandum to the Finance Bill, 2017 and gives clarification in respect of amendment to section12A of the Act, that a person in receipt of the income chargeable to income tax shall furnish the return of income within the time allowed u/s 139 of the Act. As per this clarification, the return of income was required to be filed within the time allowed u/s 139 of the Act and the relevant portion of the Circular is reproduced below:
“2. In the matter, the memorandum explaining the relevant provisions of the Finance Bill, 2017 reads as under:
“as per the existing provisions of said section, the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income tax. However, there is no clarity as to whether the said return of income is to be filed within time allowed under section 139 of the Act or otherwise. In order to provide clarity in this regard, it is proposed to further amend section 12A so as in provide for further-condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Act. These amendments are clarificatory in nature.
These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent years.”
3. Additionally, an excerpt of circular No. 2/2018 dated 15-2-2018 “Explanatory Notes to the Provisions of the Finance Act, 2017” on insertion of clause (ba) in Sub-section (1) of section 12A is quoted as under:
“The entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act.”
3. Thus, for a trust registered under section 12AA of the Act to avail the benefit of exemption under section 11 shall inter-alia file its return of income within the time allowed under section 139 of the Act. Accordingly, orders under section 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified.” (Emphasis supplied)
12. It is, thus, clear from the above Circular that exemption u/s 11 of the Act was available in respect of the return of income filed u/s 139 of the Act. This Circular does not mandate that the return has to be filed only within the time limit available u/s 139(1) of the Act and rather directs to rectify the unjust demand raised u/s 143(1)(a) of the Act. As the assessee had filed its return of income within the time limit of section 139(4) of the Act, it was eligible for benefit of exemption u/s 11 of the Act. It has been held by the Ld. ITAT, Rajkot Bench in the case of Shri Rajkot Vishashrimali Jain Samaj, [2023] 150 taxmann.com 361 (Rajkot-Tri), which has been relied upon by the assessee, that if the assessee had filed return of income after due date of filing of return u/s.139(1) of the Act but before due date prescribed u/s 139(4) of the Act, benefit of exemption u/s 11 of the Act can’t be denied to the assessee by invoking the provisions of Section 12A(1)(ba) of the Act.
13. In view of the above provisions of law, the clarificatory Circular of the CBDT as well as the judicial pronouncement, we are of the considered opinion that the department was not correct in disallowing exemption u/s 11 of the Act while processing the return, as the return of income was filed by the assessee within the due date as per the provisions of the Act. Accordingly, findings of the Ld. JCIT(A) is reversed and the department is directed to allow the exemption u/s. 11 of the Act as claimed by the assessee.
14. In the result, appeal preferred by the assessee is allowed.
This Order pronounced on 04/06/2024
