Charitable trust wins rectification appeal after exemption wrongly disallowed for missing Form 10 accumulation filing

ITAT Bangalore allowed the appeal of a charitable trust seeking rectification of intimation u/s 143(1). The AO had disallowed exemption u/s 11 for non-filing of Form 10 for accumulation of income. The assessee filed application u/s 154 for rectification, contending that Form 10 was prepared and accumulation was mentioned in the original return. ITAT held that intimation u/s 143(1) is not an assessment, and since there was no assessment proceeding, the AO should have accepted the rectification application. The tribunal directed the AO to allow the s 154 application and rectify the intimation.

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Issues:
Appeal against disallowance of exemption u/s. 11(2) for non-filing of Form 10 for charitable trust in AY 2014-15.

Analysis:
1. The assessee, a charitable trust, filed a NIL return for AY 2014-15. The AO disallowed the claim for exemption u/s. 11(2) due to non-filing of Form 10, required for accumulation of income for charitable purposes. The assessee contended that Form 10 was prepared but not submitted with the return due to online filing constraints.

2. The assessee sought rectification u/s. 154, stating the trust's resolution for income accumulation. The AO rejected the rectification request, citing belated filing of Form 10 and its mandatory requirement for accumulation benefit u/s. 11(2). The CIT(A) upheld the AO's decision, emphasizing the mandatory nature of filing Form 10 before the return due date for claiming the benefit.

3. The Tribunal considered the appeal, noting that filing Form 10 before the assessment proceedings' conclusion was sufficient. Referring to a previous decision, the Tribunal highlighted the necessity of informing the AO via Form 10 for income accumulation under s. 11(2). It emphasized that the assessing authority must have this information before completing the assessment.

4. The Tribunal held that since there were no assessment proceedings, only an intimation u/s. 143(1) existed, which is not an assessment. Citing legal precedents, the Tribunal directed the AO to accept the rectification application u/s. 154 and rectify the intimation, allowing the accumulation of income for charitable purposes.

5. The Tribunal's decision favored the assessee, emphasizing the importance of informing the assessing authority about income accumulation under s. 11(2) before assessment completion. The Tribunal's ruling highlighted the distinction between intimation u/s. 143(1) and a formal assessment, ensuring the trust's entitlement to accumulate income for charitable purposes was upheld.

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