2017 (4) TMI 772 - HC - Income Tax

Tribunal Decision Affirmed: Timely Form 10 Filing Crucial for Income Accumulation

The Commissioner of Income Tax-III, Pune Versus Sakal Relief Fund

The Court upheld the Tribunal's decision, emphasizing the importance of timely filing Form 10 for accumulation of income under Section 11(2) of the Income ... Benefit of accumulation under Section 11(2) - Form 10 is filed during the reassessment proceedings - Held that:- The decision of the Delhi High Court in Association of Corporation and Apex Societies of Handlooms (2013 (1) TMI 317 - DELHI HIGH COURT) and Trustees of Tulsidas Gopalji Charitable and Chaleshwar Temple Trust (1993 (9) TMI 75 - BOMBAY High Court ) would apply to the present facts. Therefore, Revenue accepts that even if the Form 10 is filed during the reassessment proceedings, the benefit of accumulation under Section 11(2) of the Act is available. So also, the time allowed in Rule 17 of the Rules for furnishing the form before the expiry of time to file the return of income under Section 139(1) of the Act get extended to include the time within which a return of income could be filed under Section 139(4) of the Act. Therefore, filing of Form 10 during reassessment proceedings is filing of the same within the time allowed for furnishing the return of income under Section 139(4) of the Act. Therefore, the Counsel for the Revenue has not been able to point out any reasons why the aforesaid two decisions should not be applied in the facts of the present case to reject the appeal. Also in in Nagpur Hotel Owners' Association (2000 (12) TMI 99 - SUPREME Court ) observed that for the purposes of excluding an income of the trust from the net of taxation, the intimation in Form 10 has to be filed with the Assessing Officer before he completes the Assessment. In fact, it is the context of the above finding of the Apex Court, that it observed that Form 10 has to be filed before completion of Assessment Proceedings - Decided in favor of assessee Issues:1. Interpretation of Rule 17 of Income Tax Rules regarding filing of Form 10 for accumulation of income under Section 11(2) of the Income Tax Act.2. Validity of filing Form 10 during reassessment proceedings.3. Applicability of Supreme Court and High Court judgments on the issue.Analysis:Issue 1: Interpretation of Rule 17 of Income Tax RulesThe case involved a charitable trust not filing a return of income for Assessment Years 2000-01 and 2001-02 as donations received were earmarked for specific relief funds. The Assessing Officer issued notices under Section 148 of the Act to reopen assessments due to the trust directly taking donations to the Balance Sheet. The trust later filed Form 10 during Assessment Proceedings for accumulation of income under Section 11(2) of the Act. The Assessing Officer rejected Form 10 for not being filed along with the return of income. The CIT(A) upheld this decision, but the Tribunal allowed the appeal, citing the need to file Form 10 before completion of assessment, as per Supreme Court precedent.Issue 2: Validity of filing Form 10 during reassessment proceedingsThe Revenue contended that Form 10 should have been filed before the expiry of the time allowed to file a return of income under Section 139(1) of the Act. They argued that filing Form 10 during reassessment proceedings did not comply with Rule 17 of the Rules. However, the trust argued that the time allowed for filing Form 10 extended to include the time for filing a return of income under Section 139(4) of the Act. The Court accepted this argument, noting that filing during reassessment proceedings was within the allowed timeframe.Issue 3: Applicability of Supreme Court and High Court judgmentsThe Court considered various judgments, including the Supreme Court's decision in Nagpur Hotel Owners' Association, which emphasized filing Form 10 before completion of Assessment Proceedings. The Revenue accepted the applicability of High Court judgments to the case but expressed reservations regarding the Supreme Court's decision. However, the Court found no merit in the Revenue's reservations, concluding that the Supreme Court's ruling applied to the facts of the case. Ultimately, the Court dismissed the appeal, stating that the proposed question did not give rise to any substantial question of law based on the established legal precedents.In conclusion, the Court upheld the Tribunal's decision, emphasizing the importance of timely filing Form 10 for accumulation of income under Section 11(2) of the Act, even during reassessment proceedings. The judgment clarified the interpretation of Rule 17 of the Income Tax Rules and highlighted the significance of adhering to procedural requirements for tax assessments involving charitable trusts.