2020 (3) TMI 1202 - HC - Income Tax

High Court allows Trust to file late tax form, grants exemption, sets aside assessment order.

The High Court allowed the petitioner, a Public Charitable Trust, to file a petition for condonation of delay in Form 10 filing for A.Y. 2016-17 under the ... Exemption u/s 11 - condonation of delay in filing Form 10 - claim of accumulation requires filing of Form 10 within the specified time limit - whether the prescription of Form 10 for the purpose of accumulation under section 11(2) was mandatory or directory - HELD THAT:- The Supreme Court in the case of Commissioner of Income Tax V. Nagpur Hotel Owners Association [2000 (12) TMI 99 - SUPREME COURT] considered the question of whether the prescription of Form 10 for the purpose of accumulation under section 11(2) was mandatory or directory. The conclusion was that the requirement of filing Form 10 at the time of assessment was only directory and it would suffice if the same were filed even thereafter so long as relevant information in support of the claim of accumulation was furnished by the assessee even at the time of assessment. The impugned order of assessment in this case refers to the claim of accumulation and the details of such accumulation. For this reason and in line with the judgment of Supreme Court in Nagpur Hotel [2000 (12) TMI 99 - SUPREME COURT] that has also been followed by this Court in the case of Commissioner of Income Tax V. Spic Educational Foundation [2019 (2) TMI 1438 - MADRAS HIGH COURT] the petitioner was permitted on 06.01.2020 to file a petition for condonation of delay in filing Form 10 and the Commissioner of Income Tax (Exemptions), who is the proper authority to consider the condonation of delay was impleaded suo motu in the Writ Petition as second respondent. The second respondent was directed to consider the submissions of the petitioner, and to dispose the delay condonation petition within a specified time limit. The matter was listed today for production of a copy of the order of the Commission either accepting or rejecting the request for condonation and it is seen that vide order dated 28.01.2020 passed under Section 119(2)(b) of the Act, R2 has, after consideration of the submissions of the petitioner, condoned the delay. The impugned assessment which rejects the claim of exemption solely on the ground of non-filing of Form 10 is thus set aside and the matter remitted to the file of the Assessing Authority to be re-done de novo, taking into account order of R2 dated 28.01.2020. Issues:Challenge to assessment order for A.Y. 2016-17 under Income Tax Act, 1961 by a registered Public Charitable Trust seeking exemption under Section 11 based on accumulation of funds without timely filing of Form 10.Analysis:The petitioner, a Public Charitable Trust, established for charitable purposes, sought exemption under Section 11 of the Income Tax Act for A.Y. 2016-17. Failure to file Form 10 within the specified time led to the assessment order rejecting the exemption claim in full. The Supreme Court precedent in Commissioner of Income Tax v. Nagpur Hotel Owners Association clarified the mandatory nature of Form 10 filing for accumulation under Section 11(2) as directory, allowing filing even after assessment with relevant information.The High Court, in line with previous judgments, permitted the petitioner to file a petition for condonation of delay in Form 10 filing. The Commissioner of Income Tax (Exemptions) was directed to consider the condonation request within a specified time frame. Subsequently, the Commissioner, after due consideration of submissions, condoned the delay based on valid reasons provided by the petitioner, including technical difficulties in electronic filing and proper investment of accumulated funds as per statutory requirements.The Court, after reviewing the Commissioner's order, found the condonation of delay justified and set aside the assessment rejecting the exemption claim. The matter was remitted to the Assessing Authority for re-assessment considering the condonation order. The Writ Petition was allowed accordingly, with no costs incurred. Connected Miscellaneous Petitions were closed as per the judgment.