2020 (12) TMI 542 - AT - Income Tax

Tribunal ruling: Revenue wins on IDC & IAC, assessee prevails on Section 11(2) & Form 10 delay.

M/s Infrastructure Development Fund, Chandigarh Versus The DCIT, Exemptions, Chandigarh

The Tribunal ruled in favor of the Revenue on issues related to the treatment of IDC & IAC receipts and interest income from FDRs as taxable income. ... Exemption u/s 11 - disallowance of benefit of accumulation of income as per section 11(2) - denial of benefit of accumulation for delayed filing of Form No.10 - HELD THAT:- As decided in own case [2020 (9) TMI 277 - ITAT CHANDIGARH] if form No. 10 is filed during the continuation of the assessment proceedings that should have been taken into consideration by the Assessing Officer. That non filing of the Form No. 10 within stipulated period may be an irregularity but not illegality, if the assessee cures the defect during assessment proceedings, the assessee is entitled to the benefit of accumulation as provided u/s 11(2) of the I.T. Act ITAT has held in a number of decisions that the assessee can file Form No.10 at any time during assessment proceedings and which has to be considered for granting benefit u/s 11(2) of the Act and the non filing of the same is a mere irregularity and technical lapse which needs to be condoned - we hold, that the denial of benefit of accumulation for delayed filing of Form No.10 is not as per law .- Decided in favour of assessee. Issues Involved:1. Contravention of provisions of Section 250(6) of the Income Tax Act, 1961.2. Treatment of IDC & IAC receipts as income of the assessee.3. Treatment of interest income from FDRs as income of the assessee.4. Denial of accumulation benefit under Section 11(2) of the Income Tax Act.5. Non-condonation of delay in filing Form 10 electronically.Issue-wise Detailed Analysis:1. Contravention of Provisions of Section 250(6) of the Income Tax Act, 1961:The assessee claimed that the CIT(A) erred in passing the order in contravention of Section 250(6) of the Income Tax Act, 1961. However, this issue was not elaborated further in the judgment, implying that it was not a significant point of contention in the final decision.2. Treatment of IDC & IAC Receipts as Income of the Assessee:The CIT(A) confirmed the action of the AO in treating IDC & IAC receipts amounting to Rs. 228.10 crores as income of the assessee. The assessee argued that it was only entitled to 1% of these receipts, with the balance belonging to the State Government. The Tribunal referred to a notification dated 05-04-2013, which established a Board under the HDRUA Act, 1975, making it a distinct and separate entity from the State. The Board had perpetual succession and its own property and funds, which indicated that the IDC & IAC receipts were indeed revenue receipts of the Board and not the State. Thus, the Tribunal held that these receipts were taxable under the Act, dismissing the ground raised by the assessee.3. Treatment of Interest Income from FDRs as Income of the Assessee:The CIT(A) upheld the AO's decision to treat Rs. 98.14 crores of interest income from FDRs as income of the assessee. The Tribunal noted that the interest income derived from IDC receipts was also taxable since the Board was a distinct entity from the State and not merely a nodal agency. Therefore, this ground was also dismissed.4. Denial of Accumulation Benefit under Section 11(2) of the Income Tax Act:The AO denied the benefit of accumulation under Section 11(2) due to the assessee's failure to file Form 10 electronically by the due date. The Tribunal, however, referred to its own decision for the assessment year 2014-15, which held that filing Form 10 during assessment proceedings was sufficient compliance. The Tribunal emphasized that the non-filing of Form 10 within the stipulated period was an irregularity but not an illegality if the defect was cured during assessment proceedings. Therefore, the Tribunal decided this issue in favor of the assessee, allowing the benefit of accumulation under Section 11(2).5. Non-Condonation of Delay in Filing Form 10 Electronically:The CIT(A) confirmed the AO's action of not condoning the delay in filing Form 10 electronically. The Tribunal reiterated its stance from the 2014-15 assessment year, stating that the requirement to file Form 10 before the due date of filing the return of income was introduced only from 01-04-2016 and was not applicable for the assessment year in question. The Tribunal concluded that the denial of the benefit for delayed filing was not as per law, thus deciding this issue in favor of the assessee.Conclusion:The Tribunal decided ground Nos. 1 to 3 in favor of the Revenue and ground Nos. 4 & 5 in favor of the assessee. The appeal of the assessee was partly allowed. The order was pronounced on 24.08.2020.