2023 (3) TMI 349 - AT - Income Tax

Tribunal allows deduction under Income-tax Act, overturns CIT(A)'s decision

The Tribunal allowed the deduction claimed by the Trust for application of funds and accumulation under section 11(1) of the Income-tax Act, 1961. The ... Exemption u/s 11 - deduction claimed towards application and accumulation of funds denied - delay in filing Form 10B - HELD THAT:- For AY 2016-17 & AY 2017-18, the delay in filing Form 10B is condoned where the audit report is obtained before filing the return of income and filed before the date specified u/s 139 of the Act. The circular also states that in all other cases i.e. for AYs other than AY 2016-17 & 2017-18 prior to AY 2018- 19, if there is a delay, then an application for condonation to be made and the CIT is authorized to admit the application and condone if satisfied that there was a reasonable cause for the delay. In assessee’s case the year under consideration is AY 2017-18 and therefore, we see merit in the argument of the ld. A.R. that the delay is condoned by the circular and that there is no requirement to file condonation application. Accordingly, we hold that the ld. CIT(A) denying the deduction claimed on this ground is not correct. Assessee has obtained the audit report dated 1.6.2017 and has filed the same, though not along with the return of income, on 28.8.2017 which date is well before the due date u/s 139(1) i.e. 31.10.2017. Therefore, in our view, assessee’s case is covered under para 4(i) of the CBDT Circular (supra) where by the delay in filing Form 10B is condoned. We therefore, of the opinion that assessee cannot be denied the deduction claimed towards application and accumulation of funds. The addition made in this regard is deleted. Appeal is allowed in favour of the assessee. Issues Involved:1. Denial of claim towards application of funds and accumulation under section 11(1) of the Income-tax Act, 1961.2. Interpretation of Circular No. 10 dated 22/05/2019 issued by CBDT regarding the delay in filing Form 10B.3. Condonation of delay in filing Form 10B for assessment years 2016-17 and 2017-18.4. Justification of denial of deduction by the CIT(A).5. Assessment of tax liability under sections 234B and 234C of the Act.Issue 1: Denial of Claim Towards Application of Funds and Accumulation:The assessee, a Trust, filed a return of income for AY 2017-18 declaring Nil income but received sums totaling Rs. 99,08,785. The assessee claimed amounts for application towards trust objectives and capital expenses, along with accumulation under section 11(1) of the Act. However, the CPC denied these claims citing delay in filing Form 10B. The CIT(A) upheld this denial. The Tribunal noted that the delay was condoned by a CBDT Circular for AY 2016-17 and 2017-18, allowing filing before the due date under section 139(1). As the assessee filed Form 10B before the due date, the denial was deemed unjustified, and the deduction was allowed.Issue 2: Interpretation of CBDT Circular No. 10 dated 22/05/2019:The assessee relied on Circular No. 10 dated 22/05/2019 issued by CBDT, which condoned the delay in filing the audit report if done before the due date for filing the return of income under section 139(1) of the Act. The Tribunal emphasized that the circular covered the delay in filing Form 10B for AY 2016-17 and 2017-18, provided the audit report was obtained before filing the return and filed before the due date. The Tribunal concluded that the assessee's case fell within the circular's ambit, leading to the allowance of the deduction claimed.Issue 3: Condonation of Delay in Filing Form 10B:The Tribunal analyzed the CBDT Circular, noting that for AY 2016-17 & 2017-18, the delay in filing Form 10B was condoned if the audit report was obtained before filing the return and filed before the due date under section 139 of the Act. As the assessee fulfilled these conditions, the delay was deemed condoned, and no separate application for condonation was required. The Tribunal held that the CIT(A)'s denial of the deduction on this ground was incorrect.Issue 4: Justification of Denial by CIT(A):The CIT(A) dismissed the appeal, citing the absence of a condonation petition for the delay in filing Form 10B. The Tribunal observed that the assessee did not mention a condonation petition in its submission, leaving uncertainty about whether such a petition was filed. However, as per the CBDT Circular, no separate petition was necessary for AY 2017-18 if the audit report was filed before the due date, as in the assessee's case. Therefore, the denial by the CIT(A) was deemed unjustified.Issue 5: Assessment of Tax Liability Under Sections 234B and 234C:The CPC levied interest under sections 234B and 234C, along with determining the tax liability. The Tribunal, after allowing the deduction claimed by the assessee, held that the tax liability calculation based on the denied deduction was incorrect. Consequently, the appeal was allowed in favor of the assessee, overturning the CIT(A)'s decision.This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the Tribunal's decision, ensuring a comprehensive understanding of the legal aspects and implications of the case.