Tribunal Upholds Tax Exemption for Charitable Trust Despite Delayed Form 10B Filing, Condoned by CIT Exemption.

The Tribunal allowed the appeal in favor of the assessee, a public charitable trust, ruling that the delay in filing Form 10B, which was condoned by CIT(Exemption), Ahmedabad, should not impact the exemption claim under sections 11 and 12 of the Income Tax Act. The Tribunal referenced precedents supporting that a delay does not invalidate the exemption if the return is filed within the time allowed under section 139(4). The Tribunal clarified that section 13(9) does not apply to the entire section 11, and since the assessee did not claim benefits under section 11(2), section 13(9) was inapplicable. The decision was pronounced on 13-03-2023.

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Issues Involved:
1. Confirmation of assessment of returned income.
2. Denial of deductions and expenditures.
3. Jurisdiction of adjustments under section 143(1) of the Income Tax Act.

Summary:

Issue 1: Confirmation of Assessment of Returned Income
The assessee, a public charitable trust, e-filed its return of income for A.Y. 2020-21 declaring a net total income of Rs. 1,32,610. The Centralized Processing Center (CPC) assessed the income at Rs. 14,05,398, denying the deduction under section 11 of the Income Tax Act due to the failure to furnish Form 10B within the prescribed time. The CIT(A) upheld this assessment, noting that the return of income was filed beyond the due date prescribed under section 139(1) and that the delay in filing Form 10B had been condoned by CIT(Exemption), Ahmedabad.

Issue 2: Denial of Deductions and Expenditures
The assessee argued that as a charitable trust, it should not be taxed on a gross basis due to the delay in filing the return of income. The CIT(A) dismissed this argument, stating that processing under section 143(1) does not allow for the examination of such claims unless they are validly made in the return. Since the return was filed beyond the due date and without condonation, the claim for exemption under section 11 was rightly denied.

Issue 3: Jurisdiction of Adjustments under Section 143(1)
The assessee contended that the denial of exemption under section 11 was beyond the scope of section 143(1). The CIT(A) noted that the amended provisions of section 143(1) allow for the denial of claims if required information is not furnished. The delay in filing the return of income was considered an incorrect claim under section 143(1)(a)(m).

Tribunal's Analysis and Conclusion:
The Tribunal noted that the delay in filing Form 10B was condoned by CIT(Exemption), Ahmedabad, and thus should not impact the claim under sections 11 and 12. It referenced the Gujarat High Court's decision in Sarvodaya Charitable Trust v. ITO, which held that a public charitable trust should not be denied exemption merely due to a delay in submitting Form 10. The Tribunal also cited the Delhi ITAT's decision in Conference of Religious India, which allowed the benefit of exemption under section 11 if the return was filed within the time allowed under section 139(4).

The Tribunal concluded that the delay in filing the return of income did not impact the exemption claim under sections 11 and 12, as the return was filed within the time prescribed under section 139(4). It also clarified that section 13(9) applies only to sub-section (2) of section 11 and does not extend to the entire section 11. Since the assessee did not claim any benefit under section 11(2), section 13(9) was not applicable.

Decision:
The Tribunal allowed the appeal, ruling in favor of the assessee, and did not adjudicate on other grounds of appeal. The order was pronounced on 13-03-2023.

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