2024 (2) TMI 532 - AT - Income Tax

Filing Form 10B after return deadline doesn't disqualify charitable trust from section 11/12 exemption benefits

ITAT Ahmedabad allowed assessee's appeal against CPC adjustment under section 143(1) denying exemption under sections 11/12 for failure to file Form 10B ... Adjustment made to the income returned in the intimation made by the CPC u/s 143(1) - exemption u/s 11/12 denied as assessee had failed to furnish the necessary Form 10B one month prior to the due date of filing of return of income u/s 139(1) - procedural v/s mandatory requirement - assessee pleaded as requisite Form 10B had been prepared much in advance i.e. 70 days prior to the filing of the return, but had not been filed by the assessee since its income was below the taxable limit. HELD THAT:- Since the failure to file Form No.10B was the only reason for the adjustment made to the return of income of the assessee subjecting its entire income to tax on the filing of the Form 10B to the ld. CIT(A), the assessee ought to have been allowed its claim of exemption to its entire income. As in the case of Association of Indian Panelboard Manufacturer [2023 (3) TMI 1374 - GUJARAT HIGH COURT] has categorically held that filing of Form 10B alongwith the return of income is only a procedural requirement and cannot be treated as mandatory requirement for the purpose of claiming exemption u/s 11 & 12 of the Act and even if filed at a later stage the assessee is entitled to exemption claimed. As in the case of Shree Bhairav Seva Samiti [2022 (12) TMI 445 - ITAT MUMBAI] allowed assessee’s claim to exemption u/s 11 as held that even if form 10B is filed at a later stage exemption cannot be denied u/s 11. Thus no hesitation in holding that the assessee’s claim of exemption to its entire income u/s 11 of the Act is to be allowed. The AO/CPC is accordingly directed to delete the adjustment made in the intimation u/s 143(1) - Decided in favour of assessee. Issues Involved:1. Whether the land received as a gift in kind by the assessee-trust falls under the purview of income and is liable to tax.2. Whether the contribution received from the trustee for stamp duty should be treated as income.3. Whether the inadvertent mistake made in the return can be upheld legally.4. Whether the belated filing of the Audit report - Form 10B is relevant to the facts of the capital receipt.5. Whether the decision of Balraj Singh Jagjit Singh ITAT (Mum) applies to the facts of the assessee trust.6. Whether the value adopted for paying stamp duty can be treated as income of the trust.7. Whether the principle of natural justice and Circular 14 (XL - 35) should be applied to the facts of the assessee.Summary:1. Land Received as Gift in Kind:The assessee argued that the land received as a gift from the trustee, duly registered, should not be treated as income as it is a capital receipt. The CIT(A) upheld the income computed by the AO, treating the land as taxable income. The Tribunal noted that the land received as a gift does not fall under the definition of income under Section 2(24) of the Act and should be considered a capital receipt, not liable to tax.2. Contribution for Stamp Duty:The assessee contended that the contribution of Rs. 70,60,000/- received from the trustee for stamp duty is an integral part of the land-gift and should be treated as a capital receipt. The CIT(A) upheld the AO's adjustment, but the Tribunal found that this amount should also be considered a capital receipt, not falling under the purview of income.3. Inadvertent Mistake in Return:The assessee claimed that the inadvertent mistake in the return should not be upheld factually or legally. The Tribunal acknowledged the mistake but emphasized that the principle of natural justice should be applied, and the department should not take advantage of the assessee's ignorance to collect more tax.4. Belated Filing of Audit Report - Form 10B:The assessee argued that the belated filing of Form 10B is not relevant to the capital receipt and that the trust had income below the taxable limit. The Tribunal referred to the Hon'ble jurisdictional High Court's decision, which held that filing Form 10B is a procedural requirement and cannot be treated as mandatory for claiming exemption under Sections 11 & 12 of the Act.5. Applicability of Balraj Singh Jagjit Singh ITAT (Mum) Decision:The CIT(A) relied on the decision of Balraj Singh Jagjit Singh ITAT (Mum), which the assessee claimed was not applicable. The Tribunal agreed with the assessee, noting that the facts of the case were different and the decision should not be relied upon.6. Value Adopted for Stamp Duty:The assessee argued that the value adopted for paying stamp duty should not be treated as income. The Tribunal found that the value for stamp duty does not fall under the purview of income and should not be treated as such.7. Principle of Natural Justice and Circular 14 (XL - 35):The assessee contended that the principle of natural justice and Circular 14 (XL - 35) should be applied, ensuring that the department does not take advantage of the assessee's ignorance. The Tribunal upheld this principle, directing the AO/CPC to delete the adjustment made in the intimation under Section 143(1) of the Act.Conclusion:The Tribunal allowed the appeal, directing the AO/CPC to delete the adjustment made in the intimation under Section 143(1) of the Act and accept the assessee's claim of exemption to its entire income under Sections 11 & 12 of the Act. The appeal was allowed in favor of the assessee.