Denial of exemption for charitable trusts reversed where belated return and late Form 10B filing were condoned.

Belated filing of return under section 139(4A) before the last date for filing a belated return under section 139(5) constitutes due compliance with clause (ba) of subsection (1) of section 12A, permitting entitlement to exemption under section 11; consequently the claim for exemption was allowed. Delay in uploading the audit report in Form 10B was condoned where the audit report was electronically filed during appellate proceedings and prior decisions treating such belated compliance as regularizing the claim were followed, resulting in rejection on delay grounds being set aside.

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Issues: Whether the assessee (a charitable trust) is entitled to exemption under section 11 of the Income-tax Act, 1961 despite (i) filing the income tax return after the due date under section 139(1) and (ii) uploading the audit report in Form No.10B belatedly (filed during appellate proceedings).

Analysis: Applicable statutory provisions include section 11, clause (b) and clause (ba) of section 12A(1), and the filing requirements of section 139 (including sub-sections (4A) and (5)). CBDT circulars and administrative directions clarify that returns filed within the time allowed under section 139 (including belated returns under section 139(5) where applicable) should be treated as meeting clause (ba) of section 12A(1) for specified years; authorities have power to consider condonation of delayed audit reports under section 119(2) and administrative instructions. Judicial authorities have characterised the requirement to furnish the audit report in Form No.10B as directory/substantial compliance in appropriate circumstances and have condoned delay where the audit report was filed before appellate disposal and the audit was conducted prior to filing of return. The facts show return was filed belatedly but within the period contemplated for belated returns for relevant years and Form No.10B was uploaded during appellate proceedings (with audit date preceding filing), invoking the principles of substantial compliance and condonation as reflected in CBDT guidance and judicial precedents.

Conclusion: The exemption under section 11 is allowable to the assessee; the delayed filing of the return and belated uploading of Form No.10B do not disentitle the assessee where belated return falls within the time allowed under section 139 and the audit report was filed during appellate proceedings with audit dated prior to filing. Relief is in favour of the assessee.

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