Charitable trust wins exemption after correcting return filing deadline and form 10B procedural errors

ITAT Ahmedabad allowed appeal of charitable trust registered u/s 12AA. CIT(A) erroneously denied exemption u/s 11 citing late filing of return and form 10B. ITAT held belated return filing deadline was 31.03.2018 (not 31.03.2017) per Finance Act 2016 amendment effective 1.4.2017. Trust's mistake in filling wrong column showing Rs. 40,66,996 as income u/s 12(2) instead of charitable application was rectified based on form 10B evidence. ITAT condoned delay in filing form 10B, following coordinate bench precedent that procedural omissions cannot bar exemption claims. Addition deleted and exemption u/s 11 allowed.

---

---

Issues involved:
The judgment addresses the disallowance of exemption u/s 11 of the IT Act, addition of income chargeable u/s 12(2) due to a delay in filing the return of income and Tax Audit Report, misinterpretation of section 12A, and the validity of the order passed by the CIT(A).

Disallowance of exemption u/s 11:
The assessee, a public charitable trust, appealed against the disallowance of exemption u/s 11 in the intimation order passed u/s 143(1) of the IT Act. The CIT(A) upheld the disallowance due to a delay in filing the return of income and Tax Audit Report, despite the substantial charitable activities and valid registration of the appellant. The assessee contended that the delay in filing was procedural and should not result in denial of exemption u/s 11. The Tribunal, after considering the submissions, set aside the CIT(A)'s order, deleted the addition made on account of income u/s 12(2), and allowed the exemption u/s 11 to the assessee.

Misinterpretation of section 12A:
The CIT(A) was criticized for misinterpreting the provisions of section 12A, specifically regarding the condition of filing the return of income before the due date to claim exemption u/s 11. The Tribunal clarified that this condition came into effect from AY 2018-19, rendering the disallowance of exemption due to a filing delay illegal and ultra vires.

Validity of the CIT(A)'s order:
The Tribunal found that the CIT(A) erred in considering the due date of filing the belated return of income as 31.03.2017 instead of 31.03.2018. It was noted that the return of income was valid and processed by the CPC, making the CIT(A)'s treatment of the return as non-est unjust. Additionally, the Tribunal condoned the delay in filing form 10B, following a decision by a coordinate bench, and set aside the CIT(A)'s order after deleting the income addition u/s 12(2) and allowing the exemption u/s 11.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing the eligibility of the trust for deduction as a charitable trust and correcting the errors made by the lower authorities. The judgment was pronounced in the Open Court on 27th May, 2024 at Ahmedabad.

---