2024 (10) TMI 23 - AT - Income Tax

Public charitable trust wins appeal after being denied accumulation benefits under section 11(2) for insufficient charitable purpose specificity

National Childrens Fund Versus The Income Tax Officer, Ward (Exemption) 2 (4), Delhi

ITAT Delhi allowed the appeal of a public charitable trust controlled by the Ministry of Women and Child Welfare. The trust was denied accumulation ... Denial of accumulation u/s 11(2) as mentioned in Form No. 10 - 'specific charitable purpose' has not been mentioned in Form No. 10, as filed to the department - HELD THAT:- We find that the appellant/assessee’s objectives derive its spirit from the Directive Principles of State Policy enshrined in the Constitution of India. Since, the Govt. of India makes endeavor to provide welfare to one and all in the society at large and in view thereof the registration for public charitable trust through enactment is given in order to ensure that through these charitable trusts benefits should flow to the entire society and the objectives of the Govt. of India in furtherance to the Directive Principles of State Policy are achieved. In the present case in hand, the appellant/assessee is directly controlled by the Ministry of Women and Child Welfare. Therefore, the appellant/assessee Trust’s aims and objectives are not questionable at all. There may be some technical lacuna in compliances as such Trust is not being advised by the top available Professionals in day-to-day affairs and routine compliances. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. We find the purpose for which the amount was claimed to be accumulated or set apart mentioned in the Form No. 10 of the AY 2016- 17 “To be applied to promote and support research scientists for the advancement of research and development in future' as specific and categorical and thus, we are inclined to interfere with the finding of the CIT(A) in this regard. Accordingly, we order so and allow the appeal of the AY 2016-17 with the direction to the AO to allow the consequential benefit under section 11(2) of the Act to the appellant/assessee. Issues Involved:1. Disallowance of accumulation under section 11(2) of the Income Tax Act, 1961 due to non-specification of 'specific charitable purpose' in Form No. 10.2. Delay in filing Form No. 10 beyond the due dates.Issue-Wise Detailed Analysis:1. Disallowance of Accumulation under Section 11(2) due to Non-Specification of 'Specific Charitable Purpose' in Form No. 10:Facts and Arguments:- The appellant/assessee is a charitable organization registered under the Societies Registration Act and section 12A of the Income Tax Act, 1961.- The main objectives of the appellant/assessee include raising funds and promoting programs for children affected by various adversities.- The appellant/assessee filed its Income Tax Returns (ITR) for AY 2016-17 and 2017-18 but faced disallowance of accumulation under section 11(2) as the specific charitable purpose was not mentioned in Form No. 10.- The Assessing Officer (AO) held that the claim under section 11(2) could not be allowed as the Form No. 10 was filed beyond the due dates and lacked a specific purpose.- The CIT(A) upheld the AO's decision, citing that the purpose mentioned was too vague and general, relying on judicial precedents like Singhania Charitable Trust and M Ct. Muthiah Chettiar Family Trust.Judgment:- The Tribunal noted that the purpose mentioned in Form No. 10 for AY 2016-17, 'To be applied to promote and support research scientists for the advancement of research and development in future,' was specific and categorical.- For AY 2017-18, although the purpose was initially vague, the appellant/assessee clarified during assessment proceedings, aligning with the decision in Bochasanwasi Shri Akshar Purshottam Public Charitable Trust.- The Tribunal emphasized substantial justice over technicalities, considering the appellant/assessee's objectives derived from the Directive Principles of State Policy and controlled by the Ministry of Women and Child Welfare.- The Tribunal allowed the appeals for both AY 2016-17 and 2017-18, directing the AO to grant the consequential benefit under section 11(2).2. Delay in Filing Form No. 10 Beyond the Due Dates:Facts and Arguments:- The appellant/assessee filed Form No. 10 electronically after the due dates, leading to disallowance by the AO.- The CIT(A) condoned the delay based on a circular and an order from the Commissioner of Income Tax (E), New Delhi, which was not challenged by the Revenue before the Tribunal.Judgment:- The Tribunal acknowledged that the delay in filing Form No. 10 was condoned by the CIT(A) and was not contested by the Revenue.- Consequently, the first reasoning for disallowance by the AO did not survive, leaving only the issue of non-specification of the charitable purpose.Conclusion:The Tribunal allowed both appeals, emphasizing the importance of substantial justice over technicalities. The appellant/assessee's objectives, aligned with the Directive Principles of State Policy and controlled by the Ministry of Women and Child Welfare, were deemed sufficient to justify the accumulation under section 11(2) despite initial technical lapses in Form No. 10. The Tribunal directed the AO to grant the consequential benefits for both assessment years.