2025 (2) TMI 762 - AT - Income Tax

Assessee wins: corpus donation cannot be recast under s.143(1); late Form 10B not automatic denial under ss.11/12

ITAT held the appeal in favor of the assessee. The tribunal ruled that recharacterising a corpus donation as a voluntary donation is beyond the scope of ... Assessment of trust - Adjustments contemplated u/s 143(1) - Treatment of corpus donation as voluntary donation by the authorities - HELD THAT:- We are of the considered view that treatment of such corpus donation as voluntary donation falls outside the scope of adjustments contemplated u/s 143(1) unless such incorrect claim is apparent from any information in the return of income. In the return of income filed by the assessee, such donation was specifically treated as corpus donation and not as voluntary donation. Accordingly, in our considered view, treatment of corpus donation as voluntary donation falls outside the scope of adjustments contemplated u/s 143(1) of the Act. Denial of exemption u/s 11&12 - late filing of Form No. 10B - As decided in Shree Swaminarayan Charitable Trust [2024 (10) TMI 1635 - ITAT AHMEDABAD] delay in submission of Form No. 10B is a procedural defect and once the said Form has been filed during the course of hearing, no disallowance is called for on account of late / delayed filing of Form No. 10B. In the instant case, we observe that the assessee had filed Form No. 10B before Ld. JCIT(A) before conclusion of appellate proceedings. Thus, exemption u/s 11&12 of the Act cannot be denied to the assessee only on account of late filing of Form No. 10B. Accordingly, in light of the above observations, the appeal of the assessee is allowed. The appeal in this case was filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals) for the Assessment Year 2020-21. The main issues presented and considered in this case were:1. Whether the treatment of corpus donation as voluntary donation by the authorities was justified.2. Whether the failure to file Form 10B and the delay in filing it affected the eligibility of the Assessee for tax exemption under Sections 11 & 12 of the Act.3. Whether the adjustments made by the CPC under Section 143(1) of the Act were valid.The Court analyzed these issues in detail:The Court observed that the adjustments made by the CPC were confirmed by the JCIT(A) based on three grounds: the late filing of the return of income, the failure to file Form 10B, and the permissibility of the addition under Section 143(1) of the Act. The JCIT(A) upheld the adjustments, leading to the taxation of the corpus donation as income.The Assessee argued that the treatment of the donation as voluntary instead of corpus was incorrect, as it was clearly earmarked as corpus in the return of income. Additionally, the Assessee contended that the income was below the taxable limit, negating the obligation to file Form 10B. The Assessee also cited a case precedent to support the argument that delayed filing of Form 10B is a procedural defect.The Court referred to a case involving a similar issue and held that the delay in submitting Form 10B was a procedural defect. As the Assessee had filed Form 10B before the JCIT(A) during the appellate proceedings, the Court concluded that denial of tax exemption under Sections 11 & 12 solely due to the late filing of Form 10B was unwarranted. Consequently, the Court allowed the appeal of the Assessee.In conclusion, the Court determined that the treatment of the corpus donation as a voluntary donation was incorrect and that the delayed filing of Form 10B did not disqualify the Assessee from tax exemption under Sections 11 & 12. Therefore, the appeal of the Assessee was allowed, and the decision was pronounced in the Open Court on 14/02/2025.