2025 (9) TMI 80 - AT - Income Tax

Assessee entitled to exemption under s.10(23C)(vi) despite delayed electronic verification of Form 10BB due to extended deadlines

ITAT Mumbai (AT) allowed the assessee's appeal and directed the AO to grant exemption under s.10(23C)(vi). The tribunal found Form 10BB was obtained on ... Denial of exemption u/s 10(23C)(vi) - procedural delay in validating form 10BB i.e. after filling of return of income -HELD THAT:- For the year under consideration, the due date was extended to 07.11.2022 and the due date for filing Form 10BB was 07.10.2022. The assessee had obtained Form 10BB on 29.09.2022 and the same was uploaded on 30.09.2022 along with return of income. Form 10BB was undoubtedly verified on 05.12.2022 but as per the acknowledgement it has been specifically mentioned that Form 10BB has been digitally signed on 30.09.2022. It can be seen from the above that Form 10BB was uploaded along with return of income and was duly verified, therefore, we do not find any reason to deny the exemption claimed by the assessee. AO is directed to allow the same. Appeal by the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether a claim to exemption under section 10(23C)(vi) can be denied by the assessing machinery on the ground that Form 10BB was validated by CPC after the filing of the return, when the Form 10BB was uploaded and digitally signed contemporaneously with the return. 2. Whether a procedural delay in the system-driven validation of Form 10BB (validation occurring after return filing) is a ground to deny exemption under section 10(23C)(vi), and whether the appellate authority has power to condone such delay or treat CBDT circulars as binding. 3. Whether, in the alternative, if exemption under section 10(23C)(vi) is not allowed, the assessee is nevertheless entitled to set off/allow the expenses against the receipts. 4. Whether interest under sections 234B and 234C can be sustained where exemption under section 10(23C)(vi) is contested on the basis of alleged non-filing/late validation of Form 10BB. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of exemption claim where Form 10BB was uploaded and digitally signed on date of return but validated by CPC at a later date Legal framework: Exemption under section 10(23C)(vi) is conditioned on compliance with prescribed registration/filing requirements; Form 10BB is the documentary requirement evidencing compliance. Processing of returns by CPC involves system-side validation steps which may occur after initial uploading. Precedent Treatment: No precedent was cited or applied by the Tribunal in the text; no earlier decisions were followed, distinguished or overruled. Interpretation and reasoning: The Tribunal examined the system acknowledgements and metadata attached to the uploaded Form 10BB. The acknowledgement explicitly recorded that the Form 10BB was digitally signed on 30.09.2022 (time and IP address provided). The due date for return was extended to 07.11.2022 and the due date for filing Form 10BB was 07.10.2022 for the year in question. The Tribunal treated the contemporaneous upload and digital signature as conclusive evidence that the form was filed within the statutory/due date even though CPC's technical validation occurred on 05.12.2022. The Tribunal therefore rejected the assumption by processing authorities that Form 10BB had not been filed. Ratio vs. Obiter: Ratio - where an assessee can demonstrate, by system-generated acknowledgement showing digital signing/upload on or before the due date, that Form 10BB was filed, a later system validation by CPC does not justify denial of exemption under section 10(23C)(vi). Conclusion: The exemption of Rs. 4,07,21,961 under section 10(23C)(vi) is to be allowed; the assessing officer is directed to permit the claimed exemption. Issue 2 - Effect of procedural/system delay in validation of Form 10BB and the appellate authority's power to condone delay/role of CBDT circulars Legal framework: Administrative/technical validation steps by CPC may lag behind taxpayer uploads; appellate authorities exercise supervisory review and apply evidentiary tests to determine compliance. Rule 18(6) of the ITAT Rules was noted as part of record consideration. Precedent Treatment: The Tribunal did not rely upon or discuss binding precedents or CBDT circulars; it treated the CBDT circular as not binding on appellate scrutiny insofar as factual evidence establishes timely filing. Interpretation and reasoning: The Tribunal observed that the relevant determination is factual - whether the Form 10BB was uploaded and digitally signed within the due date. Given the contemporaneous digital signature and the statutory due dates, the Tribunal found no justification for penalizing the assessee for a subsequent system validation date. The Tribunal implicitly recognized the appellate forum's authority to examine the documentary record and to disregard a mechanical denial resulting from CPC's processing status. Ratio vs. Obiter: Ratio (limited): Administrative validation timing cannot defeat the legal effect of a timely uploaded and digitally signed Form 10BB; the appellate authority may examine system acknowledgements and condone or disregard procedural/system delays where evidence shows compliance. Obiter: Remarks regarding the non-binding nature of CBDT circulars on appellate fact-finding (no extensive doctrinal discussion provided). Conclusion: Procedural/system validation delay is not a valid ground to deny exemption when documentary/system evidence shows timely filing; the appellate authority may entertain and accept such evidence to uphold exemption. Issue 3 - Allowability of expenses if exemption under section 10(23C)(vi) were not granted Legal framework: Tax treatment of receipts and matching of expenses depends on whether receipts are taxable; if exemption is denied, the question arises whether related expenses may be allowed against the receipts. Precedent Treatment: Not considered in the judgment text; no precedents applied. Interpretation and reasoning: The Tribunal did not adjudicate the issue substantively because it disposed of the primary controversy in favour of the assessee by allowing the exemption on factual grounds. Consequently, the question of allowing expenses against receipts remained unnecessary to decide. Ratio vs. Obiter: Obiter - the question of expenses was left undecided and therefore has no ratio in this judgment. Conclusion: Not adjudicated as the exemption was allowed; the point is therefore moot in the present order. Issue 4 - Charging of interest under sections 234B and 234C in view of contested exemption Legal framework: Interest under sections 234B/234C arises from short/non-payment/shortfall of advance tax or defaults in estimated tax payments; applicability depends on taxable income determinations and timing of entitlements. Precedent Treatment: Not addressed in the Court's reasoning. Interpretation and reasoning: Since the Tribunal accepted that the Form 10BB was duly uploaded and the exemption under section 10(23C)(vi) is allowable, the basis for imposing interest founded on a denial of exemption (i.e., treating receipts as taxable) does not survive. The Tribunal therefore did not sustain the assessing officer's denial leading to interest; no separate analysis of sections 234B/234C was undertaken. Ratio vs. Obiter: Obiter/Incidental - treatment of interest was not separately reasoned because the primary relief rendered the issue moot. Conclusion: No interest is to be sustained insofar as it was predicated on the denial of exemption; the order directing allowance of exemption disposes of the interest issue. Cross-references The conclusions on Issues 3 and 4 flow from and are contingent upon the conclusion on Issue 1 (see Issue 1 ratio). The Tribunal's factual finding-acknowledgement showing digital signing/upload on the date of return-controls the outcome on procedural delay, condonation, and downstream consequences including expense allowance and interest.