Exemption u/s 11 Allowed as Timely Form 10B Filing for AY 2019-20 Precedes Finance Act 2020 Amendment

ITAT Ahmedabad allowed the assessee's appeal, holding that exemption u/s 11 could not be denied for AY 2019-20 on the ground of belated uploading of Form 10B or non-attachment of registration documents u/s 12A with the return. The Tribunal held that the amendment introduced by Finance Act 2020, mandating filing of the audit report one month prior to the due date of filing the return, is applicable only from AY 2020-21 and has no retrospective effect. Since the assessee filed Form 10B along with the return within the prescribed due date, disallowance of accumulation was unjustified. The CIT(A)'s order was set aside and exemption u/s 11 directed to be allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a delay of four days in filing the appeal before the Tribunal warranted condonation.

1.2 Whether, for Assessment Year 2019-20, the assessee-trust was required to furnish the audit report in Form 10B at least one month prior to the due date for filing the return of income, and whether belated uploading of Form 10B justified denial of exemption under section 11, including application and accumulation of income.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of short delay in filing appeal

Interpretation and reasoning

2.1 The Tribunal noted that there was a delay of four days in filing the appeal and that an application supported by an affidavit of the trustee explaining the delay had been filed.

2.2 Considering the averments made and the shortness of the delay, the Tribunal considered it fit to condone the delay.

Conclusions

2.3 The delay of four days in filing the appeal was condoned, and the appeal was admitted for adjudication on merits.

Issue 2: Due date for furnishing audit report in Form 10B for AY 2019-20 and entitlement to exemption under section 11

Legal framework as discussed

2.4 The Tribunal considered section 12A(1)(b) of the Income-tax Act, which mandates that where the total income of a charitable trust exceeds the maximum amount not chargeable to tax, its accounts must be audited and an audit report in the prescribed form (Form 10B) furnished by the "specified date" referred to in section 44AB.

2.5 The Tribunal examined section 44AB and its Explanation, under which, for the relevant period, the "specified date" for furnishing the audit report was the same as the due date for furnishing the return of income.

2.6 The Tribunal noted that the amendment requiring furnishing of the audit report at least one month prior to the due date for filing the return of income was introduced by the Finance Act, 2020 with effect from 01.04.2020 and applied from AY 2020-21 onwards.

Interpretation and reasoning

2.7 The Tribunal recorded that the assessee is a charitable trust registered under section 12A and that its return of income for AY 2019-20 was filed on 31.10.2019, claiming exemption under section 11.

2.8 The Centralized Processing Centre had denied exemption under section 11 on the ground that the registration document under section 12A was not attached with the return; on appeal, the appellate authority accepted that the assessee was validly registered but denied exemption on the ground that Form 10B was not furnished by 20.09.2019, i.e., one month prior to the due date for filing the return.

2.9 The Tribunal accepted the assessee's contention that, for AY 2019-20, the law in force required the audit report in Form 10B to be furnished by the same due date as prescribed for filing the return under section 139(1), i.e., 31.10.2019, and not one month prior.

2.10 It was noted that the assessee had filed Form 10B along with the return of income on 31.10.2019, which was within the statutory due date applicable for AY 2019-20 under the then-prevailing provisions.

2.11 The Tribunal held that the appellate authority's reliance on the requirement of filing Form 10B one month prior to the due date for filing the return was based on a legal position introduced only with effect from AY 2020-21 and was not applicable to AY 2019-20.

Conclusions

2.12 For AY 2019-20, the due date for furnishing the audit report in Form 10B was the same as the due date for filing the return of income under section 139(1), i.e., 31.10.2019.

2.13 Since the assessee filed Form 10B along with the return of income on 31.10.2019, the statutory requirement under section 12A(1)(b) read with section 44AB stood complied with.

2.14 The denial of exemption under section 11, including disallowance of application of income and accumulation of income solely on the ground of alleged belated filing of Form 10B, was unwarranted in law for AY 2019-20.

2.15 The impugned appellate order was set aside; the disallowances made by the lower authorities were ordered to be deleted; and the Assessing Officer was directed to allow exemption/deduction under section 11 to the assessee in accordance with law.

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