Charitable exemption under section 11 cannot be denied for a clerical error or when Form 10B is filed before return processing.

Exemption under section 11 was denied on the grounds of an alleged change in charitable objects and late filing of Form 10B, but the record showed the change entry was only an inadvertent clerical error and no actual alteration in objects occurred. The Tribunal also noted that Form 10B had been filed before processing of the return and before the income-tax return was filed, so it should have been considered. In the alternative, even if treated as an association of persons, expenditure exceeded gross receipts and no taxable income remained. The addition was deleted.

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Issues: Whether exemption under section 11 could be denied on the grounds that the return wrongly recorded a change in objects and the audit report in Form 10B was filed after the due date but before filing the return, and whether, in the alternative, the income could still escape taxation if the assessee were treated as an association of persons.

Analysis: The denial of exemption was founded on two reasons: an alleged change in the objects of the charitable society and delayed filing of the audit report. The record, including the affidavit of the secretary, showed that the entry regarding change in objects was an inadvertent punching error and that there was in fact no change in the objects during the year. On the audit report, the Tribunal noted that Form 10B had been filed before the return was processed and before filing of the income-tax return, and therefore it ought to have been considered. The Tribunal also accepted the alternative contention that, even on the footing of an association of persons, the expenditure exceeded the gross receipts and no taxable income remained.

Conclusion: Denial of exemption under section 11 was unsustainable and the addition made in the assessment was deleted.

Final Conclusion: The assessee succeeded in obtaining relief against the impugned addition and the appeal was allowed.

Ratio Decidendi: Where the factual basis for denial of charitable exemption is shown to be a clerical or inadvertent error, and the audit report is available before return processing and filing, exemption cannot be refused on a purely technical ground.

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