TaxTMI 
TaxTMI 
2021 (8) TMI 753
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....e no application of income for the earlier years accumulated fund have taken into consideration, therefore, since those accumulated funds have already been utilized in the earlier years and, therefore, the finding of the CIT(A) in concluding in para 4.1 at page 4 is not correct. 4. That the Ld. CIT(A) has erred in giving a finding in para 4.2 that the claim of the assessee out of application of capital expenditure out of the fund accumulated u/s. 11(2) of the I.T. Act 1961 for the earlier year, is without any basis. 5. That the Ld. CIT(A) has erred in holding that Form No. 10, which was filed during the course of assessment proceedings and having not been filed at the time of filing the return of income and, therefore, the said accumulated fund could not be carried forward to the next year. Further, the assessee can make a claim during the assessment proceedings and the Assessing Officer is bound to consider the same. 6. That the Ld. CIT(A) has failed to appreciate and follow the CBDT Circular No. 7/2018 :, dated 20.12.2018, which authorized the department to admit belated application on Form No. 10 particularly for Asstt. Year 2016-17, since this provision was introduced for....
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....Sec. 11 of the Act." 5.3. The A.O. however was not satisfied from the aforesaid submissions and disallowed the claim of the assessee by observing in para 6 & 7 of the assessment order dt. 08/12/2018 as under: 6. I have considered the submission of the assessee, however, the same is not acceptable. As per form 10, during the assessment year preceding the relevant assessment year, the assessee had accumulated funds of Rs. 52,59,279/- in the year 2012, Rs. 5,00,10,118/- in the year 2013 and Rs. 4,05,55,014/- in the year 2014. The assessee had taken benefit u/s. 11(2) of the Act in these earlier years when the accumulation was made. This issue was also discussed with the authorised representative of the assessee, Sh. Harinder Pal Singh, Advocate, as noted vide order sheet entry dated 26.11.2018. While the assessee is required to use the accumulated or set apart funds u/s. 11(2) of the Act within a period of 5 years, the assessee cannot be allowed to claim the utilization of these accumulated funds in the year in which these are actually utilized as the benefit u/s. 11(2) has already been derived in the earlier years. As per section 11 of the Act, the assessee is allowed to accumulat....
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....ghted portions of the circular. Had the AO waited till 20-12-2018 as requested, the Form 10 filed by assessee society was in order even specifically as per law. However the Ld. AO was in unusual hurry and passed the assessment order u/s. 143(3) of the Act on 08-12-2018. In the light of above said circular, you are now requested to accept Form-10 filed electronically Belatedly on 17-11-2018. Copy of acknowledgement of same is enclosed and also available on Income Tax e-portal. Even the judicial decisions are there to establish that in case of genuine omissions, Form 10 and even Form 10B audit report can be filed by assessee even during first appeal proceedings as such proceedings are mere extension of regular 143(3) proceedings. Please refer the following case laws whose texts are enclosed: Mali Ram Gopi chand Charitable Trust vs. Addl. CIT-Range-2, Muzaffarnagar (ITA No. 467/Del/2011 dt. 14.6.2013); and C.I.T. vs. Hardeodas Agarwalla Trust dt. 24/07/1991 (1992 198 ITR 511 Cal) Thus in view of acceptance of belatedly filed Form 10, the exemption available to assessee u/s. 11(2) of the Act comes in the picture and addition of Rs. 2,15,46,952/- looses its validity. There....
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....low, devoid of facts and unwarranted. When the capital expenses of Rs. 73,47,393/- have been accepted as incurred for charitable purpose as per Sec. 11 of the Act, they can not be put to tax on any ground whatsoever. Therefore you are requested to delete this addition also and oblige. 6.1. The Ld. CIT(A) after considering the submissions of the assessee sustained the disallowance made by the A.O. by observing in para 4.2 of the impugned order as under: 4.2 I have carefully considered the facts of the case and submissions of the appellant. The assessee has accumulated funds u/s. 11(2) of the Income Tax Act, 1961 from A.Y. 2012-13 onwards out of which an amount of Rs. 73,47,393/- was applied during the previous year as capital expenditure on new assets. The assessing officer has disallowed this amount being claimed as application of income during the year under consideration. However, while passing the order, in the computation sheet on page 2 in column 11(ii), the amount was mistakenly written as applied for charitable purposes - Rs. 73,47,393/-. However, while determining total income only revenue expenditure was taken into account and capital expenditure was not taken into acco....
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....res are correct figures. The said chart reads as under: 8.1. The Ld. Counsel admitted that the said chart was not available to the A.O. as well as the Ld. CIT(A) for their perusal, also furnished copy of the affidavit of the then counsel for the assessee stating therein that the figures of funds accumulated brought forward from the earlier years and utilization made in the year under consideration had been wrongly presented, copy of the said affidavit is placed at page No. 30 to 31 of the assessee's paper book. 8.2. Ld. Counsel for the assessee requested to remand this issue back to the file of the A.O. to be decided afresh after verification and taking into consideration the correct figures. The reliance was placed on the following case laws: * Vijay Vishin Meghani Vs. DCIT, Circle-23(2), Mumbai [2017] 86 Taxmann.com 98 (Bom.) * Premier Motor Garage Vs. Commissioner, Central Excise Commissionerate, Chandigarh [2016] 70 taxmann.com 18 (P & H) * Manoj Ahuja and Anr. Vs. Inspecting Assistant [1984] 150 ITR 696 (P & H) * Mukesh Jesangbhai Patel Vs. ITO, [2013] 29 taxmann.com 389 (Gujarat) * M/s. Bhagwati Colonizers Pvt. Ltd. Vs. ITO ITAT, Amritsar Tribunal (Third Membe....
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.....2016. 6. That the additional compliance of electronic filing of Form 10 for the Assessment Year 2016-17 before the due date of filing of Income Tax Return was omitted to be made due to an inadvertent error as it was a new requirement and it only came to my knowledge during the course of assessment proceedings before the Assessing Officer. That the said Form 10 was then filed electronically immediately on 17.11.2018 vide E-filing Ack. No. 376855871171118 which was available with the Assessing Officer before she concluded the Assessment vide her Assessment Order dated 08.12.2018 passed u/s. 143(3) of the Act. 7. That my client ICES had provided all the information relating to Form 10 to the undersigned in due time and such informal was also furnished in due time in the Audit Report in Form 10B. 8. That the delay in filing of Form 10 was only on account of the above reasonable cause and is liable to be condoned in terms of CBDT Circular No. 7/2018 dated 20,12.2018. 9. That besides the above, the figures of funds accumulated brought forward from the past years [A.Y. 2013-14 and 2014-15] and utilization made in the A.Y. 2016-17 amounting to Rs. 73,47,393 as mentioned in the com....
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.... bearing on the issue under consideration and the then counsel for the assessee had also furnished an affidavit stating therein that the figures were wrongly mentioned. We therefore deem it appropriate to set aside this issue back to the file of the A.O. to be adjudicated afresh after considering the aforesaid chart furnished by the assessee and claim of the assessee to be considered after proper verification of the figures mentioned in the chart vis-a-vis. the record already available with the department. 11. Vide ground Nos. 5 & 6 the grievance of the assessee relates to the submissions of the Form No. 10 during the course of assessment proceedings which was not considered by the A.O. 12. The facts related to this issue in brief are that the A.O. during the assessment proceedings observed that for claiming the benefit under section 11(2) of the Act the assessee filed Form No. 10 on 17/11/2018 i.e., during the assessment proceedings and claimed the benefit of accumulation of Rs. 1,44,17,439/- for the purpose of "Construction of Research and Training and Examination Centre Buildings". He also observed that as per Section 11(2) of the Act read with Rule 17 of the Income Tax Rules ....
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.... is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:-- (a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5); (c) the statement referred to in clause (a) is furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year: Provided that in computing the period of five years referred to in clause (a), the period during which the income could not be applied for the purpose for which it....
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....fore the due date of filing return of income specified under section 139 of the Act for the fund or institution. In case the Form 10 is not submitted before this date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rate. Further, the benefit of accumulation would also not be available if return of income is not furnished before the due date of filing return of income. These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years." 13. The above makes it absolutely clear that e-filing of form 10 by the due date specified u/s. 139 of the Act is a mandatory condition for claiming benefit u/s. 11(2) of the Act w.e.f. A.Y. 2016-17. 14. In view of the above, the assessee is denied the benefit claimed u/s. 11(2) of the Act as the mandatory condition of filing form 10 by the due date mentioned u/s. 139 of the Act has not been fulfilled. 13. Being aggrieved the assessee carried the matter to the Ld. CIT(A) who confirmed the action of the A.O. by observing in para 5.2 of the impugned order as under: 5.2 I have carefully considered....
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.... delay in filing of form 10. The assessee has not brought on record whether it has obtained permissions from the concerned Commissioner of Income Tax to file form 10 belatedly. In view of these facts, the findings of the assessing officer are upheld. This ground of appeal is dismissed. 14. Now the assessee is in appeal. 15. The Ld. Counsel for the Assessee reiterated the submissions made before the authorities below and further submitted that the legal consultant of the assessee prepared the statutory audit report in Form No. 10B and the said report was electronically uploaded on the Income Tax Portal on 25/08/2016 i.e., before filing of the return by the assessee. It was also submitted that prior to A.Y. 2016-17 the Form No. 10 was being manually filed with the department and for the A.Y. 2016-17, it was the first year when the facility of e-filing of Form No. 10 was mandated by the law and this requirement skipped the attention of the Ld. Counsel for the assessee. However, as soon as the counsel realized this lapse the Form No. 10 (declaring the same particulars as already declared by the statutory Auditor in his audit report) were uploaded by him on 17/11/2018 during the cours....
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....1(2) of the Act, therefore, the A.O. was fully justified in denying the claim of the assessee under section 11(2) of the Act and the Ld. CIT(A) was fully justified in confirming the action of the A.O. 17. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is not in dispute that as per section 11(2) of the Act read with Rule 17 of the Income Tax Rules, as mandated with effect from A.Y. 2016-17 the assessee was required to e-file Form No. 10 by due date mentioned under section 139 of the Act. However, in the present case the assessee filed Form No. 10 on 17/11/2018 i.e. during the course of assessment proceedings. The A.O. denied the claim of the assessee since the Form No. 10 was not furnished before filing the return of income under section 139 of the Act. 17.1. In this regard the CBDT has issued Circular No. 6/2020 dt. 19/02/2020 which read as under: Circular No. 6/2020 F. No. 197/55/2018-ITA-I Government of India, Ministry of Finance Department of Revenue Central Board of Direct Taxes ***** New Delhi, the 19 February, 2020 Sub: Condonation of delay under section 119(2)(b) of the Income-tax Ac....
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....such trust is that the income derived from property held under trust should be applied for the charitable purposes in India. Where such income cannot be applied during the previous year, it has to be accumulated and applied for such purposes in accordance with various conditions provided in the section. 2. The Finance Act, 2015 amended section 11 and section 13 of the Act with effect from 1-4-2016 (A.Y. 2016-17). Consequently, Income-tax Rules, 1962 (hereafter 'Rules') were also amended vide the Income-tax (1st Amendment) Rules, 2016. As per the amended provisions of the Act read with rule 17 of the Rules, while 15% of the income can be accumulated indefinitely by the trust or institution, 85% of income can only be accumulated for a period not exceeding 5 years subject to the conditions, inter alia, that such person submits the prescribed Form No. 10 electronically to the Assessing Officer within the due date specified under section 139(1) of the Act. 3. Further, where the income from the property held under trust and applied to charitable or religious purposes falls short of 85% of the income derived during the previous year for the reason that the income has not been ....
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....he Assessing Officer does not have the necessary information, the question of excluding such income from assessment does not arise at all. As a matter of fact, the benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time it completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the assessee the benefit of such exclusion and once the assessment is so completed, it would be futile to find fault with the assessing authority for having included such income in the assessable income of the assessee. Therefore, even assuming that there is no valid limitation prescribed under the Act and the Rules, even then it is reasonable to presume that the intimation required under section 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of the income, the assessing authority cannot entertain the claim of the assessee under section 11. T....