TaxTMI 
TaxTMI 
2026 (2) TMI 1239
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....claimed to have utilized more than 85% of its gross receipts of Rs. 1,77,08,249/- and encashment proceeds of Rs. 1,60,70,939/- towards charitable purposes. However, the CPC vide intimation u/s 143(1) of the Act disallowed the exemption claimed u/s 11 of the Act and assessed the income of the assessee at Rs. 3,45,51,290/-. 3. Before the Ld. Addl / JCIT(A) the assessee filed the following financial details: Particulars Amount Gross receipts during the year Rs.1,77,08,249/- Add: Encashment of FD/Mutual funds. Rs.1,60,70,939/- TOTAL Rs.3,37,79,188/- Less: Expenses made during the year Rs.99,49,982/- Balance Rs.2,38,29,206/- Less: Appropriation of available funds set apart for future utilization Rs.2,44,97,300/- Balance Taxable amount if any Rs.NIL 4. It was argued that the assessee has offered its short term capital gain and long term capital gain properly and also updated return filed u/s 139(8A) of the Act. It was submitted that the CPC has not taken in to account the claims made by the assessee u/s 11 and 12 of the Act regarding utilization of income and wrongly calculated the taxable income at Rs. 3,45,51,290/-. It was submitted....
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....Act. This section categorically states that in order to be eligible for exemption u/s 11 and 12, the person in receipt of income must furnish the audit report in Form No. 10B electronically atleast one month prior to due date of furnishing return u/s 139(1), which the appellant failed to do so. In the present case, the appellant has filed the Updated Return on 18.12.2023, well beyond the due date. The appellant is claiming exemption u/s 11(2), but has also not filed form 10 within due date specified u/s 139(1). As per intimation order, no forms have been filed by the appellant. Further, exemption us 11 cannot be claimed in an updated return if no original return is filed. The Income Tax Act, as amended by the Finance Act, 2017, makes it mandatory for charitable and religious trusts to file their return of income within the due date specified under section 139(1) to claim exemption under Section 11. The updated return (ITR-U) facility under section 139(8A) allows taxpayers to file or update returns within 24 months from the end of the relevant assessment year. However, this provision does not override the specific conditions for claiming certain exemptions or deductions, su....
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....he Act. 4] The learned Addl. CIT(A) erred in not appreciating that the assessee had filed its return of income and also audit report in Form 10B before the intimation order passed by the learned CPC and hence, there was no reason to deny the claim of exemption claimed u/s 11 of the Act. 5] The learned Addl. CIT(A) failed to appreciate that even if, there was a small delay in filing the audit report in Form 10B, since the assessee has ultimately filed the same, the claim of exemption u/s 11 ought to have been granted. 6] Without prejudice to the above grounds, assuming without admitting that the exemption u/s 11 is not allowable to the assessee trust, the learned CPC erred in taxing the gross receipts as an income of the assessee without appreciating that only the net surplus after deducting the expenditure incurred could be taxed as an income of the assessee. 7] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 8. The Ld. Counsel for the assessee at the outset referring to the decision of the Tribunal in assessee's own case for assessment years 2014-15 to 2020-21 submitted that the Tribunal in assess....
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....med in an updated return if no original return is filed. According to him, the Income Tax Act as amended by the Finance Act, 2017 makes it mandatory for charitable and religious trusts to file their return of income within the due date specified u/s 139(1) of the Act to claim exemption u/s 11 of the Act. The updated return facility u/s 139(8A) of the Act allows taxpayers to file or update returns within 24 months from the end of the relevant assessment year. However, this provision does not override the specific conditions for claiming certain exemptions or deductions such as those u/s 11 which require timely filing. Since the assessee in the instant case has not filed its return along with the audit reports within the specified time, therefore, the CPC was justified in rejecting the claim of exemption u/s 11 of the Act. 13. It is the submission of the Ld. Counsel for the assessee that the provisions of section 12A(1)(ba) of the Act have been amended w.e.f. 01.04.2023 and after this amendment, the exemption can be claimed only if the return of income is furnished either u/s 139(1) or u/s 139(4) of the Act. It is his submission that this amendment was introduced to exclude the ca....
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....titution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via) shall furnish the return of income for the previous year in accordance with the provisions of sub-section (4C) of section 139 of the Act, within the time allowed under sub-section (1) or sub-section (4) of that section. b) amend clause (ba) of sub-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of subsection (4A) of section 139 of the Act, within the time allowed under subsection (1) or sub-section (4) of that section. e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years." (emphasis supplied by us) 15. We find after considering the Memorandum explaining the Finance Bill, 2023, the Kolkata Bench of the Tribunal in the case of DCIT vs. Bishnupur Public Education Institute (supra) has decided an identical issue and allowed the claim of exemption u/s 11 of the Act. We find in that case als....
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....at the same is filed within the time limit allowed u/s 139 of the Act which includes the return filed u/s 139(1) of the Act as well as 139(4) of the Act. The case of the assessee is covered by the decision of the co-ordinate Bench in case of Shri Mahudi Madhupuri Jain Vs. ITO (supra), wherein the co-ordinate Bench held as under: - "7. The provision of Section 12A(1)(ba) of the Act was amended w.e.f. 01.04.2023 and the time allowed for the filing of return was prescribed as 'within the time allowed under sub-section (1) of sub-section (4) of that section'. Thus, there is no doubt that for A.Y. 2023-24 onwards the time limit for filing of return of the trust includes not only the time limit for filing the original return u/s 139(1) of the Act but also the time as available for filing belated return u/s 139(4) of the Act. 8. The contention of the ld. AR is that the above amendment was only clarificatory in nature and that the return for the earlier years filed within the time limit u/s 139(4) of the Act also gets this benefit. On the other hand, the Ld. CIT-DR has contended that for the years prior to A.Y. 2023- 24 the benefit of exemption u/s11 of the Act is availab....
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....-section (1) of section 12A of the Act to provide that the person in receipt of the income shall furnish the return of income for the previous year in accordance with the provisions of subsection (4A) of section 139 of the Act, within the time allowed under subsection (1) or sub-section (4) of that section. e. These amendments will take effect from 1stApril, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years. 10. It is apparent from the above clarification that this amendment was introduced to exclude the category of updated returns of income u/s 139(8) of the Act. The requirement of Section 12A(1)(ba) of the Act for this year was that the return should be filed within the time allowed under that section (i.e. u/s. 139 of the Act). Section 139 provides time limit for filing of original return, belated return, revised return as well as updated return. Thus, all these category of returns were eligible for consideration under the general time line of section 139 of the Act. In order to exclude the category of updated return of income, this amendment was brought in to exclude the revised/updated category of retur....
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....s quoted as under: "The entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income-tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income-tax Act." 3. Thus, for a trust registered under section 12AA of the Act to avail the benefit of exemption under section 11 shall inter-alia file its return of income within the time allowed under section 139 of the Act. Accordingly, orders under section 143(1)(a) in those cases in which demand has been raised on this issue may please be rectified." (Emphasis supplied). 12. It is, thus, clear from the above Circular that exemption u/s 11 of the Act was available in respect of the return of income filed u/s 139 of the Act. This Circular does not mandate that the return has to be filed only within the t....
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....ut giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. However, there was no clarity as to whether the said return of income was to be filed within time allowed under section 139 or otherwise. 15.5 In order to provide clarity in this regard, further amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income tax Act. In view of the above excerpts of Finance Act, 2017 explaining the provisions of Finance Act, 2017 by the CBDT, clarified that amendment to section 12A of the Act was made so as to provide additional condition that the person in respect of income chargeable to income-tax claiming exemption shall furnish return of income within the time allowed u/s. 139 of the Act. She stated that the assessee's case is squarely covered by the CBDT Circular No.2/2018 dated 15.02.2018. 5. We noted that even in regard to representation received by CBDT for the applicability of amended provisions of secti....
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.... 1st April, 2018 and will, accordingly, apply in relation to assessment year 201 8-19 and subsequent years." 3. Additionally, an excerpt of circular 02/2018 dated 15.02.2018 "Explanatory Notes to the Provisions of the Finance Act, 2017" on insertion of clause (ba) in Sub section (1) of section 12A is quoted as under: "the entities registered under section 12AA are required to file return of income under sub-section (4A) of section 139 of the Income -tax Act, if the total income without giving effect to the provisions of sections 11 and 12 exceeds the maximum amount which is not chargeable to income-tax. Amendment to section 12A of the Income-tax has been made so as to provide for additional condition that the person in receipt of the income chargeable to income-tax shall furnish the return of income within the time allowed under section 139 of the Income -tax Act." 3. Thus, for a trust registered u/s 12AA of the Act to avail the benefit of exemption u/s 11 shall inter-alia file its return of income within the time allowed u/s 139 of the Act. Accordingly, orders u/s 143(1)(a) in those cases in which demand has been raised on this issue may please be rectif....
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.... well as return of income filed u/s 139(4) of the Act. So far as the filing of form no.10 is concerned during the assessment proceedings on 29.08.2018, we are of the considered view that the late filing of the said form is a procedural delay on the part of the assessee and cannot be used as ground for denying the legitimate exemption u/s 11(2) of the Act. The case of the assessee find force from the decision of Hon'ble High Court in case of CIT(E) Vs. M/s Indian Sugar Mills Association in ITAT/270/2023 (supra), wherein the Hon'ble Court has held that filing of form no.10B is a procedural provision. Similarly, in the case of Association of Indian Panel board manufacturer Vs. DCIT (supra), Hon'ble Gujrat High Court has held that the non-filing of audit report along with return of income which was at best procedural omission, could never lead to an impediment in law in claiming the exemption. Similarly, in the case of M/s Seth Chagan Mall Hira Lall Dugar Charitable Trust Vs. ITO (supra), the co-ordinate Bench held that filing of audit report is only a procedural provision and could not be used to reject the exemption u/s 11 of the Act. The operative part of the same is ext....
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....on) (supra) wherein Para 32 of the said judgment reads as follows: 32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Gujarat), wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had not produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause." 14. In the above judgment, Hon'ble Court has held that filing of audit report is directory in nature and its substantial compliance would suffice. The ld. Departmental Representative failed to place before us any other binding precedents of Hon'ble Jurisdictional High Court or the Hon'ble Apex Co....
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.... and (ba) to section 12 and there is no dispute at the end of the revenue authorities that the assessee is carrying on charitable activities, for which it has been granted registration u/s 12A of the Act, the benefit of section 11 and 12 should be given to the assessee and deductions claimed by the assessee are, therefore, allowed. Thus, Ground Nos.1 to 4 of the assessee are allowed." 2.2. We have also gone through the order passed by the cob of ITAT, Kolkata in Sasha Association for Craft Producers v. ITO in [IT Appeal No. 181 (Kol.) of 2021, dated 16- 8-2023] on the issue for non-submission of Form-10, the Hon'ble Member has allowed the appeal of the assessee. 3. Keeping in view the above cited decisions and considering the facts of the present case, we are of this view that the appellant is entitled to deduction and his claim cannot be denied only on this regard that Form-9A has been filed later on, not with the returned income. The appellant has been able to establish his ground of delay that the trustee responsible for handling tax related matters was hospitalized and he had been suffering from severe illness. It is also not in dispute that the copy of di....