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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
ORDER PER OM PRAKASH KANT (AM): This appeal has been preferred by the assessee against the order dated 10/09/2021 passed by the National Faceless Appeal Centre (NFAC), Delhi [in short, the Ld.CIT(A)] for assessment year 2016-17, raising following grounds:-
2 ITA 2724/Mum/2022 “On the facts and in the circumstances of the case and in law 1. The Learned CIT [A] has erred in facts and in law while passing order under 143(3) of the act.
2. The Learned CIT (A) has erred in facts and by law by not considering the appellant's written request to a submit copy of confirmation and direction letter which was submitted to Assessing officer of corpus fund & also not considering the application for condonation of delay in filing form 10 electronically filed with CIT (E) while disposing the matter.”
2. During the course of hearing, the assessee revised its grounds as under:- “1. Disallowance of Rs.24,00,000/- towards corpus donation 1.1. The Ld CIT(A) has erred in law and/or on facts in upholding the disallowance of Rs.24,00,000/- towards corpus donation. 1.2. The Ld CIT(A) ought not to have upheld the disallowance of Rs.24,00,000/- towards corpus donation.
2. Disallowance of claim of Rs.1,29,13,9907- u/s 11(2) 2.1. The Ld CIT(A) has erred in law and/or on facts in confirming / upholding the disallowance of claim of Rs.1,29,13,9907- u/s 11(2) made by AO. 2.2. The Ld CIT(A) has erred in law and/or on facts in appreciating the fact that appellant was prevented by reasonable & sufficient cause for filing form 10 electronically alongwith return of income u/s 139(1) of the Act, being the first year for mandatory e-filing of form 10. 2.3. The Ld CIT(A) has erred in law and/or on facts in appreciating that the form 10 was successfully filed and requirement was well complied before passing of assessment order u/s 143(3) so that it was sufficient compliance within the eye of law. 2.4. The Ld CIT(A) has erred in law and/or on facts in appreciating the fact that CBDT took liberal approach in condoning the delay in filing of form 10 electronically. 2.5. The Ld CIT(A) ought not to have upheld the rejection of claim u/s 11(2) made by AO.”
Briefly stated, facts of the case are that the assessee e-filed its return of income on 16/10/2016 declaring total income at Nil. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short, ‘the Act’) were issued and complied with.
3 ITA 2724/Mum/2022 4. The assessee is a ‘trust’ registered under section 12AA of the Actas a charitable institution. For claiming exemption of income of the trust under the provisions of the Act, the assessee was required to apply certain percentage of income(i.e. 85% during year under consideration) for the purposes of object of trust and balance to be accumulated as prescribed under the Act and in case of failure to so accumulate, the assessee was required to intimate the Assessing Officer in Form No.10 as prescribed under section 11(2) of the Act. For ready reference, relevant part of section11(2) is reproduced as under: "[(2) "Where "eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or 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 4 ITA 2724/Mum/2022 not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded.] 5. Under the section 11(2) of the Act, Rule 17 has been framed under Income Tax Rules, 1962 and Form No.10 has been prescribed for filing electronically. For ready reference, said Rule 17 is reproduced as under:- “17.(1) The option to be exercised in accordance with the provisions of the Explanation to sub-section (1) of section 11 in respect of income of any previous year relevant to the assessment year beginning on or after the 1st day of April, 2016 shall be in Form No.9A and shall be furnished before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income of the relevant assessment year. (2) The statement to be furnished to the Assessing Officer or the prescribed authority under sub-section (2) of section 11 or under the said provision as applicable under clause (21) of section 10 shall be in Form No.10 and shall be furnished before the expiry of the time allowed under sub- section (1) of section 139, for furnishing the return of income. (3) The option in Form No.9A referred to in sub-rule (1) and the statement in Form No.10 referred to in sub-rule2) shall be furnished electronically either under digital signature or electronic verification code. (4) The Principal Direction General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall – (i) specify the procedure for filing of Forms referred to in sub-rule (3); (ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (3), for purpose of verification of the person furnishing the said Forms; and 5 ITA 2724/Mum/2022 (iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Forms so furnished.]”
6. The Assessing Officer noticed that the Form No.10 prescribed under the Income-tax Rules, which the assessee was required to upload electronically was not done and, therefore, in view of the provisions of the Act, the Assessing Officer denied the benefit of the application of fund and disallowed the exemption under section 11(2) of the Act for Rs.1,29,13,990/-. The Assessing Officer also made disallowance for the corpus donation of Rs.24 lakhs. On further appeal, the Ld.CIT(A) upheld the addition made by the Assessing Officer.
Before us, the Ld.Counsel of the assessee filed a paper book containing pages 1-22 and submitted that the form No.10 prescribed under the I.T. Rules for reporting accumulation of income exceeding the prescribed limit of 85%,was filed manually by the assessee on 14/10/2016, i.e. prior to the date of filing return of income on 16/10/2016. The Ld.Counsel referred to the said copy of the Form No.10, which is available at pages 2-3 of the paper book. But according to the Assessing Officer, the Form No.10 was required to be filed electronically alongwith the return of income under the Rules prescribed and, therefore, the assessee had not complied with the Rules. Whereas according to the Ld.Counsel of the assessee, the assessee had also filed the Form No.10 electronically on 21/12/2018. He further submitted that Central Board of Direct Taxes (in short, CBDT) in circular No.7/2018 extended the period for filing the Form No.10 and also directed the 6 ITA 2724/Mum/2022 Commissioners of Income-tax (Exemption)(in short, Ld.CIT(E) for condoning the delay in filing of the Form No.10. He submitted that assessee had also filed a request on 21/12/2018 before the Ld.CIT(E) for condoning the delay in filing the Form No.10,however, the same is still pending. The Ld.Counsel relied on the decision of the Tribunal in the case of Shree Dadar Jain vs Income-tax Officer (E), Mumbai reported in (2019) 111 taxmann.com 272(Mumbai-Trib.) and submitted that Tribunal has accepted the Form No.10 filed manually and allowed the claim of deduction under section 11(1) of the Act.
On the other hand, the Ld.Departmental Representative relied on the order of the Ld.CIT(A).
We have heard rival submissions of the parties on the issue in dispute and perused the relevant materials on record. The only dispute in the case is that whether the Form No.10 filed manually by the assessee should be considered as in compliance to the requirement of law. We find that for the for the Assessment Year under consideration, the CBDT in Instruction No.7 of 2018 permitted the CIT(E) to condone the delay in filing the Form No.10. The relevant part of the said circular(supra) is reproduced as under: - “5. Accordingly, in supersession of earlier Circular/Instruction issued in this regard, with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred under section 119(2)(b) of the Act, the Central Board of Direct Taxes hereby authorizes the Commissioner of Income-tax, to admit belated applications in Form No.9A and Form No.10 in respect of AY 2016- 17 where such Form No.9A and Form No.10 are filed after the 7 ITA 2724/Mum/2022 expiry of the time allowed under the relevant provisions of the Act.” (emphasis supplied externally) 10. The Ld.CIT(A) has mainly proceeded on the ground that application of the assessee filed before the Ld.CIT(E) for considering the delay in filing the form No. 10 electronically has not been adjudicated. We find that in this case, the request has been filed by the assessee on 21/12/2018 for considering the delay in filing the form electronically but before us, the Ld.DR failed to confirm the status of the same whether pending or disposed off. In our opinion, the assessee cannot be left at the mercy of ld CIT(E) for want of justice for an indefinite period if the Ld.CIT(E) does not decide the application for condonation of delay in filing Form No.10. We find that the Tribunal in the case of Shree Dadar Jain vs Income-tax Officer (E), Mumbai (supra) has held that the Form No.10 filed manually followed by the Form filed electronically, amounts to due compliance by the assessee. The relevant finding of the Tribunal (supra) is reproduced as under:- 8.18 The assessee did filed Form No. 10 in physical mode on 21.12.2016 before the AO during the course ofassessment proceedings which culminated into an assessment order dated 28.12.2016 passed by the AO u/s.143(3) of the 1961 Act. The assessee also filed Resolution dated 10.02.2014 of the Board of Trustee authorizing accumulation of income to the tune of Rs. 6.50 crores for purchase of property for temple, dharmshala etc.. Thus, the assessee did substantial compliance of requirements of filing form no. 10 with the AO before the culmination of assessment proceedings. However, there was an amendment in proviso to Rule 12(2) of the 1962 Rules as it did not file Form No. 10 to be filed electronically w.e.f. 01.04.2014. This is the first year for compliance of saidamended Rule to file Form No. 10 electronically. The assessee however defied proviso to Rule 12(2) of the 1962Rules as it did not file Form No. 10 electronically before the conclusion of the assessment proceedings by theAO. The assessee however later on 07.11.2017 e-filed 8 ITA 2724/Mum/2022 Form No. 10 electronically. The said Form No. 10 filedelectronically along with Resolution dated 10.02.2014 of the Board of Trustee authorising accumulation ofincome to the tune of Rs. 6.50 crores for purchase of property for temple, dharmshala etc. were duly filed beforelearned CIT (A) before the culmination of first appellate proceedings vide appellate order dated 08.02.2019. Wehave observed that the assessee has stated that it is due to oversight that it skipped its attention that from this(assessment year onwards i.e. with effect from 01.04.2014, there was an amendment in proviso to Rule 12(2) requiring it to file Form No. 10 electronically which amendment was applicable from 01.04.2014. Further, it isclaimed that Rule 17 was not amended simultaneously when aforesaid amendment in proviso to Rule 12(2) of the1962 Rules took place. We have also observed that CBDT vide its circular number 7 of 2018 has taken a liberalview in condoning delays in electronic filing of Form No. 10 albeit it is for ay: 2016-17. We are presently concerned with ay: 2014-15. CBDT circular no. 7 of 2018 dated 20.12.2018(F.No. 197/55/2018-ITA-I) wherein CBDT has relaxed the provisions relating to filing of form no. 10 electronically for AY 2016-17, is reproduced hereunder:— "Sub: Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form no. 10 and Form No. 9A for AY 2016-17 Under the provisions of section 11 of die Income-tax Act, 1961 (hereafter Act') the primary condition for grant of exemption to trust or institution in respect of income derived from property held under such trust is diat 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.
The Finance Act, 2015 amended section 11 and section 13 of the Act with effect from 01.04.2016 (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 received during that year or any other reason, then on exercise of the option by submitting in Form No.9A electronically by the trust/institution 9 ITA 2724/Mum/2022 on or before the due date of furnishing the return of income, such income shall be deemed to have been applied for charitable or religious purpose .
Representations have been received by the Board/field authorities stating that die Form No. 9A and Form No.10 could not be filed in the specified time for AY 2016-17, which was the first year of e-filing of these forms. It has been requested that the delay in filing of Form No. 9A and Form No.10 for AY 2016- 17 may be condoned under section 119(2) (b) of the Act.
Accordingly, in supersession of earlier Circular/Instruction issued in this regard, with a view to expedite the disposal of applications filed by trusts for condoning the delay and in exercise of the powers conferred under section 119(2)(b) of the Act, the Central Board of Direct Taxes hereby authorizes the Commissioners of Income-tax, to admit belated applications in Form No. 9A and Form No.10 in respect of AY 2016-17 where such Form No. 9A and Form No. 10 are filed after the expiry of the time allowed under the relevant provisions of the Act.
The Commissioners will, while entertaining such belated applications in Form No. 9A and Form No. 10, satisfy themselves that the assessee was prevented by reasonable cause from filing of applications in Form No. 9A and Form No. 10 within the stipulated time. Further, in respect of Form No. 10 the Commissioners shall also satisfy themselves that the amount accumulated or set apart has been invested or deposited in anyone or more of the forms or modes specified in subsection (5) of section 11 of the Act." 8.19 We have already observed undisputed position between rival parties that activities of the assessee are genuine. There is no dispute between rival parties as to the genuineness of the deduction of Rs. 6.50 crores claimed by the assessee u/s. 11(2). It is also undisputed that purpose of accumulation of income u/s. 11(2) of Rs. 6.50 crores was to purchase property for furtherance of activities and objects of the assessee. It is also undisputed that die assessee invested said accumulation of income in one of the modes prescribed u/s. 11(5) of the 1961 Act by taking FDR's with banks. It is also undisputed that the assessee did purchase property in immediately succeeding financial year for Rs. 16.50 crores and the aforesaid accumulation of income of Rs. 6.50 crores u/s. 11(2) stood applied in immediately succeeding year for the purposes of the objects and activities of the assessee trust. Thus, keeping in view the totality of the entire factual matrix and circumstances of the case, we are of the considered view that the assessee is entitled for deduction u/s.