Loading judgment…
Facts
The assessee, a charitable trust registered u/s 12A, claimed exemption u/s 11. It filed Form 10 for income accumulation u/s 11(2) with a six-day delay and stated a general purpose of "education." The Assessing Officer disallowed the exemption citing both the delay and the vagueness of the stated purpose, a decision upheld by the Ld. CIT(A).
Held
The Tribunal condoned the delay in filing Form 10, citing Supreme Court and High Court precedents that such forms can be filed before assessment completion. However, regarding the lack of specificity for the purpose of accumulation (i.e., "education"), the Tribunal remitted the issue back to the Assessing Officer for verification, allowing the assessee an opportunity to provide detailed documentary evidence.
Key Issues
1. Whether a delay in filing Form 10 for income accumulation under Section 11(2) of the Income Tax Act, 1961, disallows the exemption. 2. Whether a general purpose like "education" for income accumulation is specific enough to claim exemption under Section 11(2).
Sections Cited
11, 11(2), 12A, 143(2), 143(3), 142(1)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “G” BENCH MUMBAI
Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL
Present for: Assessee : Ms. Simran Dhawan, Advocate and Ravi Ganatra, CA Revenue : Shri Arun Kanti Datta, CIT DR Date of Hearing : 02.07.2025 Date of Pronouncement : 22.09.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1068043238(1), dated 28.08.2024 passed against the assessment order by Income Tax Officer, Exem ward-2(3), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 14.11.2019 for Assessment Year 2017-18.
Shree Ghatkopar Sarvajanik Jivdaya Khatu AY 2017-18 2. Grounds taken by the assessee are reproduced as under: “1. On the facts and the circumstances of the appellant company's case and in law, the Ed. Commissioner of Income Tax (Appeals), NFAC has erred in not quashing the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 on 14.11.2019 2. On the facts and the circumstances of the appellant company's case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the disallowance of exemption claimed u/s 11(2) of the Income Tax Act, 1961 amounting to Rs. 75,00,000/-made by the Assessing Officer merely due to delay of 6 days in filing Form no. 10 3. On the facts and the circumstances of the appellant company's case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the view of the Assessing Officer that the purpose of accumulation u/s 11(2) of the Income Tax Act, 1961 as declared in Form No. 10 does not warrant the allowance of a deduction by way of accumulation us 11(2) of the Income Tax Act, 1961. It was alleged by the Assessing Officer that the purpose of accumulation stated as 'Education' was not specific. In this regard, it is stated that once assessee has accumulated income with a specific purpose and such purpose is specified in the main objects of the trust, then the Assessing Officer cannot deny such accumulation of income merely for the reason that purpose specified in Form No. 10 is vague and general in nature. As long as objects of the trust provide for such purpose, then the assessee can accumulate funds for the purpose which is specified in trust deed. This contention of the appellant has been upheld in the following judicial pronouncements: a) Decision of Hon'ble Gujarat High Court in the case of CIT (Exemption) vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust reported in [2019] 102 taxmann.com 122 where it was held that lack of declaration in Form No.10 regarding specific purpose for which funds were being accumulated by the assessee trust would not be fatal to the exemption claimed u/s.11(2) of the Act. The Hon'ble Supreme Court reported in (2019) 263 Taxmann.com 247(SC) has dismissed SLP filed by the Department in the above case and has upheld the findings of the Hon'ble Gujarat High Court. b) Decision of Hon'ble Income Tax Appellant Tribunal, Chennai Bench 'C' in the case of Arhatic Yoga Ashram Management Trust vs. Income Tax Officer (Exemptions) Ward 1, Chennai reported in I.T.A.No.2920/Chny/2017. c) Decision of the Hon'ble High Court of Delhi in the case of Bharat Kalyan Pratisthan vs. Director of Income-tax (Exemption) reported in [2007] 160 Taxman 216 (Delhi).”
Shree Ghatkopar Sarvajanik Jivdaya Khatu AY 2017-18 3. Brief facts of the case are that assessee is a trust registered as a charitable organisation with DIT(E), Mumbai, u/s.12A vide registration No.TR/3403, dated 29.11.1976. It filed its return of income on 13.11.2017 along with income and expenditure account, balance sheet and audit report in Form No.10B reporting total income at nil. Assessee claimed exemption u/s.11 of the Act. Assessee submitted Form No.10 on 13.11.2017 whereby it had claimed deduction u/s.11(2) amounting to Rs.75 lakhs for accumulation of income. According to the ld. AO, due date for filing Form 10 u/r. 17 of the Income Tax (Rules), 1962 (The Rules) was 07.11.2017 which in effect was filed on 13.11.2017 i.e., with a delay of six days and therefore making assessee ineligible for claim of exemption u/s.11(2). Explanations were called for which were duly replied with. Ld. AO also noted that in the Form No.10 so filed, the purpose for accumulation mentioned by the assessee was not specific as it only mentioned “education”. According to him, accumulation u/s.11(2) should be done on specific purpose. He thus, held that the language of reason for accumulation given by the assessee in Form No.10 renders the assessee not fit for claiming deduction towards accumulation u/s.11(2). Thus, on these two counts, i.e., delay in filing of Form-10 and non specific purpose given therein, claim of exemption u/s. 11 was disallowed. Ld. CIT(A) in the first appeal took note of the facts and observation of ld. AO and in a cryptic and non-speaking manner dismissed the appeal of the assessee, sustaining the disallowance. Aggrieved, assessee is in appeal before the Tribunal.
Shree Ghatkopar Sarvajanik Jivdaya Khatu AY 2017-18 4. Before us, ld. Counsel for the assessee reiterated the above stated facts acknowledging that there is a delay in filing Form No.10 though there is no prescribed limitation for such a filing. According to him, Form no.10 was filed much before the issue of notice u/s. 143(2) and 142(1) and was available with the ld. AO before the completion of assessment proceedings. Filing of such form is a mere procedural compliance so as to enable the ld. AO for entertaining the claim u/s.11 made by the assessee. He placed reliance on the decision of Hon’ble Supreme Court in the case of CIT vs. The Nagpur Hotel Owners Association [2001] 247 ITR 201 (SC) wherein Hon’ble Supreme Court while dealing with requirement on filing of Form No.10 in reference to section 11(2) held that even though there is no valid limitation prescribed under the Rules for filing of Form No.10, yet such an intimation has to be furnished before the assessing authority any time before the assessment proceedings so as to enable the authority to entertain the claim of assessee u/s.
Relevant observations of Hon’ble Supreme Court on this issue as contained in para-6 are extracted below: “6. It is abundantly clear from the wordings of sub-section (2) of section 11 that it is mandatory for the person Taming the benefit of section 11 to intimate to the assessing authority the particulars required under rule 17 in Form No. 10 of the Act. If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from section 11 and is subjected 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, in our opinion, 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 ito valid limitation prescribed under the Act and the Rules, even then, in our opinion, 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 this income, the assessing authority cannot entertain the claim of the assessee under section 11, therefore. compliance of the requirement of the Act will have to be any time before the assessment proceedings.”
4.1. Ld. Counsel also referred to the decision of Hon’ble Jurisdictional High Court of Bombay in the case of CIT vs. Sakal Relief Fund [2017] 81 taxmann.com 396 (Bom) who followed the decision of the Hon’ble Supreme Court in the case of The Nagpur Hotel Owners Association (supra). Relevant observations of Hon’ble Jurisdictional High Court as contained in para-13 are also extracted below for ready reference: “In fact, we note that the Apex Court in the above one has served that for the purposes of excluding an income of the trust from the net of taxation, the intimation in Form 10 has to be filed with the Assessing Officer before he completes the Assessment. In fact, it is the comext of the above finding of the Apex Court, that it observed that Form 10 has to be filed before completion of Assessment Proceedings. In fact, the Delhi High Court in the case of Association of Corporation & Apex Societies of Handlooms (supra) has also relied upon and so understood the decisions of the Apex Court in Nagpur Hotel Owners Association (supra).”
4.2. On the second issue relating to inadequacy of specific mention of the purpose for accumulation in Form No.10 as alleged by ld. AO, ld. Counsel submitted that assessee is engaged in charitable activity relating to education and therefore, mentioned the purpose of accumulation as “education”. Assessee also placed on record, minutes of the meetings of its trustees which according to the ld. AO was not sufficient. According to him, lack of detailed description cannot be held against the assessee to deny the claim of exemption u/s.11. To buttress his contentions, he placed reliance on the decision of Hon’ble High Court of Gujarat in the case of CIT vs. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust [2019] 102 taxmann.com 122 (Guj) which squarely covers the case of assessee wherein it was held that lack of declaration in Form No.10 regarding specific purpose for which funds were accumulated by the assessee trust would not be Shree Ghatkopar Sarvajanik Jivdaya Khatu AY 2017-18 fatal to exemption claimed u/s.11(2). Relevant extract from the said decision as contained in para-8 are reproduced below: “8. Section 11(2) of the Act provides that eighty five percent of the income which is not utilized by the Trust for charitable or religious purposes would not be included in the total income of the previous year of receipt of the income provided the conditions laid down in clause (a) to (c) contained therein are satisfied. Clause (a) in particular, which is applicable, provides that such person furnishes the statement in the prescribed form and in prescribed manner to the Assessing Officer staving 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. Undoubtedly therefore, the statement of purpose for which the income is being accumulated or set apart is one of the requirements which must be satisfied before the assessee can avail the benefit under sub-section (2) of section 11 of the Act. However, that by itself would not mean that any inaccuracy of lack of full declaration in the prescribed format by itself would be fatal to the claimant. The prime requirement of this clause is of stating of the purpose for which the income is being accumulated or set apart. In the present case we are prepared to accept the Revenue's stand that the declaration made in Form 10 by the assessee was not sufficient to fulfill this requirement However, as noted, during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain the position in response to which, the assessee in detail pointed out background under which the board of trustees had met, considered the material and eventually passed a formal resolution setting apart the funds for the ongoing hospital projects of the Trust and for modernization of the existing hospitals. There was thus a clear statement made by the assessee setting out the purpose for which the income was being set apart. We therefore do not find any error in view of the Tribunal. Tar Appeals are dismissed”
Per contra, ld. CIT DR asserted the observation of the ld. AO, so as to uphold the disallowance made.
We have heard both the parties and perused the material placed on record. We have also given our thoughtful consideration to the judicial precedents relied upon. Admittedly, it is a fact on record that there was a time lag between the due date prescribed for filing of return and actually filing done by the assessee. Also, the reason given for accumulation in Form No.10 mentioned only “education”. Upon calling of details by ld. AO on both the issues, assessee explained its case by furnishing the relevant documents in the form of minutes of Shree Ghatkopar Sarvajanik Jivdaya Khatu AY 2017-18 the meetings of Board of Trustees as well as details of charitable objects for which it is set up. As regards the observation of ld. AO of denying the claim of exemption u/s.11 due to delay in filing of Form No.10, the fact of the matter is that it was available on record much prior to the issue of notice u/s.143(2) and completion of impugned assessment proceedings. This aspect is already dealt by Hon’ble Supreme Court in the case of The Nagpur Hotel Owners Association (supra) as well as by the Hon’ble Jurisdictional High Court of Bombay in the case of Bochasanwasi Shri Akshar Purshottam Public Charitable Trust (supra). Respectfully, following the said two decisions, the delay noted by the ld. AO for dislodging the claim of assessee u/s.11 has no grounds to hold its feet. The said delay is thus, condoned.
6.1. On the other aspect of the issue, i.e., inadequacy of specific detailing on the purpose of accumulation by merely stating as “education”, we do take note of the decision of Hon’ble High Court of Gujarat which supports the case of the assessee. However, fact of the matter remains that ld. AO has to enquire into the conditions which has to be duly complied with as prescribed u/s.11. Each year of assessment is an independent year and the AO is required to verify and examine the conditions prescribed u/s.11 which the assessee has to comply with for claiming the exemption. In the given set of facts, in the interest of justice and fair play, we find it appropriate to remit this specific aspect of the issue back to the file of ld. AO for the limited purpose of verification and examination for the conditions prescribed u/s.11 for the claim of exemption u/s.11 to ensure that the purpose for accumulation is explained by the assessee, corroborating by relevant documentary evidences. Needless to say, assessee be given reasonable opportunity of being heard to substantiate its claim by
In the result, appeal of the assessee is partly allowed.