SHREE GAJANAN MAHARAJ SHEGAON MANDIR VISHWASTH MANDAL,AT GAJANANMAHARAJ MANOIR vs. EXEMPTION WARD, AURANGABAD

3 In the present case, the appellant filed Form 10B on 04.09.2018, which was beyond the prescribed statutory timeline of one month prior to the due date of furnishing the return u/s 139(1) of the Act wherein the appellant had filed the return of income on 24.11.2017. The statutory requirement u/s 12A(1)(b) of the Act read with Rule 178 mandated that the audit report in Form 10B must be furnished electronically one month prior to the date for furnishing the return of income under u/s 139(1) of the Act. The failure to comply with this mandatory condition disentitles the assessee from claiming exemption u/s 11 of the Act. At the time of processing under section 143(1) of the Act or during rectification u/s 154 of the Act, the AO was bound to apply the law strictly, and the assessee's belated filing of Form 10/10B rendered it ineligible for exemption.

4 The Hon'ble Supreme Court in Principal Commissioner of Income Tax-III v. Wipro Limited (2022) categorically held that compliance with statutory preconditions for claiming deductions or exemptions is mandatory and not directory. In that case, the Court emphasized that filing of a declaration u/s 10B of the Act before the due date of filing the return was a sine qua non for availing the benefit, and belated compliance could not cure the defect. Applying the same ratio, the assessee's failure to file Form 10B within the prescribed time is fatal to its claim. The Revenue's action in denying exemption u/s 11 of the Act is thus fully justified, as the statutory mandate cannot be diluted by equitable considerations.

5 Therefore, in light of the facts and the binding precedent of the Hon'ble Supreme Court, the Revenue's stand is legally sound. The exemption u/s 11 of the Act is a conditional benefit, available only upon strict adherence to procedural requirements. Since the appellant failed to comply with the mandatory timeline of filing the Form 10B, the denial of exemption u/s 143(1) of the Act is in accordance with law and consistent with the principle ratio decidendi by the Hon'ble Supreme Court, in the case of Principal

6 In relation to the additional ground that if section 11 of the Act is denied the appellant should be allowed the benefit of deduction u/s 57 of the Act while determining the taxable income, it is submitted that deductions u/s 57 of the Act are admissible when computing taxable income chargeable under the head "Income from Other Sources." These deductions apply to specific expenses directly linked to earning such income, ensuring only net income is taxed and are allowed only for expenses incurred wholly and exclusively for earning the income, excluding capital or personal expenditures. They must relate to the relevant accounting year and cannot be claimed against exempt income. Charitable trusts whose income, on denial of section 11, is brought to tax under the normal provisions and where expenses are held not to satisfy the "wholly and exclusively for the purpose of making or earning such income" test u/s 57(iii) of the Act, particularly in situations where the so-called "application of income" for charitable purposes is treated as application (or appropriation) of income and not as an expenditure incurred to earn that income may lead to disallowance of deduction u/s 57 of the Act. During the appellate proceedings, as no material on record to show that the expenses were incurred directly linked to earning of income, hence, the ground no. 6 is also dismissed as per above discussion and material available.

In the result, the appeal of the appellant is Dismissed in the above terms.”

On the facts and in the circumstances of the case, the learned CIT(A) has erred in not directing the CPC/Juri ictional Assessing Officer to admit and take on record Form No. 10B and Form No. 10 filed by the Appellant before the completion of the assessment proceedings and in not granting the consequential exemption under section 11 of the Act, despite the fact that the audit was completed within the prescribed time and the delay was only in electronic filing. The learned CIT(A) failed to follow settled judicial principles and CBDT Circular No. 14 (XL-35) dated 11.04.1955, which mandate that legitimate claims should not be denied on account of mere procedural lapses, thereby causing grave hardship to the Appellant.

On the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding the action of the CPC in taxing the gross receipts of the Appellant trust as income, which is contrary to the settled principles of Income Tax Law that only real income and not gross receipts can be brought to tax, even under the head 'Income from Other Sources'. Therefore, the impugned order is bad in law and should be set aside.

On the facts & circumstances of the case and in law, without prejudice to above grounds of appeal, the learned CIT(A) has erred in not allowing the expenditure incurred by the Appellant trust under section 57 of the Act of INR 1,07,54,286/- and taxed the entire receipt of appellant trust as income from other sources, the CIT(A) may be directed to allow the 4 deduction of INR 1,07,54,286/- under section 57 of the Act while computing the total income.

The Appellant craves leaves to add/modify/amend/delete all/ any of the grounds of appeal and to lead and submit evidence/ additional evidences during the course of Appellate proceedings.”

Reference to the aforesaid decision has no connection whatsoever remotely to the facts of the present case and therefore, in the facts of the present case, the Tribunal has rightly followed the decision of this Court in case of Sarvodaya Charitable Trust v. Income Tax Officer (Exemption) in Special Civil Application No.6097 of 2020 decided on 09th December, 2020 as well as the decision in case of Social Security Scheme of GICEA (supra) to uphold the decision of the CIT (Appeals), wherein this Court has held that the approach of the authority in such type of cases should be equitable, balancing and judicious. In the facts of the case. when the assessee has already filed the audit report in Form 10B electronically on 27.02.2021 during pendency of appellate proceedings along with copy of audited financial statements, delay in filing the said form is rightly condoned by CIT(A) and the Tribunal.

In such circumstances, we are of the opinion that the Tribunal has not committed any error by not following the decision in case of M/s. Wipro Limited (supra) as referred to and relied upon by learned advocate for the appellant- Revenue, and has rightly followed the decision of this Court in case of Social Security Scheme of GICEA (supra).

In view of the foregoing reasons, we are of the opinion that no question of law much less any substantial question of law arises from the impugned order of the Tribunal. The Appeal is accordingly dismissed."