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Facts
The assessee, an educational institution registered as a charitable organization, filed its return for AY 2017-18 declaring Nil income. It claimed exemptions under Section 11 for amounts deemed applied for charitable purposes and for accumulated income. The Assessing Officer denied the exemption as the assessee failed to file Forms 9A and 10 electronically within the prescribed time.
Held
The Tribunal held that while the primary condition for exemption is applying income for charitable purposes, accumulation is permissible under certain conditions and requires filing of specific forms. However, considering the CBDT Circulars extending the applicability for condoning delays in filing these forms, the Assessing Officer is directed to allow the claim of exemption.
Key Issues
Whether the exemption under Section 11 can be denied solely on the ground of belated filing of Forms 9A and 10, despite CBDT circulars providing for condonation of delay?
Sections Cited
11, 13, 119(2)(b), 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SUNIL KUMAR SINGH, HON’BLE
Assessee by : Shri Malav P. Seth, C.A. Revenue by : Shri Dr. Kishor Dhule, CIT D/R सुनवाई की तारीख/Date of Hearing : 09/01/2025 घोषणा की तारीख /Date of Pronouncement: 13/01/2025 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order dated 19/09/2024 by the NFAC, Delhi, [hereinafter ‘the ld. CIT(A)’], pertaining to AY 2017-18.
2. The grievance of the assessee reads as under:- “1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in no appreciating that the amount of Rs 18,83,882/- is deemed to have been applied to charitable or religious purposes in India and thereby eligible for exemption u/s 11. The learned CIT(A) erred in not appreciating that the appellant had filed Form no. 9A anc Form no. 10 though belatedly but before the completion of the assessment proceedings and thus the exemption claimed cannot be denied. 2. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the amount of Rs 75,35,529/- accumulated is eligible for exemption u/s 11. The learned CIT(A) erred in not appreciating that the appellant had filed Form no. 9A and Form no. 10 though belatedly but before the completion of the assessment proceedings and thus the exemption claimed cannot be denied. 3. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.”
Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record, duly considered in the light of Rule 18(6) of the ITAT Rules, 1963.
Briefly stated the facts of the case are that the assessee filed its return of income on 09/11/2017 along with the income and expenditure account, balance sheet and Form No. 10B, declaring total income at Rs. Nil. The assessee is a registered charitable organization with ld. CIT(E) u/s 12A of the Act. 5. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. The assessee runs an educational institution and on perusal of the computation of income, the AO noticed that the assessee has claimed exemptions, namely, Rs. 18,83,882/- being amount deemed to have been applied for charitable purposes in India and Rs. 75,35,529/- being amount accumulated u/s 11(2) of the Act. On going through the e-filing site, the AO found that the assessee has not filed From No. 9A as well as Form 10, electronically. Since the assessee had not filed the prescribed form, the claim of exemption was denied which was confirmed by the ld. CIT(A). 6. The CBDT vide Circular No. 7/2018, has issued directions as under:- “ CIRCULAR NO. 7/2018 [F.NO.197/55/2018-ITA-I], DATED 20-12-2018 Under the provisions of section 11 of the 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 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.
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 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 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.
4. Representations have been received by the Board/ field authorities stating that the 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 6. 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 any one or more of the forms or modes specified in sub-section (5) of section 11 of the Act.” 5.1. And for the assessment year under consideration Circular No. 30/2019 was issued which, reads as under:- “ CIRCULAR NO. 30/2019 [F. NO. 197/55/2018-ITA-I], DATED 17-12-2019 In partial modification of this office Circular No.7 of 2018, dated 20th December, 2018 issued vide F. No. 197/155/2018-ITA-I on the 4 abovementioned subject, it is decided to extend the applicability of this Circular to Assessment Year 2017-18.”