SHREE DADAR JAIN PAUSHADHSHALA TRUST,MUMBAI vs. ITO (E_ - 1(2), MUMBAI

आयकर अपीऱीय अधिकरण “G” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER आयकर अपीऱ सं./I.T.A. No.2061/Mum/2019 (नििाारण वर्ा / Assessment Year: 2014-15) बिाम/ Shree Dadar Jain ITO(E)-1(2) Paushadhshala Trust, Room No. 501, 5 th Floor, Aaradhana Bhavan, Piramal Chambers, v. 289, S K Bole Road, Lalbaug, Parel, Dadar West, Mumbai-400012 Mumbai-400028 स्थायी ऱेखा सं./ PAN: AAATS7848E (अपीऱाथी /Appellant) .. (प्रत्यथी / Respondent) Assessee by: Shri. Bhadresh Doshi Revenue by: Shri. Abhi Rama Karthikeyn S. सुनवाई की तारीख /Date of Hearing : 03.06.2019 घोषणा की तारीख /Date of Pronouncement : 19.08.2019 आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member: This appeal, filed by assessee, being ITA No. 2061/Mum/2019, is directed against appellate order dated 08/02/2019, passed by learned Commissioner of Income Tax (Appeals)-3, Mumbai (hereinafter called ―the CIT(A)‖) in appeal number CIT(A)-3/IT-10394/2017-18, for assessment year 2014-15, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 28.12.2006 passed by learned Assessing Officer (hereinafter called ―the AO‖) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called ―the Act‖) for ay:2014-15. 2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called ―the tribunal‖) read as under:-

Page 2 of 33 ITA NO. 2061/MUM/2019 “1. On the facts and circumstances of the case and in law, the learned CIT(A) - 3, Mumbai erred in denying the appellant to claim the deduction u/s 11(2) of 6,50,00,000/-. 2. Without prejudice to ground raised above and on facts and circumstances of the case and in law the appellant may be granted the exemption in respect of deemed application of income as provided in Explanation to Section 11(1) with respect to the income of Rs. 6,50,00,000 which is applied for religious purposes in the immediately subsequent previous year. 3. On the facts and circumstances of the case and in law learned CIT(A) erred in restricting the exemption u/s. 11(1)(a) on account of application of income for the religious objects of the trust to Rs. 24,79,348 as against exemption claimed for Rs. 91,86,875.” 3. The assessee is a religious trust registered with the Director of Income Tax(Exemption),Mumbai u/s. 12A vide registration no. TR/614 dated 24.08.1979. The trust is registered with the Charity Commissioner , Mumbai. The main object of the trust is to establish, to do administration of, to manage, to do management of, to support, all in conformity with the usages of Shwetamber Murtipujak Tapagachhiya Jain Principles religious educational institution and get done and encourage all social and religious work falling within the derives satkhshetra etc.. 3.2 The assessee had filed its return of income for impugned assessment year on 25.3.2015 along with Income and Expenditure Account, Balance Sheet and Audit Report in Form no. 10B declaring total income at Rs. 1,94,770/-. The return of income was processed u/s 143(1) of the 1961 Act. The case was selected for framing scrutiny assessment and notices u/s. 143(2) and u/s. 142(1) were issued by AO to the assessee, which were duly served on the assessee. 3.3 The AO observed during the course of assessment proceedings conducted u/s 143(2) read with Section 143(3) of the 1961 Act from the perusal of the statement of total income computed by assessee

2 | P a g e

Page 3 of 33 ITA NO. 2061/MUM/2019 that the assessee has claimed deduction u/s. 11(2) of the 1961 Act, amounting to Rs. 6,50,00,000/- but the assessee has not filed Form no. 10 electronically alongwith Resolution of Trustee. The AO was of the view that deduction u/s. 11(2) of Rs. 6,50,00,000/- could only be allowed when assessee had filed Form No. 10 electronically for accumulation of income. The AO asked assessee to explain as to why accumulation of income of Rs. 6,50,00,000/- claimed by assessee u/s 11(2) of the 1961 Act should not be disallowed. 3.4 The assessee explained that assessee has claimed deduction u/s. 11(2) of the 1961 Act to the tune of Rs. 6,50,00,000/- and had prepared Form no. 10 in physical form . Thus, it was claimed that it was merely procedural lapse and the assessee should not be denied deduction u/s. 11(2) of the Act to the tune of Rs. 6.50 crores. 3.5 The AO was of the view that assessee has to file declaration in Form no. 10 electronically along with Resolution of Trustee, which the assessee had failed to explain reasons for non furnishing of said form no. 10 electronically . The AO observed that as per Rule 17 of the Income-tax Rules, 1962 and as per Form No. 10 , notice for ‗accumulation of income‘ by charitable trust or institution was to be furnished before the expiry of time allowed u/s 139(1) of the 1961 Act. The AO observed that under proviso to Rule 12(2) of the 1962 Rules , notice shall be furnished electronically . The AO observed that since assessee had failed to file Form No. 10 electronically before expiry of time allowed u/s. 139(1) of the Act , the AO denied deduction claimed by assessee for accumulation of income u/s. 11(2) of the 1961 Act, to the tune of Rs. 6,50,00,000/- which stood added to the income of the assessee, vide assessment order dated 28.12.2016 passed by the AO u/s 143(3) of the 1961 Act. 3.6 The AO further disallowed expenses to the tune of Rs. 67,07,527/- claimed by the assessee to have been incurred on objects of the trust as per Income & Expenditure account of the assessee , vide

3 | P a g e

Page 4 of 33 ITA NO. 2061/MUM/2019 assessment order dated 28.12.2016 passed by AO u/s. 143(3) of the 1961 Act. 4. Being aggrieved by an assessment framed by the AO vide assessment order dated 28.12.2016 passed u/s 143(3) of the 1961 Act, the assessee filed first appeal before Ld. CIT(A) . The assessee submitted before learned CIT(A) that assessee has duly filed Form no. 10 along with Resolution passed by Board of Trustees during the course of assessment proceedings before the AO on 21.12.2016 although it was filed in physical mode and not electronic mode. The assessee submitted that all the requirements for claiming accumulation of income as stipulated u/s 11(2) were satisfied except that Form No. 10 was not submitted before the stipulated time as provided u/s 139(1) of the 1961 Act but the same was filed in physical mode before the AO before the completion of assessment. It was submitted that Form No. 10 was physically submitted before the AO on 21.12.2016 which was prior to completion of assessment proceedings by the AO on 28.12.2016. The assessee submitted that it decided to acquire another premises in the nearby area as existing premises was not enough to carry on the objects and activities of the assessee‘s trust. The assessee submitted that it entered into an agreement for purchase of property at D S Babrekar Marg known as Avinash Building for a total consideration of Rs. 16.50 crores for which it entered into an agreement for purchase on 13.06.2014 and final deed of conveyance was executed on 30.10.2014. It was submitted that the assessee set aside a sum of Rs. 6.50 crores for said acquisition for which negotiations were earlier going on during the year under consideration. The assessee duly submitted copies of purchase agreements and final deed of conveyance before learned CIT(A). The assessee submitted that acquisition costs for the said property were paid in two instalments and income-tax was also deducted at source u/s 194IA of the 1961 Act while making payments for acquisition of this property, as details hereunder :-

4 | P a g e

Page 5 of 33 ITA NO. 2061/MUM/2019

Date Amount(Rs.) 11/6/2014 8,16,75,000 28/10/2014 8,16,75,000 Total 16,33,50,000

4.2 The assessee submitted before learned CIT(A), copies of bank statements. The assessee also submitted before learned CIT(A) that the aforesaid amount of income of Rs. 6.50 crores accumulated were utilised in immediately subsequent assessment year. The assessee also filed Form No. 10 electronically on 07.11.2017, when the appellate proceedings before learned CIT(A) were in progress. The assessee duly filed with learned CIT(A), a copy of Form No. 10 which was filed electronically by assessee on 07.11.2017. However, it is an admitted position between rival parties that Form No. 10 was not filed along with return of income filed by the assesee with Revenue and the same was physically filed for the first time on 21.12.2016 , when assessment proceedings were in progress before the AO. The Form No. 10 was electronically filed by assessee on 07.11.2017 when appellate proceedings were in progress with learned CIT(A). Thus , undisputedly and admittedly there was an procedural lapse by assessee in filing Form no. 10 with Revenue within the due date prescribed for filing of return of income u/s 139(1) of the 1961 Act and even physically Form No. 10 was not filed within time stipulated for filing of return of income u/s 139(1) of the 1961 Act. It was claimed before learned CIT(A) by assessee that factum of accumulation or setting apart of an amount of Rs. 6.50 crores was duly mentioned in income-tax return in form no. ITR-7 at serial number 9(vi) filed by assessee with Revenue. The assesseee also claimed before learned CIT(A) that it filed in Schedule –I to ITR-7 , details of accumulation/setting apart within meaning of Section 11(2) of the 1961 Act wherein an amount of Rs. 6.50 crores was stated as accumulated for the year under 5 | P a g e

Page 6 of 33 ITA NO. 2061/MUM/2019 consideration for purchase of immovable properties. It was submitted that in computation of income filed before the AO, the accumulation of Rs. 6.50 crores u/s 11(2) of the 1961 Act was specifically shown as deduction from the computation of income. The assessee also stated that in Audit Report in Form no. 10B (furnished electronically) , the auditors have stated that an amount of Rs. 6.50 crores was accumulated or set apart for specified purposes u/s 11(2) of the 1961 Act at serial number 5 of Form No. 10B. Thus, it was submitted that in the audit report in Form No. 10B ( furnished electronically) , the Auditor has stated that an amount of Rs. 6,50,00,000/- was accumulated or set apart for specified purposes u/s 11(2) of the 1961 Act at S.No. 5 of Form No. 10B. It was submitted that this accumulation of income in Form No. 10 along with copy of Resolution passed by Board of Trustees was physically submitted to the AO on 21.12.2016, copy of which was submitted before learned CIT(A). The copy of audit report in Form No. 10B was submitted before learned CIT(A). It was submitted that deduction u/s 11(2) was denied to the assessee merely on the grounds that the assessee has not submitted notice of accumulation in Form No. 10 electronically. It was submitted that the assessee was denied deduction u/s 11(2) merely on technical grounds and genuineness of the accumulation and its utilisation was never disputed by the AO. It was submitted that the said amount of Rs. 6.50 crores which was accumulated to acquire property for objects of the assessee was deposited in the modes specified in Section 11(5) namely Fixed Deposits with Scheduled Banks. It was claimed that the trustees have not benefitted directly or indirectly by the delay in filing Form No. 10 electronically. The assessee submitted that only ground for denial of deduction u/s 11(2) of the 1961 Act was non filing of Form No. 10 electronically in time before expiry of time allowed u/s 139(1) of the 1961 Act. The assessee claimed that Section 11(2) of the 1961 Act which provide for accumulation of income did not provides for time limit for filing of Form No. 10 . The assessee submitted that time limit for filing Form No. 10 is prescribed in Rule 17 of the 6 | P a g e

Page 7 of 33 ITA NO. 2061/MUM/2019 Income-tax Rules, 1962. The assessee relied upon decision of Hon‘ble Bombay High Court in the case of CIT v. Nagpur Hotel Owners Association (1994) 209 ITR 441(Bom.) which was later challenged by Revenue before Hon‘ble Supreme Court . The assessee also relied upon the decision of Hon‘ble Supreme Court in the aforesaid case in an appeal filed by Revenue before Hon‘ble Supreme Court in CIT v. Nagpur Hotel Owners Association (2001) 114 Taxman 255(SC). Thus, it was claimed that furnishing of Form No. 10 at any time before completion of assessment will be a sufficient compliance of requirements of the law. There was an amendment in Section 11(2) of the 1961 Act wherein a new clause was added w.e.f. 01.04.2016 by Finance Act, 2015, which reads as under: “(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.”

The Memorandum explaining the clauses in Finance Act, 2015 stipulates that said Form No. 10 is to be filed before the due date for filing of return of income u/s 139 and in case the said Form No. 10 is not filed before the due date, the benefit of accumulation shall not be available and such income would be taxable, which reads as under: “ In order to remove the ambiguity regarding the period within which the assessee is required to file Form 10, and to ensure due compliance of the above conditions within time, it is proposed to amend the Act to provide that the said Form shall be filed before the due date of filing return of income specified under section 139 of the Act for the fund or institution. In case the Form 10 is not submitted before this date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rate.” It was claimed that this amendment is applicable prospectively wef 01.04.2016. It was claimed that this amendment will not be applicable to the impugned ay under consideration as we are concerned with ay: 2014-15 which is prior to ay: 2016-17 from where the aforesaid

7 | P a g e

Page 8 of 33 ITA NO. 2061/MUM/2019 amendment in Section 11(2) shall be applicable. It was claimed that for impugned ay:2014-15, the aforesaid decision of Hon‘ble Supreme Court shall be applicable and since the assessee had filed Form No. 10 physically before the AO before the completion of assessment proceedings , the deduction u/s 11(2) be allowed to the assessee. The assessee also claimed that this requirement of furnishing Form No. 10 electronically was introduced in Rule 12 of the 1962 Rules for the first time w.e.f. 01.04.2014 vide notification number 24/2014 dated 01.04.2014. It was claimed that since it was a new requirement, the assessee was not aware of the same and the assessee was not advised properly about that. It was claimed that no corresponding amendment was made in Rule 17 of the 1962 Rules to file Form No. 10 electronically . It was submitted that requirement of filing Form No. 10 electronically was added in Rule 17 of the 1962 Rules only with effect from 01.04.2016 by Income-tax( First Amendment ) Rules, 2016. Thus, it was claimed that submission of Form No. 10 in physical mode before the AO before the finalisation of assessment was valid for the year under consideration. It was claimed that no prejudice would be caused to Revenue on account of non filing of Form No. 10 electronically but assessee would be highly prejudiced by denial of deduction of Rs. 6.50 crores u/s 11(2) of the 1961 Act. The assessee submitted that it lawfully accumulated income of Rs. 6.50 crores which was utilised in immediately succeeding year for acquiring immovable property to be used for objects of the assessee for religious purposes. The amount was deposited in Fixed Deposit with scheduled bank as contemplated u/s 11(5) and were used for the purposes of objects of the assessee in immediately succeeding year. The assessee claimed that AO never doubted the genuineness of the accumulation and in succeeding year , the AO framed assessment u/s 143(3) and accepted the said utilisation of Rs. 6.50 crores for acquisition of immovable property for objects of the assessee. The assessee submitted that contents of the physical form no. 10 and electronic version of Form No. 10 are almost same.Thus, it was prayed that mere 8 | P a g e

Page 9 of 33 ITA NO. 2061/MUM/2019 procedural lapse should not cause prejudice to the assessee in claiming deduction u/s 11(2) of the 1961 Act. The assessee prayed that exemption provision be liberally construed in favour of the assessee. Without prejudice, the assessee also claimed in alternative that assessee is entitled for deduction u/s 11(1) of the 1961 Act as it has complied with all the conditions stipulated for said deduction.

“ 6.3 Decision on ground no 3: I have considered the facts of the case, gone through the AO's Order and the submission of the appellant trust. In this case, the appellant trust had filed its return of income in on 25.03.2015 electronically in ITR-7 without the Audit Report, as required u/s 12A(1) of the I.T.Act. The requirements of filing Audit Report and the implication for non- filing of Form-10B is best understood by visiting the relevant provisions of the Act, which is reproduced for reference. The statutory provisions with regard to submission of Audit Report is as under:- "12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income- tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed". Further, in connection with the requirement to file Audit Report by a trust, Rule 12(1) of I.T. Rule is reproduced for easy reference: - [(2) The return of income required to be furnished in Form SAHAJ (ITR- 1) or Form No. ITR-2 or Form No. ITR-3 or [Form SUGAM (ITR-4)] or Form No. ITR-5 or Form No. ITR-6 [or Form No. ITR-7] shall not be accompanied by a statement showing the computation of the tax payable on the basis of the return, or proof of the tax, if any, claimed to have been deducted or collected at source or the advance tax or tax on self-assessment, if any, claimed to have been paid or any document or copy of any account or form or report of audit required to be attached with the return of income under any of the provisions of the Act:]

9 | P a g e

Page 10 of 33 ITA NO. 2061/MUM/2019 [Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A [, section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB [, section 44DA, section 50B], section 80-1 A, section 80-1B, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, [section 115JB, [section 115JC] or section 115VW] or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.] The appellant has contended that it had claimed deduction u/s 11(2) of Rs.6,50,00,000/- and prepared form No.10 in physical and hence, only a procedural lapse should not prejudice assessee from this deduction. However, no reason for failure to file the declaration through electronically along with resolution of trustee. Therefore, I am convinced that the appellant has failed to comply with the requirement of filing audit report as per Sec. 12A of the I.T. Act. On consideration of the above facts, it is found that non-filing of the Audit Report in the case of the appellant trust is a clear violation of Statutory Provision. It is all the more important in the case of a charitable trust to file its audit report in time, as the trust is provided with benevolent tax exemption benefits to encourage charitable works. Thus, the timely filing of Audit Report is put in the statue with a view to keep a check on the potential misuse of these benevolent provisions. In view of the above facts and circumstances, and due to violation of statutory provision u/s 12A of the I.T.Act, I decline to interfere with the findings of the A.O. with regard to denial of exemption on the ground of non-submission of Audit Report to the appellant trust. Therefore, the ground of appeal nos. 3 is dismissed.” 6. With regard to the second issue , the assessee explained that it had claimed an exemption u/s. 11(1)(a) amounting to Rs. 91,86,875/- on account of application of its income for religious purpose and the AO has allowed an amount of Rs. 24,79,348/- while computing income, while the balance amount of Rs. 67,07,527/- stood disallowed by the AO without any reasons and justifications. The assessee provided details/breakup of these expenses before Ld. CIT(A) and submitted that there were some earmarked funds for which donations were received which stood credited to these earmarked funds in the Balance Sheet and correspondingly expenditure incurred were not routed through P&L account , but the said expenditure were reduced from relevant earmarked funds as appearing in Balance Sheet. It was claimed that these donations were received for specific purposes for the objects of the assssee.The assessee also submitted that it filed rectification application before AO u/s 154 of the 1961 Act but the said rectification application was not properly understood by the AO

10 | P a g e

Page 11 of 33 ITA NO. 2061/MUM/2019 and no relief was granted by the AO. The assessee submitted that the AO disallowed these expenses without any discussion in its assessment order. The learned CIT(A) rejected the contentions of the assessee by passing cryptic order in the manner as detailed hereunder:- ―7.2 Decision on ground no. 4: I have considered the facts of the case, submissions of the appellant and case laws relied upon by the appellant. Considering the view taken in ground no. 3 above, ground no. 4 is dismissed.” 7. The assessee is aggrieved by an appellate order dated 08.02.2019 passed by learned CIT(A) and has come in an appeal before tribunal. At the outset Ld. Counsel for the assessee submitted that it is a stay granted matter and tribunal vide its orders dated 06.05.2019 in Stay Application bearing SA No. 223/Mum/2019 , has directed assessee to deposit Rs. 30,00,000/- as a precondition for grant of stay of the remaining outstanding amount , latest by 24th May 2019 . The learned counsel for the assessee submitted that the assessee had deposited aforesaid amount of Rs. 30 lacs on 22nd May 2019 vide challan no. 51861 with IDBI Bank Ltd. CBD Belapur, Navi Mumbai. The copy of challan is produced before the Bench and is now placed on record in file. The learned counsel for the assessee , thus, submitted that the assessee has duly complied with terms and conditions as stipulated by ITAT for grant of stay of the balance outstanding amount due to Revenue owing to assessment framed by the Revenue against the assessee for ay: 2014-15. The copy of said challan of Rs. 30 lacs was also handed over by learned counsel for the assessee to learned DR who did not controvert the factual position as the terms of stay of demand stood fulfilled by the assessee. 7.2 Coming to merits of the issue, the Ld. Counsel for the assessee submitted that there are three grounds of appeal raised by the assessee in its appeal filed with the tribunal. It was submitted that ground no. 2 is consequential in nature and if ground no. 1 is adjudicated in favour of the assessee , then in that scenario the 11 | P a g e

Page 12 of 33 ITA NO. 2061/MUM/2019 assessee would not like to press ground no. 2. It was submitted that assessee is a religious trust and is duly registered with Director of Income Tax (Exemption) , Mumbai u/s. 12A vide registration no. TR/614 dated 24.08.1979 . It was submitted that the trust is duly registered which Charitable Commissioner, Mumbai. It was submitted that assessee is religious trust and has done accumulation of income to the tune of Rs. 6,50,00,000/- u/s. 11(2) during the year under consideration i.e. previous year relevant to ay: 2014-15, for acquiring immovable property for constructing temple. It was submitted that premises was bought in the immediately next year for Rs. 16,50,00,000/- . It was submitted that income-tax was also deducted at source under the provisions of Section 194IA of the 1961 Act. It was submitted that assessee claimed exemption u/s 11(2) but was denied exemption on the grounds that Form no. 10 was not filed electronically before the due date as stipulated for furnishing of return of income u/s 139(1) of the 1961 Act. It was submitted that assessee filed form no. 10 alongwith Resolution of the Trustees in physical form before the AO on 21.12.2016 which was before completion of assessment proceedings on 28.12.2016 by the AO. It was also submitted that said Form no 10 was also electronically filed on 07.11.2017 when the appellate proceedings before learned CIT(A) were in progress and copy thereof was furnished before learned CIT(A). It was submitted that this is the first year from where onwards the assessee was required to file Form no. 10 electronically but the assessee filed said form no. 10 physically/manually alongwith Resolution of the Trustees for accumulation of income before the AO during the course of assessment proceedings but the AO denied the benefit of deduction u/s 11(2) of the 1961 Act. Our attention was drawn to paper book/ page no. 1 wherein computation of income of the assessee is placed and it was submitted that the assessee duly claimed deduction for an amount of Rs. 6.50 crores towards accumulation of income u/s. 11(2) of the Act. Our attention was also drawn to paper book / page no. 2 to 7, which is an Income Tax return 12 | P a g e

Page 13 of 33 ITA NO. 2061/MUM/2019 in Form No. ITR-7 filed by the assessee for ay: 2014-15, wherein at page no 4 , the assessee has claimed in column 9(vi) deduction of an amount accumulated or set aside for specified purposes of Rs. 6.5 crores u/s. 11(2) of the Act for the purposes of purchasing immovable property for temple, dharmashala etc. Our attention was also drawn to page no. 5 & 6 which is Schedule 1 of ITR-7 filed with Revenue on 25.03.2015, wherein it is specified that an accumulation of income of Rs. 6.50 crores was set aside for purchase of immovable properties. Our attention was also drawn to page 18 and 19 / paper book, wherein letter dated 21.12.2016 is placed which stipulate that Form No. 10 is filed before the AO during assessment proceedings. The assessee has also placed on record Resolution dated 10.02.2014(pb/page 18) passed by Trustees for setting aside an amount of Rs. 6.50 crores for purchasing immovable property for achieving objects of the trust. The assessee also placed on record Form no. 10 dated 21.02.2015 (page 20-21/pb)setting aside an income of Rs. 6.50 crores for investing in immovable property for purchase of Dharmshala, Upashray, Temple , Pathshala etc.. Our attention was also drawn to page no. 23-25/paper book wherein audit report in Form no. 10B dated 21.02.2015 along with e-filing receipt dated 25.03.2015 is placed, wherein at column 5 accumulation of income to the tune of Rs. 6.5 crore is reflected and at column number 6 , the assessee has reflected that Fixed Deposit is created for an amount of Rs. 6.50 crores in compliance with provision of Section 11(2)(b) of the 1961 Act. Our attention was also drawn to the order passed by Ld. CIT(A). It was submitted that Rule 12 of the 1962 Rules made it mandatory w.e.f. 01.04.2014 for filing of Form no. 10 electronically but no corresponding amendments were made in Rule 17 which was only amended w.e.f. assessment year 2016-17 w.e.f. 01.04.2016. Our attention was drawn to paper book / page no. 26-27 wherein said amended Rule 17 of the 1962 Rules is placed. Our attention was also drawn to page no. 28/paper book wherein amended Rule 12 of the 1962 Rules is placed. Our attention was also drawn to 13 | P a g e

Page 14 of 33 ITA NO. 2061/MUM/2019 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. The said CBDT circular 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 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. 2. 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 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.10for AY 2016-17 may be condoned under section 119(2) (b) of the Act. 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 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 anyone or more of the forms or modes specified in subsection (5) of section 11 of the Act.” 7.3 It was further submitted by learned counsel for the assessee that audit report in form no. 10B was dully filed alongwith return of income on 25.03.2015 and it is only Form no. 10 which was later filed

14 | P a g e

Page 15 of 33 ITA NO. 2061/MUM/2019 physically before the AO during the assessment proceeding on 21.12.2016 . It was submitted that later Form no. 10 was filed electronically with Department on 07.11.2017 and copy was filed with Ld. CIT(A). The assessee has placed reliance on the decision of ITAT, Chandigarh in the case of DCIT (Exemption) v. Model School Society in ITA no. 841/Chd/2018 for AY 2014-15 , vide order dated 13.11.2018. The assessee has also placed reliance on the decision of Bangalore Tribunal in the case of ITO(Exemption) v. Isidore Colaco Memorial Charitable Hospital Trust in ITA no. 1099/Bang/2018 , vide order dated 14.08.2018. The assessee also relied on judgment of Hon‘ble Gujarat High Court in the case of PCIT v. Vadhman Fashions Private Ltd., in R/TA no. 787 of 2018 , vide judgment dated 09.07.2018. The assessee also relied on the decision of Hon‘ble Bombay High Court in the case of CIT v. Nagpur Hotel Owners Association (1994) 209 ITR 441 (Bom.) and on the judgment of Hon‘ble Supreme Court in Revenue‘s appeal in the case of CIT v. Nagpur Hotel Owners Association (2001) 247 ITR 201 (SC). The assessee also relied on the judgment of Hon‘ble Bombay High Court in the case of CIT v. Shivanand Electronics (1994) 75 Taxman 93 (Bom). The assessee also submitted that deduction of Rs. 6.50 crores be allowed u/s. 11(2) of the 1961 Act . 7.4 It was submitted by learned counsel for the assessee before the Bench that ground no.2 is consequential in nature and if ground no. 1 is adjudicated in favour of the assessee, then this ground number 2 will become academic in nature. It was submitted that the assessee duly complied with Explanation to Section 11(1) of the 1961 Act and the amount so set aside of Rs. 6.50 crores was duly applied for acquiring immovable property in immediately next financial year for an amount of Rs. 16.50 crores. 7.5 With respect to ground no. 3, the assessee submitted that assessee had received donations which were toward earmarked funds and these donations were not routed through P&L account. It was 15 | P a g e

Page 16 of 33 ITA NO. 2061/MUM/2019 submitted that these earmarked funds are duly reflected in the Balance Sheet and the expenses incurred towards achieving objects of these earmarked funds were deducted from these earmarked funds. The assessee also submitted that while filing return of income , in computation of income the assessee has reflected these donations received including earmarked donation and expenses were also claimed against these donations. It was submitted that without any reasons the AO has disallowed these expenses to the tune of Rs. 67,07,527/- incurred against donations received towards earmarked funds.Our attention was drawn to paper book / page no. 1 and 8 . Our attention was also drawn to the appellate order passed by learned CIT(A) while disposing of this ground. 7.6 The Ld. DR on the other hand submitted that e-filing of form no. 10 is mandatory which ought to have been filed before due date of filing of return of income u/s 139(1) of the 1961 Act and the assessee has not filed Form no. 10 electronically alongwith return of income and it was filed physically on 21.12.2016 during the course of assessment proceedings conducted by the AO. It was submitted by learned DR that assessee e-filed Form no. 10 only on 07.11.2017 when appellate proceedings were going on with learned CIT(A) and the copy of the said Form No. 10 filed electronically by assessee with Revenue, was filed with learned CIT(A). On being asked while Rule 12 of the 1961 Act was amended we.f 01.04.2014 and why Rule 17 was not simultaneously amended to provide for electronic filing of Form No. 10 , it was submitted by the Ld. DR that it was the collective wisdom of the Parliament to have amended only Rule 12 wef 01.04.2014 and no simultaneous amendment was made in Rule 17 of the 1962 Rules. 7.7 As to ground no. 3 raised by assessee, it was submitted by Ld. DR that expenses were claimed to be debited in the Balance Sheet against donations received for earmarked funds and hence the authorities below have rightly disallowed these expenses as assessee 16 | P a g e

Page 17 of 33 ITA NO. 2061/MUM/2019 never routed these expenses through P&L account. It was claimed that these expenses claimed to be incurred against earmarked funds now required to be verified by the AO and the matter may be restored to the file of the AO for necessary verification and enquiry. 8. We have considered rival contentions and perused the material on record including cited case laws. We have observed that assessee is a religious trust registered with the Director of Income Tax(Exemption),Mumbai u/s. 12A vide registration no. TR/614 dated 24.08.1979. The assessee is registered with Charity Commissioner, Mumbai. The main object of the trust is to establish, to do administration of, to manage, to do management of, to support, all in conformity with the usages of Shwetamber Murtipujak Tapagachhiya Jain Principles religious educational institution and get done and encourage all social and religious work falling within the derives satkhshetra etc.. The assessee had e-filed its return of income for impugned assessment year in ITR-7 on 25.3.2015 which is beyond the time stipulated u/s 139(1) of the 1961 Act but is within time allowed u/s 139(4) of the 1961 Act as the said return of income was filed before the end of the assessment year . The assessee has also e-filed audit report dated 21.02.2015 in Form No. 10B on 25.03.2015 at the time of filing its return of income on 25.03.2015 . The acknowledgement for e-filing of audit report in form no. 10B is filed in paper book/page 23. . The assessee had undisputedly filed its return of income beyond the time stipulated u/s 139(1) of the 1961 Act. The audit report was also obtained and filed beyond the time stipulated for furnishing of return of income u/s 139(1) of the 1961 Act. While filing return of income, the assessee had claimed deduction of Rs. 6,50,00,000/- u/s 11(2) for purchasing immovable property for achieving its objects and activities. The said declaration of claiming deduction of Rs. 6.50 crores u/s 11(2) has been also been made and reflected in the ITR-7 filed with the Revenue on 25.03.2015. The said declaration is also found mentioned in Form No. 10B being audit

17 | P a g e

Page 18 of 33 ITA NO. 2061/MUM/2019 report issued by the auditors on 21.0.2015, which was filed with Revenue on 25.03.2015 along with Return of income. The assessee however did not file Form No. 10 along with its income-tax return filed with the Revenue. The said Form No. 10 was eventually filed by assessee for the first time physically/manually before the AO on 21.12.2016 , when the assessment proceedings were underway before the AO 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 undisputedly filed Resolution dated 10.02.2014 passed by Board of Trustees approving accumulation of income to the tune of Rs. 6.50 crores in immovable properties for achieving objects and activities of the trust, physically before the AO on 21.12.2016 along with Form No. 10 . The assessee finally filed Form No. 10 electronically on 07.11.2017 with Revenue. The said Form No. 10 filed electronically on 07.11.2017 was then filed before learned CIT(A) by the assessee when first appellate proceedings were underway before learned CIT(A) which finally culminated into an appellate order dated 08.02.2019. The assessee also undisputedly filed aforesaid Resolution dated 10.02.2014 passed by Board of Trustees approving accumulation of income to the tune of Rs. 6.50 crores in immovable properties for achieving objects and activities of the trust, before the learned CIT(A) also. There is no dispute between rival parties as to genuineness of the activities of the assessee and also 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 the 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 the banks. It is also undisputed that the assessee did purchased 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 18 | P a g e

Page 19 of 33 ITA NO. 2061/MUM/2019 activities of the assessee trust. Presently, we are concerned with ay: 2014-15. It is undisputed that return of income was filed by assessee in ITR-7 on 25.03.2015 which was beyond the time stipulated u/s 139(1) of the 1961 Act. It is again undisputed that audit report dated 21.02.2015 in Form No. 10B was filed along with return of income on 25.03.2015. It is also undisputed that Form No. 10 along with Resolution of Trustees approving accumulation of income to the tune of Rs. 6.50 crores in immovable properties for achieving objects and activities of the trust, was filed for the first time in physical form before the AO on 21.12.2016 when the assessment proceedings were underway. It is also undisputed that Form No. 10 was filed electronically on 07.11.2017 and was filed along with aforesaid Resolution of Trustees before learned CIT(A) during appellate proceedings. Under these circumstances , we have to consider allowability of deduction of Rs. 6.50 crores by way of accumulation of income claimed by the assessee u/s 11(2) of the 1961 Act. First, let us see the provisions of the statute as they existed during the relevant period as well of now. For the year under consideration, the relevant provisions of the 1961 Act and Rules are enumerated below:-

Section 11(2) as it then stood during relevant period is reproduced hereunder :-

“Income from property held for charitable or religious purposes.

11 (1)*****

“[(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 specifies, by notice in writing given to the [Assessing] Officer in the prescribed manner, 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 ten years;

19 | P a g e

Page 20 of 33 ITA NO. 2061/MUM/2019 [(b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5)]:] [Provided that in computing the period of ten years referred to in clause (a), the period during which the income could 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:] [Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words "ten years" at both the places where they occur, the words "five years" had been substituted.] [Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.]”

8.2 But Later on amendments were brought in Section 11(2) and now it reads 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 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.] [Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-

20 | P a g e

Page 21 of 33 ITA NO. 2061/MUM/2019 clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.]

8.3 Thus, as could be seen that , inter-alia, clause (c) was added which stipulated that the statement for accumulation of income is to be submitted before the AO before the due date specified u/s 139(1) of the 1961 Act for furnishing of the return of income. This amendment was brought in by Finance Act, 2015 w.e.f. 01.04.2016. The Notes on clauses to Finance Bill, 2015 while amending Section 11(2) stipulated as under:

“Clause 8 of the Bill seeks to amend section 11 of the Income-tax Act relating to income from property held for charitable or religious purposes. Sub-section (2) of the aforesaid section provides that where eighty-five per cent of the income 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, for application to such purposes in India, then, such income accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income. However, the said exemption is subject to fulfilment of the following conditions that : (i) such person specifies by notice in writing in Form 10, prescribed for such purpose, providing details of the purpose for which the income is being accumulated or set apart and that the period for which the income is to be accumulated or set apart does not exceed five years; and (ii) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) of section 11. With a view to amend the conditions specified in sub-section (2) of the aforesaid section, it is proposed to insert a new clause to provide that the statement referred to in the said clause (a) is required to be 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. It is also proposed to substitute the existing first and second provisos with a new proviso to provide that in computing the period of five years referred to in the said clause (a), the period during which the income could 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. This amendment will take effect from 1st April, 2016 and accordingly apply in relation to the assessment year 2016-17 and subsequent years.‖

8.4 Memorandum to Finance Bill, 2015 with respect to the aforesaid amendment carried in provisions of Section 11 provided as under:

“Rationalisation of provisions of section 11 relating to accumulation of Income by charitable trusts and institutions Under the provisions of section 11 of the 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 21 | P a g e

Page 22 of 33 ITA NO. 2061/MUM/2019 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. 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 that such person submits the prescribed Form 10 to the assessing Officer in this regard and the money so accumulated or set apart is invested or deposited in the specified forms or modes. If the accumulated income is not applied in accordance with these conditions, then such income is deemed to be taxable income of the trust or institution. In order to remove the ambiguity regarding the period within which the assessee is required to file Form 10, and to ensure due compliance of the above conditions within time, it is proposed to amend the Act to provide that the said Form shall be filed before the due date of filing return of income specified under section 139 of the Act for the fund or institution. In case the Form 10 is not submitted before this date, then the benefit of accumulation would not be available and such income would be taxable at the applicable rate. Further, the benefit of accumulation would also not be available if return of income is not furnished before the due date of filing return of income. These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.”

8.5 There was also simultaneous amendment in Section 13, wherein a new sub-section (9) was introduced by Finance Act, 2015, w.e.f 01.04.2016 and shall apply from ay:2016-17, which reads as under:

“(9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if— (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not 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; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.] 8.6 Notes on clauses to Finance Bill, 2015 provided as under: “Clause 9 of the Bill seeks to amend section 13 of the Income-tax Act relating to section 11 not to apply in certain cases. It is proposed to insert a new sub-section to provide that nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if–– (i) the statement referred to in clause (a) of the said sub-section in respect of such income, is not 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; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the said previous year.

22 | P a g e

Page 23 of 33 ITA NO. 2061/MUM/2019 This amendment will take effect from 1st April, 2016 and accordingly apply in relation to the assessment year 2016-17 and subsequent years.

8.7 Thus, this Sub-section 9 to Section 13 made it mandatory to file return of income within time stipulated u/s 139(1) and also furnishing of statement in Form No. 10 making declaration of accumulation u/s 11(2) before the due date as prescribed u/s 139(1) of the 1961 Act, w.e.f. ay: 2016-17, for claiming deduction u/s 11(2). Thus, the provisions of the 1961 Act were itself amended w.e.f. ay: 2016-17 onwards making it mandatory for filing of return of income within due date as provided u/s 139(1) of the 1961 Act and also to file Form No. 10 before the time stipulated for filing of return of income u/s 139(1) of the 1961 Act.

8.8 Rule 17 of the 1962 Rules was substituted by the Income-tax (First Amendment) Rules, 2016, w.e.f. 1-4-2016. Prior to its substitution, said Rule 17 of the 1962 Rules, as amended by the Income-tax (Eighth Amendment) Rules, 1989, w.e.f. 1-4-1990, read as under : "17. Notice for accumulation of income by charitable or religious trust or institution or association referred to in clauses (21) and (23) of section 10.—The notice to be given 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) or clause (23) of section 10 shall be in Form No.10 and shall be delivered before the expiry of the time allowed under sub-section (1) of section 139, for furnishing the return of income." 8.9 Thus, Rule 17 of the 1962 Rules prior to its aforesaid amendment w.e.f. 01.04.2016 only stipulated that the notice is to be given to the AO wrt accumulation of income u/s 11(2) in prescribed form no. 10 which shall be filed before due date allowed for filing of return of income u/s 139(1) of the 1961 Act. The aforesaid unamended Rule 17 of the 1962 Rules did not provided for e-filing of Form No. 10 electronically until Rule 17 of the 1962 Rules was amended by Income-tax (First Amendment) Rules, 2015 w.e.f. 01.04.2016, which now reads as under: “[Exercise of option etc under section 11.

23 | P a g e

Page 24 of 33 ITA NO. 2061/MUM/2019 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-rule (2) shall be furnished electronically either under digital signature or electronic verification code. (4) The Principal Director 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 (iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to Forms so furnished. ]”

8.10 Thus, as can be seen above, amended Rule 17 of the 1962 Rules now provides that Form No. 10 shall be filed electronically and this amendment is brought in by Income-tax (First Amendment) Rules, 2015 w.e.f. 01.04.2016. However, Rule 17 of the 1962 Rules always stipulated that Form No. 10 is to be filed before the due date of filing of return of income u/s 139(1). It can be seen from proviso to Rule 12(2) of the 1962 Rules that w.e.f. 01.04.2014, it provided that notice of accumulation of income as is required u/s 11(2)(a) is to furnished electronically , which stood inserted by the Income-Tax (Fourth Amendment) Rules, 2014, w.e.f. 1-4-2014 but simultaneous amendment was not made in Rule 17 of the 1962 Rules in 2014. The said proviso to Rule 12(2) provided w.e.f. 01.04.2014, as under: “[Provided that where an assessee is required to furnish a report of audit specified under sub-clause (iv), (v), (vi) or (via) of clause (23C) of section 10, section 10A [, section 10AA], clause (b) of sub-section (1) of section 12A, section 44AB [, section 44DA, section 50B], section 80-IA, section 80-IB, section 80-IC, section 80-ID, section 80JJAA, section 80LA, section 92E, [section 115JB [, section 115JC] or section

24 | P a g e

Page 25 of 33 ITA NO. 2061/MUM/2019 115VW] [or to give a notice under clause (a) of sub-section (2) of section 11] of the Act, he shall furnish the same electronically.]”

8.11 Thus, as can be seen from above that substantive law as it existed in the 1961 Act did not stipulated , till it was amended by Finance Act, 2015 w.e.f. 01.04.2016 to be applicable from ay: 2016-17 and subsequent years, that for claiming deduction u/s 11(2) of the 1961 Act , the return of income by an eligible trust is required to be filed before the due date as is stipulated u/s 139(1) of the 1961 Act. Reference is drawn to provisions of Section 139(4A) which regulate filing of return of income by trusts , which reads as under:- “139[(4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).]]” 8.12 The said Section 139(4A), inter-alia, provides that all provisions of the 1961 Act shall , so far as may be, apply as if it were a return of income required to be furnished u/s 139(1) of the 1961 Act. The provisions of Section 139(4) of the 1961 Act provides that in case return of income could not be filed within due date for filing of return of income as stipulated u/s 139(1), the return of income can be filed before the end of the assessment year, which reads as under: “139 (4) Any person who has not furnished a return within the time allowed to him under sub-section (1), may furnish the return for any previous year at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.]” 8.13 The assessee in the instant case has filed its return of income on 25.03.2015 which is within time prescribed u/s 139(4) and as we have seen that provisions of Section 139(4A) for the relevant period under

25 | P a g e

Page 26 of 33 ITA NO. 2061/MUM/2019 consideration before us clearly stipulates that all provisions of the 1961 Act shall , so far as may be, apply as if it were a return of income required to be furnished u/s 139(1) of the 1961 Act. The assessee did e-filed return of income in ITR-7 on 25.03.2015 within time stipulated u/s 139(4) of the 1961 Act. Thus, by virtue of stipulation in Section 139(4A) as we have seen above as applicable for relevant period under consideration before us, Section 139(4) shall also be applicable to trusts for the relevant period under consideration before viz. previous year relevant to ay: 2014-15. The substantive bar in the statute as is contained in the 1961 Act wrt denial of deduction u/s 11(2) on failure to file return of income within due time allowed by Section 139(1) of the 1961 Act came into effect from ay: 2016-17 and subsequent ay‘s. Similarly, substantive bar on denial of deduction u/s 11(2) for failure to file Form No. 10 being notice to the AO of accumulation of income came into statute as is contained in the 1961 Act w.e.f. ay: 2016-17 and subsequent ay‘s. However, Rule 17 of the 1962 Rules always provided that Form No. 10 be filed before due date as stipulated u/s 139(1) of the 1961 Act.

8.14 The assessee also did e-filed Form No. 10B being audit report on 25.03.2015, while filing its return of income on 25.03.2015. The said audit report is required to be obtained as is provided u/s 12A of the 1961 Act, which provides as under: “Section 12A(1)***

(b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed;]” 8.15 Thus, as could be seen above , Section 12A(1)(b) of the 1961 Act provided that audit report be furnished along with return of income filed by

26 | P a g e

Page 27 of 33 ITA NO. 2061/MUM/2019 the trust. The assessee did filed audit report in form no. 10B electronically on 25.03.2015 along with its return of income filed with Revenue in ITR-7. There was an amendment in Section 12A of the 1961 Act wherein clause (ba) to sub-section1 to Section 12A was inserted by Finance Act, 2017 w.e.f. 01.04.2018, which reads as under:

“[(ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section.]” 8.16 We are presently concerned with ay: 2014-15 in the instant appeal. Thus, as we have seen above the amendments in the 1961 Act were all brought post ay:2014-15. For us, now it is relevant to see that Rule 17 of the 1962 Rules provided for furnishing of Form No. 10 within time allowed u/s 139(1) of the 1961 Act to avail deduction u/s 11(2) of the 1961 Act and at the same time proviso to Rule 12(2) of the 1962 Rules provided for e-filing of Form No. 10 electronically. These two conditions clearly were not met by the assessee. Thus, for period under consideration before us, the un- amended 1961 Act as discussed by us above shall hold the field. We have seen that Hon‘ble Supreme Court has held in Nagpur Hotel Owners Association(supra) that it will be sufficient compliance of law, if Form No. 10 is filed at any stage prior to completion of assessment proceedings by the AO. The law as declared by Hon‘ble Supreme Court in the above case shall hold the field till amendments were brought in the 1961 Act itself by Parliament which are substantive amendments in the 1961 Act . Earlier, the Hon‘ble Bombay High Court has in this case of Nagpur Hotel Owners Association(supra) dealt with delegated legislation and whether Rule 17 of the 19 1962 Rules can validly provide for limitation of time in filing of Form no. 10 in the absence of limitation of time being provided in the provisions of the 1961 Act, by holding as under: “Section 11(2)(a) does not itself prescribe the limitation for giving the notice. The crux of the matter is whether the expression "prescribed manner" used in that provision would include within its fold even the time element so as to delegate to the rule-making authority the power to prescribe not only the mode and manner of notice but also the limitation within which it ought to be given. In this context, the first question that must arise is whether the prescription for limitation pertains to procedural rights or substantive rights ? There is no 27 | P a g e

Page 28 of 33 ITA NO. 2061/MUM/2019 single test to demarcate the limit where procedural law ends and substantial law starts. All depends upon the context and the purpose. Here is an Act, several substantive provisions of which refer to limitation. Section 11(2) confers certain benefits of exemption to the taxpayer. It prescribes certain conditions for availing of those benefits which are in the nature of safeguards in the interest of proper application of the trust fund. Those conditions include giving of a notice in a prescribed manner. There is no reference to any time factor in it. It is, therefore, very difficult to imagine that Parliament intended to permit whittling down or nullifying that substantive right by prescribing limitation for giving a notice. Power to prescribe the manner of giving a notice is delegated but the provision of delegation is conspicuously silent about the time element. All this clearly means that the Legislature never intended to bring the time element in the process. Had the legislative intention been otherwise, it would have been clearly expressed. It is, therefore, clear that to bring in the time element in the matter of giving notice was not within the "delegated authority". Hence, that part of rule 17 which deals with limitation is clearly beyond section 11(2)(a) and is, therefore, illegal. In this context useful reference may be made to the decision of the Supreme Court in the case of STO v. Abraham (K.I.) [1967] 20 STC 367 wherein a similar expression "prescribed manner" used in section 8(4) of the Central Sales Tax Act is interpreted thus (at page 372): "But the phrase 'in the prescribed manner' in section 8(4) does not take in the time element. In other words, the section does not authorise the rule-making authority to prescribe a time-limit within which the declaration is to be filed by the registered dealer. The view that we have taken is supported by the language of section 13(4)(g) of the Act which states that the State Government may make rules for the 'time within which, the manner in which and the authorities to whom any change in the ownership of any business or in the name, place or nature of any business carried on by any dealer shall be furnished.' This makes it clear that the Legislature was conscious of the fact that the expression 'in the manner' would denote only the mode in which an act was to be done, and if any time-limit was to be prescribed for the doing of the act, specific words such as 'the time within which' were also necessary to be put in the statute. In Stroud's Judicial Dictionary, it is said that the words 'manner and form' refer only 'to the mode in which the thing is to be done, and do not introduce anything from the Act referred to as to the thing which is to be done or the time for doing it'." In the case of Bharat Barrel and Drum Manufacturing Co. P. Ltd. v. Employees' State Insurance Corporation [1971] 40 FJR 339; AIR 1972 SC 1935, the Supreme Court has laid down-though in the context of section 75 read with section 96(1)(b) of the Employees' State Insurance Act, 1948—that the expression "such procedure as may be prescribed by rules" does not cover the time factor. It is observed (at page 1942 of AIR 1972 SC and at page 350 of 40 FJR): "It is, therefore, apparent that the Legislature does not part with the power to prescribe limitation which it jealously retains to itself unless it intends to do so in clear and unambiguous terms or by necessary intendment." The limitation prescribed in Form No. 10 of rule 17 before its amendment in 1971 has been held to be invalid not only by the Madras High Court in the case of Muthiah Chettiar Family Trust ( M. CT.) [1972] 86 ITR 282 but also this court in the case of CIT v. Trustees of Shri Teckchand Chandiram Trust [1990] 184 ITR 537. The Revenue contends that the ratio of these decisions will have no application to the amended rule 17 by which limitation is prescribed in the body of the rule and not in the body of Form No. 10. These decisions proceed only on the basis that limitation is neither prescribed in the

28 | P a g e

Page 29 of 33 ITA NO. 2061/MUM/2019 Act nor the Rules, which, according to the Revenue, means by implication that if limitation is prescribed by the rule it would be valid. This submission is not correct. A close examination of these judgments will reveal that reference to the absence of limitation in the rule is only factual. There is no scope to read in those judgments a ratio that limitation could have been legally prescribed in the rule in the absence of any specific power to that effect. The Supreme Court decisions referred to above are clear. They specifically speak of the rules and not the form. In principle also no distinction between the form and the rule can be drawn to judge the extent of delegation under section 11(2)(a) where the language does not permit delegation of power to prescribe limitation to give notice. The conclusion is thus inevitable that the Income-tax Rules could not fix a time- limit for submitting the application in Form No. 10 under rule 17 and, therefore, the Tribunal was correct in its conclusion.”

8.17 However, when the matter went to Hon‘ble Supreme Court at the behest of Revenue in the aforesaid case of Nagpur Hotel Owner Association(supra), the Hon‘ble Supreme Court held that there will be substantial compliance if the said Form No. 10 is filed by the assessee before the AO before completion of assessment proceedings, by holding as under in the case of Nagpur Hotel Owners Association(supra):-

“6. It is abundantly clear from the wordings of sub-section (2) of section 11 that it is mandatory for the person claiming 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 no 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. Further, any claim for giving the benefit of section 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. In our opinion, the Act does not contemplate such reopening of the assessment. In the case at hand it is evident from the records of the case that the respondent did not furnish the required information till after the assessments for the relevant years were completed. In the light of the above, we are of the opinion that the stand of the revenue that the High Court erred in answering the first question in favour of the assessee is correct, and we reverse that finding and answer

29 | P a g e

Page 30 of 33 ITA NO. 2061/MUM/2019 the said question in the negative and against the assessee. In view of our answer to the first question, we agree with Mr. Verma that it is not necessary to answer the second question on the facts of the case.” 8.18 The assessee did filed Form No. 10 in physical mode on 21.12.2016 before the AO during the course of assessment 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 authorising 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 which provided Form No. 10 to be filed electronically w.e.f. 01.04.2014. This is the first year for compliance of said amended Rule to file Form No. 10 electronically. The assessee however defied proviso to Rule 12(2) of the 1962 Rules as it did not file Form No. 10 electronically before the conclusion of the assessment proceedings by the AO. The assessee however later on 07.11.2017 e-filed Form No. 10 electronically. The said Form No. 10 filed electronically along with Resolution dated 10.02.2014 of the Board of Trustee authorising accumulation of income to the tune of Rs. 6.50 crores for purchase of property for temple, dharmshala etc. were duly filed before learned CIT(A) before the culmination of first appellate proceedings vide appellate order dated 08.02.2019. We have 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 is claimed that Rule 17 was not amended simultaneously when aforesaid amendment in proviso to Rule 12(2) of the 1962 Rules took place. We have also observed that CBDT vide its circular number 7 of 2018 has taken a liberal view in condoning

30 | P a g e

Page 31 of 33 ITA NO. 2061/MUM/2019 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 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. 2. 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 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.10for AY 2016-17 may be condoned under section 119(2) (b) of the Act. 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 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 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

31 | P a g e

Page 32 of 33 ITA NO. 2061/MUM/2019 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 the 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 11(2) of the 1961 Act to the tune of Rs. 6.50 crores towards accumulation of income for purchase of property for temple, dharmshala etc.. We have also observed that the assessee rightly relied upon judicial precedents which are mentioned in preceding para‘s of this order. The assessee succeeds on ground number 1 raised by it in memo of appeal filed by it with tribunal which stand allowed . We order accordingly. 9. So far as ground number 2 is concerned, the assessee has already stated that the same shall become infructuos and is to be dismissed in case ground number 1 is decided in favour of the assessee. Since , we have adjudicated ground number 1 in favour of the assessee, we dismiss ground number 2 as infructous. We order accordingly. 10 So far as ground number 3 is concerned regarding disallowance of expenses to the tune of Rs. 67,07,527/- which are stated to be incurred against earmarked donations received by the assessee and claimed is made by the assessee that these expenses and donations were not routed through Profit and Loss Account but were directly reflected in Balance Sheet, we are of the considered view that this matter is factual and requires verification by the AO and hence in the interest of justice and fairness to both the rival parties, the matter need to be set aside and restored to the file of the AO for 32 | P a g e

Page 33 of 33 ITA NO. 2061/MUM/2019 fresh adjudication after due verification and enquiry as the AO may deem fit. Needless to say that the AO shall grant proper and adequate opportunity of being heard to the assessee in denovo assessment proceedings . The AO shall admit all relevant evidences and explanations submitted by the assessee in its defence in denovo proceedings. The ground number 3 is allowed for statistical purposes. We order accordingly. 11. In the result, the appeal of the assessee in ITA no. 2061/Mum/2019 for ay: 2014-15 is partly allowed as indicated above. Order pronounced in the open court on 19.08.2019. आदेश की घोषणा खुऱे न्यायाऱय में ददनांकः 19.08.2019 को की गई Sd/- Sd/- (PAWAN SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, dated: 19.08.2019

Nishant Verma Sr. Private Secretary

copy to… 1. The appellant 2. The Respondent 3. The CIT(A) – Concerned, Mumbai 4. The CIT- Concerned, Mumbai 5. The DR Bench, 6. Master File // Tue copy// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI

33 | P a g e