HOLY CROSS CHURCH,MUMBAI vs. INCOME TAX OFFICER EXEMPTION WARD 1(3), MUMBAI

The Ld. AR submitted that on account of a delay in filing Form No. 10BB, the CPC rejected the assessee’s claim under section 11 of the Act, and consequently, the investment made under section 11(3) was also disallowed. The Ld. AR contended that the observations recorded by the Ld. CIT(A) are erroneous. It was argued that the assessee had availed an alternative remedy before the Ld. CIT(A) in respect of the rejection of the claim under section 11 on the ground of delay in filing Form No. 10BB; therefore, in any event, Form No. 10BB was available before the Ld. AO at the time of processing of the return. A marginal delay of 30 days, it was submitted, cannot be a valid ground for rejecting the assessee’s entire claim.

The Ld. AR further invited our attention in the order of the Coordinate Bench of ITAT Mumbai in the case of St. Gregarious Education and Medical Trust, Mumbai vs. DCIT in ITA No.1432/Mum/2025 date of pronouncement 10.06.2025. The similar issue is considered by the Coordinate Bench and the relevant paragraph of the said order is reproduced as below: “6. We have heard the rival submissions and perused the material available on record. It is observed that the assessee filed Form 10B with a delay of 31 days, although the ROI was filed within the extended due date. It is a settled position in law that where the assessee has satisfactorily explained the reason for the delay and has complied with the other procedural requirements for claiming exemption, the benefit should not be denied on mere technical grounds. In the present case, during the processing of the return under section 143(1) of the Act, the said form was already available on record, and the Assessing Officer could have easily verified the applicability of the provisions of section 11 of the Act. The delay in filing Form 10B is merely procedural in nature, and the assessee has otherwise fulfilled the substantive conditions.In view

The Ld. DR argued and stood in favor of the order of the revenue authorities. The Ld. DR invited our attention in impugned appeal order Para 6.6 where the Ld. CIT(A) categorically decided the issue. The relevant paragraph is reproduced as below: “6.6 Section 11(3) of the Income Tax Act is attracted when a charitable or religious trust or institution, having accumulated or set apart income under Section 11(2), fails to apply that accumulated income for the specified charitable or religious purposes within the permitted period, or applies it for purposes other than those specified in the statement filed (Form 10), or invests or deposits it in modes other than those specified in Section 11(5). Accumulated income under section 11(2) becomes taxable in the year in which there is a failure to apply the funds within the permitted time, or if such funds are diverted to other purposes, invested in impermissible modes, or paid to another trust in violation of conditions. In such cases, the amount previously exempt is deemed to be the income of the trust in the year of default and becomes taxable accordingly. The provision also applies where the utilization is not in accordance with the objects or conditions declared in Form 10.

1. In the present case, the appellant has claimed that there has been no default whatsoever and the same being matter of factual verification, the Assessing Officer is directed to carefully verify whether the appellant satisfies the conditions laid u/s 11 of the Act w.r.t amount of Rs. 1,27,00,000/- and delete the addition made by AO CPC if found unwarranted. However, the AO must first factually verify whether Form 10 under section

We have carefully considered the rival submissions, perused the material available on record, and examined the judicial precedents relied upon by the Ld. AR. It is an undisputed fact that the assessee filed its return of income within the extended due date and that Form No. 10BB was filed with a marginal delay of 30 days. It is also evident that the audit report in Form No. 10BB was available on record at the time of processing of the return under section 143(1) of the Act. The delay in filing Form No. 10BB is purely procedural in nature and does not go to the root of the assessee’s substantive eligibility for exemption under section 11 of the Act. We find merit in the contention of the Ld. AR that denial of exemption under section 11 on account of such a minor delay would result in genuine hardship to the assessee, especially when there is no dispute regarding the charitable nature of activities or the application of income. The issue is squarely covered by the judgment of the Hon’ble Jurisdictional High Court in St. Thomas High School (supra) as well as by the decision of the Coordinate Bench of the ITAT, Mumbai, in St. Gregarious Education and Medical Trust (supra), wherein it has been consistently held that a marginal delay in filing the audit report should not defeat a substantive claim for exemption. As regards the accumulation of income amounting to Rs. 1,27,00,000/-, we note that the Ld. CIT(A) has already restored the matter to the file of the Ld. AO for factual verification with respect to compliance with the conditions prescribed

In the result, appeal of the assessee bearing ITA No.5515/Mum/2025 is allowed for statistical purpose.