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Facts
The assessee claimed exemption under sections 11 and 12 of the Income Tax Act, 1961, and also under section 10(23C)(iiiad). However, the assessee failed to submit the registration certificate and Form 10B as required. The Assessing Officer disallowed the exemption and made a best judgment assessment.
Held
The appellate tribunal held that the assessee failed to comply with the procedural requirements for claiming exemption, specifically the filing of Form 10B. While agreeing with the principle of disallowing the exemption, the tribunal directed the matter to be remanded to the Assessing Officer for computing the income.
Key Issues
Whether the assessee is entitled to exemption under sections 11, 12, and 10(23C)(iiiad) when it failed to file the mandatory Form 10B.
Sections Cited
11, 12, 10(23C)(iiiad), 250, 144, 139(1), 12A, 12A(1)(b), 13(10), 40, 40A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA BENCH” PATNA
Assessment Year: 2017-18 Assistant Commissioner of Income-tax (Exemptions) Circle, Patna, 4th Floor, Lok Nayak Bhawan, Dak Bunglow Chowraha, Patna-1 ...............…...…………….... Appellant vs. New Era Social Development Welfare Society, Shankar Shoping Centre, Hanuman Nagar, Kankarbagh, Patna - 800020 .......…..…......................... Respondent [PAN: AACTN0282B] Appearances by: Assessee represented by : Sh. Nishant Maitin, CA Department represented by : Sh. Ashok Kumar, CIT, DR Date of concluding the hearing : 20.01.2025 Date of pronouncing the order : 04.02.2025
ORDER PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
In this case, the present appeal arises from order dated 10.08.2023, passed by the Ld. Commissioner of Income Tax (Appeals) [hereafter ‘the Ld. CIT(A)’], National Faceless Appeal Centre (NFAC), Delhi u/s 250 of the Income Tax Act, 1961 (hereafter ‘the Act’).
1.1 In this case, the Assessing Officer passed an order under Section 144 of the Act dated 03.12.2019. Through this assessment order, the Assessing Officer had held as under:
New Era Social Development Welfare Society “Non-admissibility of claim of exemption u/s 11 and 12 of Income-tax Act. In the row C of other details assessee has claimed that it is registered under section 12A/12AA vide registration number 32 dated 4th January 1988 in its ITR. But assessee did not submit copy of certificate of registration after giving several opportunities to justify its claim i.e. Details of project and institution run by assessee, for which it has claimed exemption under section 10(23C)(iiiad) of the I. T. Act, 1961. Further, for claiming exemption under section 11, assessee has also required to submit Form 108 under section 12A(1)(b). Section 12A(1)(b) is as under: "If total income of the trust or insinuation as computed under this act without giving effect to the provisions of section 11 and section 12 exceeds [the maximum amount (i.e. Rs.2.50 thousand) 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 of sub section 2 of section 288 and the person in the 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 particular as may be prescribed." In this case assessee has failed to get its account audited and to submit alongwith its return of income as time prescribed u/s 139(1). Hence, exemption under section 11 and 12 is also not applicable and the exemption claimed of Rs. 5,80,39,300/-plus other section in ITR is hereby disallowed by the undersigned. After due consideration of facts & circumstances and verification of documents available in this office, the income of the assessee AOP/BOI is computed u/s 144 i.e. Best Judgment Assessment as Rs. 5,80,39,300/-.”
1.2 Aggrieved with this action, the assessee approached the Ld. CIT(A), who has in principle supported the action of Ld. AO and given the following findings: “5.3 Having considered the factual matrix of the case, I find that the assessee is a Public Charitable Trust registered u/s. 12A of the Act as mentioned by the AO in the beginning of his assessment order. The case of the assessee was selected for complete scrutiny under CASS with a reason for non-filing of Audit Report in Form 10B/10BB. In response to the statutory notices issued by the AO, the assessee did not respond. Therefore, the AO Issued a show cause proposing to complete the assessment u/s. 144 of the Act which was also not replied to by the assessee. The AO completed the assessment vide an order u/s.144 of the Act dated: 03.12.2019 denying exemption claimed u/s. 11 and 12 claimed of Rs. 5,80,39,300/- or u/s 10(23C)(iiiad) or any other section in ITR s the assessee had not filed the Form 10B under section 12A(1)(b). In view of the clear admission on the part of the assessee that it has not filed Form 10B, the assessee is not entitled to exemption u/s.11/12 of the Act. I am also of the view that its only the surplus income (receipts minus revenue expenses) which can be brought to tax. Therefore, I am of the view that the AO was correct in denying exemption u/s. 11/12 and u/s, 10(23C)(iiiad) of the Act. The AO is accordingly, directed to tax the surplus of the assessee as per law after allowing revenue expenditure from the grass receipts. Hence, the grounds of appeal of the assessee is Partly allowed.”
2. New Era Social Development Welfare Society 1.3 Aggrieved with the action of Ld. CIT(A), the Revenue is in appeal before us through the following ground: “1. The Commissioner of Income Tax (Appeal) erred in law by directing Assessing Officer to allow revenue expenditure from the gross receipts claimed by the assessee as exempt income u/s 11 and 10(23C)(iad) for the AY 2017-18, though confirmed the denial of exemption under these sections by the AO, without appreciating the positions of law before the insertion of section 13(10) and the relevant proviso of section 10(23C) which are effective only from 01.04.2023.”
2. Before us, right at the outset, the Ld. DR pointed out the provisions of section 13(10) of the Act and used that to support the action of Ld. AO. The Ld. AR on the other hand stated that the Form 10B could not be filed due to ignorance of Rules and procedures and the same was prepared as a hard copy which could not then be uploaded. The Ld. AR supported the action of Ld. CIT(A).
3. We have considered the rival contentions and also gone through the orders of authorities below. Right at the outset, the provisions of section 13(10) of the Act deserves to be extracted: “[10) Where the provisions of sub-section (8) are applicable to any trust or institution or it violates the conditions specified under clause (b) or clause (ba) of sub-section (1) of section 12A, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the trust or institution, subject to fulfilment of the following conditions, namely:— (a) such expenditure is not from the corpus standing to the credit of the trust or institution as on the end of the financial year immediately preceding the previous year relevant to the assessment year for which income is being computed; (b) such expenditure is not from any loan or borrowing; (c) claim of depreciation is not in respect of an asset, acquisition of which has been claimed as application of income, in the same or any other previous year; and (d) such expenditure is not in the form of any contribution or donation to any person. Explanation.—For the purposes of determining the amount of expenditure under this sub-section, the provisions of sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head "Profits and gains of business or profession". 3 3.1 It is felt that the Learned. CIT(A) has supported the action of Ld. AO and has merely directed the Ld. AO to allow the benefit of surplus income to be taxed. However, it could be a matter of consideration whether the Ld. CIT(A) could give a direction in which the AO would give relief on account of revenue expenditure (as opposed to capital expenditure) at the time of giving effect to the first appellate order. However, since we agree in principle with the action of Ld. CIT(A), we are directing that the matter be remanded to the file of Ld. AO for computing income of the assessee keeping in view, the provisions of section 13(10) of the Act. It is also felt that the assessee could utilise any opportunity for obtaining the condonation of delay in filing of the Form 10B, in case, the facts and the relevant CBDT Instructions support that the action.
With this remanding back to the file of Ld. AO with our observations, this appeal is treated as allowed for statistical purposes.
Order pronounced in the court on 04.02.2025