Loading judgment…
Facts
The assessee, a trust registered under Section 12A/12AA/12AB, claimed exemption under Section 11(1)(a). The assessment was completed disallowing the exemption due to a clerical error in Form-10B, where the accumulated amount was incorrectly entered as zero instead of Rs. 14,84,424/-. The assessee filed a revised Form-10B and a rectification application, which was denied.
Held
The Tribunal held that a mere clerical mistake in Form-10B should not lead to the denial of a permissible deduction under Section 11(1)(a), especially when the assessee had correctly claimed the deduction in its return of income. Relying on a precedent, the Tribunal found that the 15% accumulation under Section 11(1)(a) is automatic and not subject to conditions that would be negated by a clerical error.
Key Issues
Whether a clerical error in Form-10B can lead to the denial of exemption under Section 11(1)(a) when the correct claim was made in the return of income. Whether the 15% accumulation under Section 11(1)(a) is an automatic exemption.
Sections Cited
Section 11(1)(a), Section 12A, Section 12AA, Section 12AB, Section 143(1), Section 154, Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI S. RIFAUR RAHMAN
ORDER The assessee has filed this appeal against the order of learned ADDL/JCIT(A)-1, Gurugram dated 29.08.2025 passed u/s. 250 of the Income-tax Act, 1961 (“the Act” for short) for the assessment year 2021- 22.
At the time of hearing, it was noticed that there is a delay of one day in filing this appeal. The same is condoned in the interest of justice.
At the time of hearing, learned AR of the assessee submitted that the assessee is a trust and registered u/s. 12A/12AA/12AB of the Act and the assessee is regularly claiming exemption u/s. 11 (1)(a) of the Act. During the year under consideration, he submitted that assessee has filed his return of income and also Form-10B on 19.02.2022 [Delay was condoned by CIT(E), Lucknow]. Assessment was completed u/s. 143(1) of the Act by disallowing the amount based on Form-10B.
Aggrieved, assessee filed a rectification application u/s. 154 of the Act and the same was denied.
It was brought to my notice that while certifying the Form-10B, the auditor of assessee has, by mistake, filled column -3 row 3 as zero instead of Rs.14,84,424/-. He brought to my notice page 37 of the paper book, which is return of income filed by assessee, in which the assessee has clearly mentioned the above said amount, indicating that the amount accumulated are set apart for application to the objects of the Trust to the extent it does not exceed 15% of the income derived from property.
Since the above said mistake was pointed out to the assessee, assessee filed revised Form 10B, which is placed at page 54 of the paper book, wherein it was rectified and certified form-10B was filed on 21.05.2024.
He submitted that the learned CIT(A) has rejected the claim of the assessee on the basis that Form-10B was not filed on time by referring to Rule 12(2) of the Income-tax Rules. In this regard, he submitted that the assessee is continuously claiming deduction u/s. 11(1)(a) of the Act and it is a permissible deduction. The same cannot be denied on the basis of clerical mistake. In this regard, he relied on the decision of ITAT, 2 | P a g e Chennai in the case of V. Ramakrishna Charitable Trust vs. DCIT (E)
[2015] 62 taxmann.com 297(Chennai-Trib).
On the other hand, learned DR brought to my notice page 52 of the paper book and submitted that Form-10B was filed with a delay of four days. The assessee has to file the Form-10B on time as per Rule 12(2)
to claim any benefits. Accordingly, he relied on the findings of learned CIT(A).
Considered the rival submissions and the material placed on record.
I observe that the assessee had filed return of income on 19.02.2022 and also filed Form 10B on the same date, i.e., 19.02.2022.
It is the fact on record that there is clerical error made by the auditor in Form-10B. However, the assessee has properly filed his return of income and rightly claimed deduction in its return of income. The mistake is pointed out to the assessee and the assessee has filed revised Form- 10B during the assessment proceedings. The issue raised by the assessee before me is, the assessee is a trust regularly claiming exemption u/s. 11(1)(a) of the Act and it is a permissible deduction as per the provisions of the Act. In my view, there is proper justification for the claim of assessee that mere clerical mistake in Form 10B cannot be denied when the same is a permissible deduction u/s. 11(1)(a) of the Act. 3 | P a g e I observe that the ITAT Bench, Chennai in the case of V. Ramakrishna Charitable Trust (supra) has held the same in favour of the assessee.
For the sake of brevity, it is reproduced below :
“8. Thus, it is clear that income earned by the trust during the previous year are given exemption from income-tax to the extent of that part of the income which is actually spent for charitable or religious purposes plus accumulated income not exceeding 15% of the income. Clause (a) of Section 11(1) of the Act permits automatic accumulation of income up to 15% without any precondition set. Once the operation of Sec. 11(1) (a) exhausted, then follows sub-section (2) of Section 11 of the Act, which deals with the question of investment of the balance of accumulated income over and above 15% accumulated income which has still not qualified for exemption under clause (a) of sub-section 11(1) of the Act. That balance accumulated income can also qualify for exemption from income-tax meaning thereby the ceiling or the limit of exemption of accumulated income from income-tax as imposed by clause (a) of sub-section (1) of section 11 would get lifted if the additional accumulated income beyond 15% as the case may be, is invested as laid down by section 11(2) after following the procedure laid down therein. Therefore, sub-section (2) will operate for the entire balance of the previous year which has not got the benefit of tax exemption under clause (a) of sub- section (1) of section-11 of the Act. It has to be kept in view that out of the accumulated income of the previous year, 15% of the total income is given exemption from income-tax by clause (a) of sub section (1) of section 11 itself. That exemption is unfettered and not subject to any conditions. Section 11(2) does not operate to whittle down or to cut across the exemption provision contained in section 11(1)(a) so far as such accumulated income does not exceed 15% of the income accumulated in the previous year. It has also to be appreciated that sub-section (2) of section 11 does not contain any non obstante clause like "notwithstanding the provisions of subsection (1)". Consequently it must be held that after section 11(1)(a) has had its full force and if still any accumulated income of the previous year is left to be dealt with and to be considered for the purpose of income-tax exemption, sub-section (2) of section 11 can be pressed into service and if it is complied with, then such additional accumulated income beyond 15% will also be eligible for exemption from income-tax on compliance with the conditions laid down by sub-section (2) of section-11 of the Act.
4 | P a g e
A charitable or religious trust have to apply 85% of income for the object of the trust so as to qualify for exemption u/s 11 of the Act. Income not exceeding 15% of income is allowed to be accumulated under this section 11(1)(a) of the Act. This accumulation is automatic and does not call for any statutory stipulation. Explanation to section 11(1) provides deemed application of the income. The said explanation deals with a situation where income applied to charitable or religious purpose falls short of 85% of the income for the reason that the income was not received during that year or for any other reason, the trust have to exercise in writing for accumulation in accordance with Explanation to section 11(1) of the Act. It is pertinent to mention that filing of Form 10 u/s 11(2) of the Act and exercising in writing before the expiry of the time allowed under sub section (1) of section 139 while furnishing the return of income Explanation to section 11(1) of the Act is different. For exercising in writing it is not required to file any prescribed form. It could be on simply application or it could be exercised by passing accounting entries in the books of account, financial statements and other documents filed along with the return of income. If, combinedly, 85% of income including income applied, deemed to be applied and accumulation not exceeding 15% are less than 85% still the trust is eligible for exemption from income u/s 11(2) of the Act. In other words, it can be said that a chartable or religious trust can claim exemption from income even no income is applied for the object of the trust during the year, the remaining 85% of the income will be allowed exemption u/s 11(2) of the Act provided the statutory requirements for filing Form 10 and investing the amount in specified securities are fulfilled by the assessee.”
Respectfully following the above said decision of coordinate Bench, we are inclined to allow the claim of the assessee.
In the result, appeal filed by assessee is allowed.
Order pronounced in the open court on 05.01.2026. Sd/- (S. RIFAUR RAHMAN) ACCOUNTANT MEMBER Dated: 05.01.2026 *aks/- 5 | P a g e