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2025 (5) TMI 2127 - AT - Income TaxDisallowance of claim of exemption u/s 10(23C) - assessee trust has not filed Form No.10BB before the statutory time limit but has filed the return of income as well as Form No.10BB after the due date of time HELD THAT - Hon ble Gujarat High Court in Anjana Foundation 2024 (10) TMI 664 - GUJARAT HIGH COURT after considering the decision of Wipro Limited 2022 (7) TMI 560 - SUPREME COURT has held that where the assessee had already filed audit report in Form 10B electronically during pendency of appellate proceedings along with copy of audited financial statements it is sufficient compliance for claiming the exemption u/s 11 of the Act. Since in the instant case the assessee has already submitted the audited report in Form No.10BB during assessment proceedings itself therefore the assessee in our opinion is in a better position. The various other decisions relied on by the Revenue as per grounds of appeal or during the course of arguments are distinguishable and not applicable to the facts of the present case. No infirmity in the order of the Ld. CIT(A) / NFAC allowing the claim of exemption u/s 10(23C)(v) of the Act for belated filing of Form No.10BB. We hold and direct accordingly.
1. ISSUES PRESENTED and CONSIDERED
(a) Whether the assessee trust is entitled to exemption under section 10(23C)(v) of the Income Tax Act, 1961, despite filing the audit report in Form No.10BB after the due date prescribed under the ActRs. (b) Whether the delay in filing Form No.10BB can be condoned if the audit report is filed before the completion of assessment proceedingsRs. (c) Whether the generation of surplus funds by the trust, exceeding 15% of gross receipts, justifies denial of exemption on the ground of improper utilization or supervision of fundsRs. (d) Whether registration under section 12AA of the Income Tax Act is a mandatory prerequisite for claiming exemption under section 10(23C)(v)Rs. (e) Whether the observations of the Assessing Officer regarding non-utilization and mismanagement of funds without supporting material can be sustainedRs. (f) The applicability and interpretation of judicial precedents, including the Supreme Court decisions on strictness of exemption provisions and the mandatory or directory nature of filing statutory audit reports. 2. ISSUE-WISE DETAILED ANALYSIS (a) Entitlement to exemption under section 10(23C)(v) despite late filing of Form 10BB The legal framework mandates that trusts claiming exemption under section 10(23C)(v) must file an audit report in Form No.10BB within the due date of filing the return of income, as stipulated under the provisos to section 10(23C) read with section 139(4A). The Assessing Officer denied exemption on the ground that the assessee filed Form 10BB belatedly and did not comply with the statutory timeline. The Tribunal examined the issue in light of the decision of the Coordinate Bench in the assessee's own case for AY 2014-15, which held that filing of the audit report before completion of assessment proceedings constitutes sufficient compliance. The Tribunal also relied on the Supreme Court decision in CIT v. Nagpur Hotel Owner's Association, which recognized that submission of the audit report during assessment proceedings satisfies the statutory requirement. Further, the Tribunal noted that the filing of Form 10BB was made before the completion of the assessment and that the delay was procedural rather than substantive. The Tribunal found no provision in section 10(23C)(v) making the filing deadline mandatory and held the requirement to be directory, thus allowing the exemption claim. The Revenue's reliance on the Supreme Court decision in Principal Commissioner of Income Tax vs. M/s Wipro Limited, which emphasized strict compliance with timelines for exemption under section 10B, was distinguished on the ground that section 10B pertains to a different exemption regime and the facts were not analogous. The Tribunal also referred to CBDT Circular No.19 of 2020 and subsequent Circular No.6 of 2021, which authorized the Commissioner of Income Tax to condone delays in filing audit reports up to AY 2018-19, supporting a liberal approach to procedural delays. (b) Condonation of delay in filing Form 10BB The Assessing Officer rejected the assessee's application for condonation of delay filed with the CIT(Exemption). However, the Tribunal, following the Coordinate Bench's precedent and various High Court decisions, held that the audit report filed before the completion of assessment proceedings is sufficient compliance of the statutory requirement. The Tribunal referred to decisions of the Gujarat High Court and Delhi Tribunal, which held that the filing of Form 10B (analogous to Form 10BB) is a procedural requirement and delay in filing should be condoned if the report is submitted before the conclusion of assessment or appellate proceedings. The Tribunal further observed that the assessee had filed the audit report during the assessment proceedings, thereby meeting the purpose of the statutory requirement. It rejected the Revenue's contention that the delay should not be condoned and upheld the CIT(A)'s order allowing exemption. (c) Effect of generation of surplus on exemption claim The Assessing Officer observed that the assessee generated surplus funds exceeding 15% of gross receipts consistently over several years, concluding that the funds were not properly utilized or supervised, and thus denied exemption. The Tribunal found this observation to be a bald allegation unsupported by any material evidence. It noted that the trust is managed under the supervision of the District Collector and the Charity Commissioner, with no findings of irregularity or mismanagement by those authorities. The Tribunal cited Supreme Court decisions in Queen's Educational Society v. CIT and Aditanar Educational Institution v. Addl. CIT, which held that mere generation of surplus does not disqualify a trust from exemption or indicate that it is not charitable or religious in nature. Accordingly, the Tribunal held that surplus generation alone cannot justify denial of exemption and that the Assessing Officer's conclusion was unsustainable. (d) Requirement of registration under section 12AA The Revenue contended that the assessee was not registered under section 12AA during the relevant years and hence not entitled to exemption under section 10(23C)(v). The Tribunal examined the statutory provisions and noted that section 10(23C)(v) and section 11/12AA operate as parallel and independent regimes. It referred to CBDT Circular No.14 of 2015, which clarifies that registration under section 12AA is not a condition precedent for claiming exemption under section 10(23C)(v). The Tribunal further relied on the principle of statutory interpretation that no condition not prescribed in the statute can be read into it, citing the Supreme Court decision in CIT v. Vadilal Lallubhai. Therefore, the absence of registration under section 12AA did not disentitle the assessee from exemption under section 10(23C)(v). (e) Validity of Assessing Officer's observations on fund utilization and management The Tribunal emphasized that the Assessing Officer, as a quasi-judicial authority, must base findings on material evidence and cannot rely on mere conjecture or bald observations. Since no material was produced to substantiate the claim of improper utilization or mismanagement of funds, and considering the trust's governance structure involving government officials, the Tribunal held the Assessing Officer's observations as unsubstantiated and legally untenable. (f) Interpretation of judicial precedents and statutory provisions The Tribunal analyzed various judicial decisions, including:
The Tribunal concluded that the statutory provisions and judicial precedents favor a liberal and purposive approach to procedural compliance for charitable trusts, especially where substantive compliance is established. 3. SIGNIFICANT HOLDINGS "The filing of audit report in the prescribed form before completion of the assessment proceedings is sufficient compliance under the provisions of the Act." "The observation of the Assessing Officer that the funds of the trust were not properly utilized, managed and supervised is a bald observation in the absence of any material on record." "No stipulation exists in section 10(23C)(v) requiring registration under section 12AA as a condition precedent to claim exemption." "Mere generation of surplus does not lead to the conclusion that the trust is not charitable or religious or that it is for profit." "The requirement of filing statutory audit reports within the due date is directory and procedural, and delay can be condoned if the report is filed before completion of assessment or appellate proceedings." "The Assessing Officer must refrain from making findings without supporting evidence, especially when the trust is managed under government supervision." Accordingly, the Tribunal dismissed the Revenue's appeals for assessment years 2016-17 and 2017-18, upholding the exemption claim under section 10(23C)(v) despite late filing of Form 10BB and rejecting the denial of exemption based on surplus generation or absence of section 12AA registration.
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