2025 (6) TMI 1835 - AT - Income Tax

Denial of exemption u/s 10(23C)(via) - non-filing of Form 10BB by the Assessee-Trust - CIT(A) allowed claim as Form 10BB was filed within the time allowed by the CBDT Circular No.16/2024 dated 18.11.2024 - HELD THAT - It is noticed that the revenue has not been able to point out any specific error in the order of the ld. JCIT(A)-9 Mumbai. The assessee is entitled to the benefit of Section 10(23C)(via) of the Act and the requisite Form 10BB has also been filed. The provisional approval u/s 10(23C)(via) of the Act is also available with the assessee for the assessment years 2022-2023 2024-2025 vide an order dated 30.09.2021. This being so as no error has been pointed out by the revenue in the order passed by the ld. JCIT(A)-9 Mumbai in the case of the assessee the appeal filed by the revenue stands dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

• Whether the assessee, a charitable trust registered under section 12A of the Income Tax Act, is entitled to exemption under section 10(23C)(via) for the assessment year 2022-23, despite having erroneously claimed exemption under section 11 in the return of income.
• Whether the failure to file Form 10BB along with the return of income within the prescribed time, as mandated under the Income Tax Act and related rules, disentitles the assessee from claiming exemption under section 10(23C)(via).
• Whether the delay in filing Form 10BB beyond the prescribed time limit can be condoned under CBDT Circular No. 16/2024 dated 18/11/2024, and if so, whether such condonation remedies the non-compliance and preserves the exemption claim.
• Whether the order of the Commissioner of Income Tax (Appeals) allowing exemption under section 10(23C)(via) by deleting the adjustment made under section 143(1) is legally sustainable.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to exemption under section 10(23C)(via) despite erroneous claim under section 11

Relevant legal framework and precedents: Section 10(23C)(via) provides exemption to income of certain charitable trusts or institutions approved under the prescribed conditions. Section 11 deals with exemption for income derived from property held for charitable or religious purposes. Registration under section 12A is a prerequisite for claiming exemption under section 11, whereas provisional approval under section 10(23C)(via) is required for exemption under that section. The law requires that the assessee comply with the relevant procedural formalities and correctly claim exemption under the applicable section.

Court's interpretation and reasoning: The Tribunal noted that the assessee was duly registered under section 12A since 1998 and had obtained provisional approval under section 10(23C)(via) vide Form 10AC dated 30/09/2021 for the years 2022-23 to 2024-25. The assessee's error in claiming exemption under section 11 instead of section 10(23C)(via) was due to inadvertence and lack of awareness during the transition period to the new registration and compliance requirements.

Key evidence and findings: The assessee filed the return of income (ROI) on 04/11/2022 claiming exemption under section 11, and filed Form 10B instead of the required Form 10BB. The provisional approval under section 10(23C)(via) was on record. The CIT(A) accepted the explanation of inadvertent error and held that the assessee was eligible for exemption under section 10(23C)(via) for the relevant assessment year.

Application of law to facts: The Tribunal concurred with the CIT(A) that the assessee's entitlement to exemption under section 10(23C)(via) was established by the provisional approval and registration, and the incorrect claim under section 11 was a procedural error that did not affect substantive eligibility.

Treatment of competing arguments: The revenue challenged the exemption on the ground of procedural non-compliance and the mismatch in the return, but did not dispute the substantive eligibility of the assessee for exemption under section 10(23C)(via).

Conclusions: The Tribunal upheld the CIT(A)'s finding that the assessee was entitled to exemption under section 10(23C)(via) despite the erroneous claim under section 11.

Issue 2: Effect of non-filing or delayed filing of Form 10BB on exemption claim

Relevant legal framework and precedents: Form 10BB is a prescribed form containing details of donations received, required to be filed by trusts claiming exemption under section 10(23C)(via). Non-filing or delayed filing of Form 10BB can lead to disallowance of exemption as per procedural requirements under the Income Tax Act.

Court's interpretation and reasoning: The Tribunal observed that neither the Central Processing Centre (CPC) nor the CIT(A) had made an adverse finding specifically on the ground of non-filing or delayed filing of Form 10BB. The CPC's adjustment under section 143(1)(a) was based on a mismatch between the details in the return and Form 10AC, not on the absence of Form 10BB.

Key evidence and findings: The assessee had filed Form 10B instead of Form 10BB initially, and later filed Form 10BB along with an application for condonation of delay before the Commissioner of Income Tax (Exemptions) in accordance with CBDT Circular No. 16/2024 dated 18/11/2024.

Application of law to facts: The Tribunal referred to the CBDT Circular No. 16/2024, which permits condonation of delay in filing Form 10BB beyond 365 days but within 3 years from the end of the relevant assessment year, if reasonable cause is shown. The assessee filed the condonation application within this extended period, thereby remedying the procedural lapse.

Treatment of competing arguments: The revenue contended that exemption should be denied due to non-filing of Form 10BB within the prescribed time. The assessee argued that the delay was inadvertent, and the filing was regularized within the extended period allowed by the CBDT Circular.

Conclusions: The Tribunal accepted the assessee's explanation and condonation application, holding that the delay in filing Form 10BB was curable and did not justify denial of exemption.

Issue 3: Validity of CIT(A)'s order deleting addition and allowing exemption

Relevant legal framework and precedents: The appellate authority has the jurisdiction to consider facts and law to rectify errors made in assessment or intimation orders, including inadvertent omissions or mismatches, provided the assessee is otherwise eligible for exemption and procedural compliance is satisfied or condoned.

Court's interpretation and reasoning: The CIT(A) after considering the facts, submissions, and documents, including the provisional approval under section 10(23C)(via), held that the assessee was eligible for exemption and that the adjustment made by the CPC was unjustified. The CIT(A) allowed the exemption by deleting the addition made under section 143(1).

Key evidence and findings: The CIT(A) relied on the assessee's registration, provisional approval, and the explanation of inadvertent error in claiming exemption under section 11 instead of 10(23C)(via). The CIT(A) did not find any adverse material regarding non-filing of Form 10BB at that stage.

Application of law to facts: The Tribunal found no error in the CIT(A)'s order. The revenue failed to demonstrate any legal or factual infirmity in the appellate order.

Treatment of competing arguments: The revenue sought restoration of the CPC's order on grounds of procedural non-compliance. The Tribunal noted that the procedural lapse was rectified by subsequent filing of Form 10BB and condonation application, and no adverse finding was made by CIT(A) on this ground.

Conclusions: The Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal.

3. SIGNIFICANT HOLDINGS

The Tribunal's crucial legal reasoning includes the following verbatim excerpt:

"It is noticed that the revenue has not been able to point out any specific error in the order of the ld. JCIT(A)-9, Mumbai. The assessee is entitled to the benefit of Section 10(23C)(via) of the Act and the requisite Form 10BB has also been filed. The provisional approval under Section 10(23C)(via) of the Act is also available with the assessee for the assessment years 2022-2023 & 2024-2025 vide an order dated 30.09.2021. This being so, as no error has been pointed out by the revenue in the order passed by the ld. JCIT(A)-9, Mumbai in the case of the assessee, the appeal filed by the revenue stands dismissed."

Core principles established:

• An inadvertent procedural error in claiming exemption under an incorrect section does not defeat the substantive eligibility of a charitable trust for exemption under the correct section, provided the registration and approvals are in place.
• Non-filing or delayed filing of Form 10BB, a mandatory compliance for claiming exemption under section 10(23C)(via), can be condoned if the delay is within the extended period allowed by the CBDT Circular and reasonable cause is shown.
• The appellate authority's order allowing exemption by deleting additions made under section 143(1) is sustainable where the assessee's eligibility is established and procedural lapses are rectified or condoned.

Final determinations on each issue:

• The assessee trust was entitled to exemption under section 10(23C)(via) for the assessment year 2022-23 despite the initial erroneous claim under section 11.
• The delay in filing Form 10BB was condoned in accordance with CBDT Circular No. 16/2024, and the subsequent filing remedied the procedural non-compliance.
• The CIT(A)'s order deleting the addition made by the CPC and allowing exemption was upheld.
• The revenue's appeal was dismissed.