2025 (6) TMI 1937 - AT - Income Tax

Denial of exemption u/s. 11 - Form No. 10 was filed belatedly - typographical error in the original audit report - HELD THAT - Assessee Trust already made fixed deposits with Axis Bank in specified mode. However in the original Audit Report in Form No. 10 there is some typographical error which was rectified by filing a Revised Audit Report on 01-07-2023. Therefore held that Revised Form No. 10 should be considered for determining accumulated funds available with the assessee u/s. 11(2) of the Act. Further the Board resolution passed for Investment also as per Section 11(5) of the Act as the amount was deposited in fixed deposits with the bank accounts - Appeal filed by the Revenue is hereby Dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

• Whether the claim of accumulation of income under section 11(2) of the Income Tax Act, 1961, can be allowed when the revised Form No. 10, reflecting the correct accumulated amount, was filed belatedly beyond the due date prescribed under the Act?
• Whether a typographical error in the original audit report (Form No. 10) can be rectified by filing a revised Form No. 10 after the due date, and such revision can be considered for claiming exemption under section 11(2)?
• Whether the mode of investment and the purpose of accumulation comply with the requirements under sections 11(2) and 11(5) of the Income Tax Act, thereby entitling the assessee to exemption?
• Whether the Revenue's rejection of the rectification petition under section 154 on the ground of belated filing of Form No. 10 was justified?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Allowability of accumulation claim under section 11(2) when revised Form No. 10 is filed belatedly

Relevant legal framework and precedents: Section 11(2) of the Income Tax Act allows a charitable or religious trust to accumulate income for specified purposes, subject to certain conditions including filing of Form No. 10 within prescribed timelines. Section 11(5) prescribes the mode of investment for accumulated funds. The Revenue contended that since the revised Form No. 10 was filed after the due date, the claim for accumulation was not allowable as per section 11(2)(c).

The Tribunal relied on precedents including the decision of the ITAT Kolkata Bench in Crawley & Ray Founders Engineers Pvt. Ltd. vs DCIT CPC, where a typographical error in the original audit report was rectified by considering the revised Form No. 10 filed later, and the Hon'ble ITAT Mumbai Bench in Deputy Commissioner of Income-tax (Exemption)-2(1) vs Vile Parle Mahila Sangh, which allowed revised Form No. 10 for accumulation claims under section 11(2) despite belated filing, emphasizing the nature of the claim and verifiability from documentary evidence.

The Apex Court's ruling in Commissioner of Income-tax vs Gokula Education Foundation was also pivotal, holding that as long as the objects of the trust are charitable and the purposes mentioned in Form No. 10 align with those objects, exemption under section 11(2) cannot be denied merely due to non-furnishing or incorrect furnishing of details.

Court's interpretation and reasoning: The Tribunal observed that the assessee had originally filed Form No. 10 with a typographical error, mentioning Rs. 3,75,000 instead of Rs. 3,75,00,000 as the amount set apart for acquisition of land and construction of a new school building. The revised Form No. 10 filed on 01-07-2023 correctly reflected the accumulated amount. The Tribunal found that the claim was genuine and supported by the trust board resolution and fixed deposit details, which complied with section 11(5).

Key evidence and findings: The trust resolution dated 21-09-2022, the fixed deposit of Rs. 2.75 crores with Axis Bank, and the revised audit report were critical documentary evidence. The Tribunal noted that the original error was typographical and the revised Form No. 10 was filed to rectify this mistake.

Application of law to facts: Applying the ratio of the cited decisions, the Tribunal held that the revised Form No. 10 should be considered for determining the accumulated funds under section 11(2). The mode of investment was in accordance with section 11(5), and the purpose was consistent with the charitable objects of the trust.

Treatment of competing arguments: The Revenue's argument that the revised Form No. 10 was filed belatedly and thus not permissible was rejected. The Tribunal emphasized that the error was clerical and rectifiable, and the revised filing was substantiated by documentary proof. The Tribunal also distinguished the case from situations where accumulation claims are made without bona fide intent or supporting documents.

Conclusions: The Tribunal concluded that the assessee's claim of accumulation under section 11(2) was allowable despite the belated filing of the revised Form No. 10, as the error was typographical and rectified with supporting evidence. The exemption claim was valid and should be accepted.

Issue 2: Validity of rectification under section 154 and denial of exemption by CPC

Relevant legal framework and precedents: Section 154 allows rectification of mistakes apparent from the record. The CPC rejected the rectification petition on the ground that the revised Form No. 10 was filed belatedly, thus not allowing the exemption claim.

Court's interpretation and reasoning: The Tribunal noted that the rectification sought was to correct a typographical error in the original Form No. 10, which was apparent from the record and supported by the trust resolution and fixed deposit details. The rejection by CPC was found to be incorrect as it did not consider the bona fide nature of the revision and documentary evidence.

Key evidence and findings: The revised Form No. 10, trust resolution, and fixed deposit evidence demonstrated the genuineness of the claim and the nature of the mistake.

Application of law to facts: The Tribunal applied the principle that rectification under section 154 is permissible for correcting clerical or arithmetical mistakes apparent from the record and that such rectification cannot be denied solely on the ground of belated filing if the claim is genuine and verifiable.

Treatment of competing arguments: The Revenue's contention that the rectification petition was not maintainable due to delay was rejected in light of the precedents and facts showing the error was inadvertent and rectifiable.

Conclusions: The Tribunal held that the rectification petition should have been allowed and the exemption claim under section 11(2) accepted.

3. SIGNIFICANT HOLDINGS

"The appellant had set apart Rs. 3,75,00,000/- for specific purposes, which can be verifiable from Trust Board resolution and ITR filed. However, the amount was entered as Rs. 3,75,000/- which amounts as a typographical error."

"The revised Form No. 10 should be considered for determining the accumulated funds available with the assessee under section 11(2) of the Act."

"As long as objects of trust were charitable in character and purpose or purposes mentioned in Form No. 10 were for achieving objects of trust, merely because details were not furnished, assessee could not be denied benefit of exemption under section 11(2)."

"The mode of investment was also as per section 11(5) of the Act as the amount was deposited in scheduled banks or co-operative societies as per section 11(5) of the Act."

"The ground raised by the Revenue is devoid of merits and the same is liable to be dismissed."

Core principles established include that a bona fide clerical or typographical error in Form No. 10 can be rectified by filing a revised form even after the due date, provided the claim is supported by documentary evidence and is in accordance with the provisions of sections 11(2) and 11(5). The exemption under section 11(2) cannot be denied merely due to incorrect or belated filing of details if the underlying claim is genuine and verifiable.

The final determination was that the Revenue's appeal was dismissed, affirming the CIT(A)'s order allowing exemption under section 11(2) based on the revised Form No. 10 and supporting documents.