Exemption u/s 11 and 12 for Charitable Trusts Can't Be Denied on Mere Technical Errors : ITAT [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) Pune bench held that the exemption under sections 11 and 12 of the Income Tax Act, 1961, cannot be denied for mere procedural defaults if the assessee meets all substantive conditions.

Savitribai Phule Shikshan Prasarak Mandal, a trust running educational institution, claimed exemption of ₹4.85 crore under section 10(23C) of the Income Tax Act, 1961 for the Assessment Year 2019–20.

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However, the Centralized Processing Center (CPC) denied the claim due to the non-filing of the Form 10BB audit report within the prescribed time. The assessee's rectification application under section 154 of the Income Tax Act, 1961, was also rejected on the same ground.

Read More: Kerala HC Directs Income Tax Commissioner  to Expeditiously Dispose of Rectification Petition filed u/s 154 of Income Tax Act

Aggrieved by the AO’s order, thBulk Subscription Enquirye assessee filed an appeal before the Commissioner of Income Tax (Appeals) [ CIT(A) ], who allowed the claim. The Revenue then filed an appeal before the ITAT against the order of CIT(A).

Revenue’s counsel, Arvind Desai, argued that since the assessee was registered under section 10(23C)(vi) of the Act, it was mandatory to file the audit report in Form 10BB.

It was contended that the CIT(A) erred in accepting Form 10B in its place, and the exemption should have been denied due to this procedural lapse.

Since no one appeared on behalf of the assessee despite proper service of notice, the appeal was proceeded with ex parte, taking into account the arguments presented by the departmental representative.

Read More: AO Failed to Consider Rule 6DD Exceptions in Cash Deposit Disallowance: ITAT Remits Case for De Novo Assessment

The Bench, comprising Vinay Bhamore (Judicial Member) and Dr. Manish Borad (Accountant Member), held that the assessee’s claim was denied merely due to filing Form 10B instead of Form 10BB, which is only a technical error.

The Tribunal noted that the assessee was registered under Section 12AA of the Actand had applied over 85% of its income towards charitable purposes. Thus, it fulfilled all necessary conditions for exemption under sections 11 and 12 of the Act.

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The tribunal agreed with the CIT(A) that denying the exemption on procedural grounds was unfair and against natural justice. The CPC’s rejection was found to be unjustified.

Thus, the Tribunal upheld the CIT(A)’s order and dismissed the Revenue’s appeal.

To Read the full text of the Order CLICK HERE

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