The Kerala High Court has held that income tax exemption claimed by public charitable trusts should not be denied merely on the bar of limitations. The court was of view to consider the applications for condonation of delay without being too hyper-technical and in a judicious manner.
Mary Queens Mission Hospital, the petitioner assessees are entities registered under Section 12A of the Income Tax Act, 1961. The petitioners were required to file their return of income by October 31, 2022, and the audit report in Form-10B had to be filed on or before September 30, 2022. The due date for filing the return of income for the assessment year 2022-2023 was extended by the Central Board of Direct Taxes for a period of 7 days, as a result of which the last date for filing the return for that year became November 7, 2022. Therefore, the last date for filing the audit report in Form-10B was October 7, 2022.
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The petitioners did not file any audit report in Form-10B within the specified time. However, they filed it on or before the date of filing of the return for the assessment year 2022-2023, which was, as already indicated, November 7, 2022. The petitioners, therefore, filed separate applications before the Commissioner of Income Tax (Exemption) under Section 119(2)(b), praying that the delay in filing the audit report in Form-10B be extended. The Commissioner has rejected the applications for condonation of delay.
The petitioners contended that the Commissioner has considered the applications for condonation of delay in a highly mechanical manner. The delay was 30 days or less in each of these cases; the Commissioner ought not to have taken a strict view and ought to have condoned the delay in filing the audit report, especially taking into consideration the fact that the income tax returns were filed within the due date.
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The department contended that they were unable to uphold the audit report on account of certain technical glitches, which cannot be correct, as the audit report itself was prepared much later than the date on which such glitches are reported.
The filing of the audit report was mandatory, and the Commissioner has considered the contentions taken before him as grounds to condone the delay and has come to the conclusion that there was no reason to exercise the jurisdiction under Section 119(2)(b) to condone the delay in filing the audit report.
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The division bench of Justice Gopinath P. has observed that the delay in filing the audit report in Form-10B can at best be 30 days, as the law only requires that the audit report be uploaded at least a month before the due date for filing returns. The Commissioner exercised his jurisdiction under Section 119(2)(b) of the Income Tax Act, 1961, to condone the delay instead of taking a strict view of the matter.
While allowing the petition, the court held that the assessees, a public charitable trust that substantially satisfies the condition for availing of such an exemption under Income tax legislation, should not be denied merely on the bar of limitation, especially when the legislature has conferred wide discretionary powers to condone the delay on the authorities.
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The court quashed the orders issued by the Commissioner of Income Tax (Exemptions), Kochi, dismissing the applications filed by the petitioners under Section 119(2)(b) of the Income Tax Act.
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