Delay in Filing Form 10 due to Technical Issue Cannot Deny Benefit to Trust: Madras HC condones 530-Day Delay [Read Order]

In a recent ruling, the Madras High Court held that a trust cannot be denied the benefit of exemption under Section 11 of the Income Tax Act, 1961 merely due to a technical breach of delay in filing Form 10 especially when the ITR and audit report were filed within the prescribed time.

The Court condoned a 530-day delay in filing Form 10 and set aside the rejection order passed by the tax authorities.

M/s. Sindhi Educational Society (Madras) challenged an order passed by the Principal Commissioner of Income Tax under (PCIT) under Section 119(2)(b). The department rejected its request for condonation of delay in filing Form 10 for AY 2015-16.

The society submitted that it had e-filed its return of income along with the audit report in Form 10B within the due date, but filed Form 10 later on 15.04.2017, that is with a delay of 530 days.

Due to the delayed filing of Form 10, the return was processed under Section 143(1) by CPC, and a tax demand of about ₹1.68 crore was raised. The exemption under Section 11 was denied. The condonation petition was filed on 28.03.2023.

The trust contended that the delay was due to technical/administrative difficulties including changes in the accounting team.

It submitted that the exemption should not be rejected when other requirements were met.

The department defended the rejection by stating CBDT Circular No.9/2015 dated 09.06.2015, which says that condonation applications beyond six years from the end of the relevant assessment year cannot be entertained.

Since the Society’s condonation petition was filed only on 28.03.2023, i.e., beyond the cut-off period mentioned in the circular, the Principal Commissioner held that the request was beyond jurisdiction and rejected it, said the department.

Justice C. Saravanan observed that the statutory benefit available to a trust registered under Section 12A cannot be denied for a mere technical breach.

Therefore the delay in filing Form 10 ought to have been condoned. The Court held that the reasoning given in the impugned order was unsustainable. Thus, it set aside the rejection order.

While allowing the petition, the High Court directed that the petitioner comply with the requirements of Section 11.

It also instructed the Assessing Officer shall pass a speaking order condonation delay in filing Form 10.