Reduction of Accumulated Income for Charitable Trust Due to Technical Glitch in Form 10B: ITAT Remitted the Matter to AO [Read Order]
ITAT Remits Matter to AO After CPC Reduced Charitable Trust Accumulation Due to Form 10B Glitch
The Income Tax Appellate Tribunal (ITAT), Lucknow Bench, remitted the matter to the Assessing Officer (AO) after the Centralized Processing Centre (CPC) reduced the accumulated income of a charitable trust due to a technical glitch in Form 10B and directed the AO to pass order in accordance with law after providing reasonable opportunity to the appellant.
The appellant, Namo Narain Educational and Charitable Trust, is a trust registered under Section 12A of the Income Tax Act, 1961. For the Assessment Year 2023-24, the appellant filed its return of income in Form 7 and also furnished the audit report in Form 10B within the prescribed time.
During the relevant year, the appellant applied 91.16% of its total income towards the objects of the trust and the remaining 8.84%, amounting to ₹73,77,534, was claimed as accumulation within the permissible limit of 15% under Sections 11(1)(a) and 11(1)(b) of the Income Tax Act.
While CPC processing, the accumulation was reduced from ₹73,77,534 to ₹57,77,534 and treated the balance amount of ₹16,00,000 as taxable income of the trust. Further, the CPC also added ₹87,650 by treating repayment of loan as income of the appellant.
The appellant filed an appeal before the Commissioner of Income Tax (Appeals) (CIT(A)). The appellant contended that the reduction in accumulation was made by CPC based on Clause 31(xi) of Form 10B. It was submitted that the amount of ₹16,00,000 represented borrowings made during the year, which was required to be reduced from application of income in accordance with Explanation 4(ii) to Section 11(1) of the Act.
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