Requirement Of Filing Audit Report In Form 10B Is Only Procedural: Delhi ITAT Grants Exemption To Educational Trust U/s 11

Section 11 of the Income Tax Act provides exemptions to income derived from property held under trust or institutions wholly for charitable or religious purposes to the extent that such income is applied to charitable and religious purposes in India.

Referring to the decision of Ahmedabad Tribunal in the case of ITO Vs. Takshshila Foundation (NGO) [ITA NO. 118/Ahd/2024], the Division Bench of Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) reiterated that “requirement of filing of audit report in Form 10B was only procedural requirement of law and as long as the same was made available to the AO before the completion of assessment either u/s 143(1)/ 143(3)/ 144/ 147, the substantive claim of exemption u/s 11 cannot be denied to the assessee.” (Para 4)

Facts of the case:

The assessee society, registered u/s 12AA, filed its return declaring Nil income, after claiming exemption u/s 11. In the meanwhile, in pursuance of CBDT Circular No. 17/2021, all charitable trusts were supposed to apply for fresh registration u/s 12AB despite the fact that they were already holding registration u/s 12AA. During processing of return, the details of fresh registration u/s 12AB were not filled by the assessee in the relevant column of the ITR and consequentially exemption u/s 11 was denied.

Observations of the Tribunal:

The Bench found that the assessee had furnished the audit report in form No. 10B along with return, however, this filing of audit report in form 10B was beyond the prescribed due date.

The Bench noted that AY 2021-22 being the first year of requirement of law to file the audit report in Form 10B 1 month prior to the due date of filing the return of income, the assessee had not complied with this amended requirement of law, being the first year of such requirement.

The Bench went on to observe that the assessee was already enjoying the registration u/s 12AA, though it had indeed applied for fresh registration u/s 12AB in the prescribed form within the time allowed by the statute, in view of the CBDT Circular.

That is why the said application has been duly considered by the Pr. CIT by granting provisional registration in Form 10AC valid for five assessment years commencing from AY 2022-23 to 2026-27, added the Bench.

As per the law, the Bench explained that fresh registration could be granted only from the year in which application was preferred by the assessee, and the application made by the assessee for seeking fresh registration u/s 12AB is well within time allowed by CBDT.

Hence, the Bench pointed that the original registration obtained u/s 12AA would protect the assessee up to AY 2021-22 for claim of exemption u/s 11 as long as other conditions prescribed in section 11 to 13 of the Act have been fulfilled by the assessee.

Hence, the ITAT allowed Assessee's appeal and concluded that the assessee society would be duly entitled for claim of exemption u/s 11 for A.Y 2021-22.

Counsel for Assessee/ Appellant: Rano Jain and Mansi Jain

Counsel for Revenue/ Respondent: N. K. Bansal

Case Title: Shambhu Dayal Modern School vs. ITO

Case Number: ITA No. 1236/Del/2024

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