Chevalier P J Cherian Arts and Cultural Foundation, Ashok Nagar V. DDI Exemptions, Chennai

ITA 702/CHNY/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 1988 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-06-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 16-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N. SANJAY GANDHI
• Assessee Lawyers: P. RAVICHANDRAN
• Keywords: Opportunity of being heard; Earning of tax free income; Charitable institution; Procedural lapse
• Section: 11; 12A; 10B

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI ŵी महावीर िसंह, उपाȯƗ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ के समƗ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.702/Chny/2024 िनधाŊरण वषŊ /Assessment Year: 2021-22 Chevalier PJ Cherian Arts and Cultural Foundation, 45, First Avenue Ashok Nagar, Chennai – 600083. [PAN: AAAAC 8002B] Vs. The DDI (Exemptions), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथŎ की ओर से/ Assessee by : Shri P. Ravichandran, CA ŮȑथŎ की ओर से /Revenue by : Shri N. Sanjay Gandhi, JCIT सुनवाई की तारीख/Date of Hearing : 13.06.2024 घोषणा की तारीख /Date of Pronouncement : 05.09.2024 आदेश / O R D E R PER S.R. RAGHUNATHA, A.M : This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-1, Surat [hereinafter “CIT(A)] in DIN & Order No. ITBA/APL/S/250/2023-24/1060188727(1), dated 29.01.2024. 2. The assessee has raised the following grounds of appeal. 1. The orders of the Assessing Officer and the First Appellate Authority are contrary to law. 2. The denial of exemption under Section 11 to the extent of ITA No.702/Chny/2024 :- 2 -: Rs.16,60,000/- is contrary to law when the Appellant had filed Form 10 along with the necessary resolution for accumulation of income. 3. The denial of exemption by the First Appellate Authority on the grounds that the Audit Report in Form 1OB was incomplete is erroneous and in any case the Appellant ought to have been given an opportunity to rebut and explain the incompleteness. 4. The Appellant craves leave to raise additional grounds.” 3. The brief of the case are that, the assessee is a charitable institution carrying on the activities for the last several years and was duly registered u/s. 12A of the Act. The only activity of the assessee is to run the school called Vidyaniketan Matriculation Higher Secondary School in Chennai. The School collects fees strictly in accordance with the fee fixed by a committee headed by a former Judge of the Hon'ble Madras High Court. The assessee has also collects donations from companies and other charitable bodies to meet the expenditure for achieving the objects of the trust. During the A.Y 2021-22, the assessee has filed its return of income on 24.02.2022 by declaring total income as Rs.Nil. Since, the assessee had not spent 85% of its gross receipts towards charitable activities during the impugned assessment year, Form-10 has been filed on 10.11.2022 for an amount of Rs.16,60,000/- as accumulated are set apart to be spent on or before 31.03.2026. The CPC, Bengaluru has processed the return u/s.143(1) of the Act and proposed to deny the exemption claimed ITA No.702/Chny/2024 :- 3 -: u/s.11(1)(2) of the Act, stating that Form-10 has not been filed along with return of income holding as under: “Proceeding Name: Adjustment u/s 143(1)(a) Incorrect claim (1) Disallowance of Incorrect claim in the return - 143(1)(a) (i) Variance 1,660,000 Particulars: The Trust or Institution is registered u/s.12A/12AA/12AB and is claiming exemption u/s.11, but the trust or institution has not e-filed Form 9A within the due date. Hence exemption claimed in Sl.no. 4iv of Part B-TI "Amount deemed to have been applied during the previous year as per clause (2) Explanation to section 11(1)" is not allowable in accordance with the said provisions r/w Rule 17 of Income Tax Rules. Rs. 1,660,000 Amount entered in the income tax return” 4. In reply to the above, the assessee has submitted that it has exercised option to accumulate its income u/s.11(2) of the Act and has submitted Form-10 on 02.02.2022 and also submitted that accumulated amount of Rs.16,60,000/- was wrongly reflected in Coloumn-4(iv) in part B-TI instead of column-4(vi). However, the CPC, Bengaluru, confirmed the denial of exemption to the tune of Rs.16,60,000/- on 25.10.2022. Aggrieved by the order of the CPC, Bengaluru, the assessee filed an appeal before the Ld. CIT(A). After going through the details and order of the CPC, the Ld. CIT(A) has confirmed the action of the CPC by holding as under: “The appellant was issued a notice u/s.250 of the Act, for providing an opportunity of being heard and to submit its claim. Online reply submitted by the appellant and documents available on records i.e, intimation u/s, 143(1), Form 10, 10B and ITR were perused. ITA No.702/Chny/2024 :- 4 -: 4.1 On perusal of ITR filed by the appellant, it is noticed that in Part B-TI column 4(iv) the appellant has accepted to have filed Form No. 9A and it has also mentioned date of fling the Form-9A i.e, on 23rd December, 2021. The issue was clearly asked by the AO, CPC vide notice dated 01.07.2022, as the appellant had not uploaded Form 9A. In reply of the above notice issued by the AO, CPC the appellant submitted that accumulated amount of Rs.16,60,000/- was wrongly reflected in column 4(iv) in part B-TI instead of column 4(vi). The appellant has also pleaded that it fulfilled all the conditions under section 11(2) for accumulation of income and put reliance on various decisions in support of its claim that disallowance cannot be made on merely filing wrong column or on technical issues. 4.2 On perusal of the explanation submitted by the appellant and as per facts of the case, exemption disallowed by the AO, CPC is found to be justified. The appellant has not filed Form 9A, however it has filled the date of filing of Form 9A in the ITR. The reason behind the fact that if Form 9A has not been filed, how the date was mentioned in column 4(iv)b of Part B-TI, not brought up before the CPC. 4.3 Without prejudice to the above, the appellant has submitted it has filed Form No.10B as it claims to have fulfilled the conditions required. However, on perusal of Form No. 10B in column No. 6 of Application of Income for Charitable or Religious purposes, the appellant has not mentioned the amount invested or deposited in-the manner laid down in section 11(2)(b) rather it has submitted its plan/purpose to make expenditure. In that view also, Form 10B submitted by the appellant is erroneous and therefore, the exemption claimed by the appellant is not allowable. 4.4 The appellant has relied on the decisions of the various appellate authorities which have been perused however it is found that same is not applicable in case of the appellant. The Appellate authorities have given their decisions that disallowance for the eligible deductions should not be on mere technicalities. However, in the instant case it is not only issue of filling of wrong columns, the appellant in Form 10B has not furnished the details of investment or deposit of the accumulated or set apart sum in the manner laid down in section 11(5) of the 1.T. Act, 1961. In view of the above, the fault is not on technical issue rather it is procedural lapse on part of the appellant. In view of the facts mentioned above, appeal of the appellant is dismissed. 5. In the result, the appeal is dismissed.” Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. ITA No.702/Chny/2024 :- 5 -: 5. The Ld. Counsel for the assessee has submitted that the assessee has filed return of income before well within the due date prescribed u/s.139 of the Act for A.Y 2021-22. During the assessment year, the assessee had accumulated Rs.16,60,000/- to be spent in the next five AYs i.e., on or before 31.03.2026 towards renovation and repair of school building and auditorium, development and acquiring of educational resources and aids and special equipment required for Montessori system of education and information technology equipments etc. The assessee-trust passed a resolution for such accumulation in the meeting of trustees held on 04.10.2021 and the same has been shown to us in Page No.5 of the paper book filed. The Ld.Counsel for the assessee has also took us through the audit report filed in Form-10B on 02.02.2022, wherein the claim of Rs.16,60,000/- has been shown as accumulated or set apart for specified purpose u/s.11(2) of the Act in Serial No.5 (refer page Nos.6 & 7 of the paper book). However, the assessee had not shown the amount of Rs.16,60,000/- invested as per Section 11(5) of the Act in Column No.6 in audit report in Form-10B. Before us, the Ld. Counsel for the assessee filed an affidavit obtained from statutory auditor(CA) stating that the audit report in Form-10B had been duly prepared and filed by him. However, inadvertently the amount invested u/s.11(5) had been omitted while filling the column ‘details of investments’. Further, the ITA No.702/Chny/2024 :- 6 -: revised audit report in Form-10B (Paper Book Page No.78 to 82) duly certified by an auditor has also been filed on 27.03.2024 by filling details of deposits/investments as per section 11(5) of the Act and requested for accumulation of the unutilized fund objects by setting aside the order of the Ld. CIT(A). Therefore, the ld.counsel prayed that the assessee is entitled to the benefit of accumulation under section 11(2) of the act, even though there was an inadvertent error in the return of Income and the exemption claimed. In support of the claim of the assessee, the ld. Counsel relied on the following decisions of Hon’ble Courts, where the identical facts are dealt and the exemption was granted to the assessee: a) Changancherry Co-op. Agrl & Rural Dev. Bank Ltd Vs.ITO [2023] 152 taxmann.com 466 (Cochin Tribunal) – Where the assessee had quoted the wrong section, and an adjustment was made. In that case the Tribunal held that the assessee was entitled to the exemption notwithstanding the wrong section being cited, holding as under: "A perusal of the return of income filed by the assessee reveals that it has in column No. 5 under the Schedule BP (computation of income from business or profession) especially under clause 'C' subtitled 'Any other exempt income' has specified exempted income of co-operative society under section 80P(2) at Rs. 9,39 lacs. Therefore, the assessee has shown to have claimed deduction under section 80P(2) of an amount of Rs. 9,39 lacs (as exempt) as per the format given in the return of income. In the light of the same the observation made by the Commissioner (Appeals) that because assessee didn't file details of exempt income at Schedule El, CPC denied deduction cannot be accepted. Mere typographical error or an omission to ITA No.702/Chny/2024 :- 7 -: make a claim in one of the columns, when assessee has claimed it in any other column in the same return, cannot be the sole ground on which the disallowance ought to have been made." b) The Decision of the Hon’ble Bombay High Court - Sesa Goa Ltd Vs. Addl.CIT [2020] 117 taxmann.com 548 (Bom) – The claim not having been made in the return, can be considered by the CIT(Appeals) in exercise of its plenary powers. These powers extended even to cases where a claim for exemption is made for the first time before the CIT(Appeals). c) Shree Vasan Sheri Kelavani Samiti Trust Vs.ITO [ITA NO.437/AHD/2022 (Ahmedabad Tribunal) - Where in the case of charitable trust, the exemption was denied on account of an inadvertent error in punching in IT return, the Tribunal directed the AO to consider the exemption by taking note of the evidence filed. d) Shambhu Dayal Harish Chand Charitable Trust Vs.DCIT [ITA NO.4000/DEL/2019 (Delhi Tribunal) - Where Charitable trust had filed Form 10 but instead of claiming exemption U/s.11(2) claimed the deduction U/s.11(1) on account of punching mistake. The Tribunal held that the revenue authorities have to tax the right person in right manner and should not disallow eligible deductions on mere ITA No.702/Chny/2024 :- 8 -: technicalities and allowed the benefit under section 11(2) by holding as under – relevant extract given ; 7. We have heard the parties and perused the material available on record and gave our thoughtful consideration. It is not in dispute that the assessee had filed Form No. 10 and who is eligible for the deduction. It is the case of the assessee is that the assessee should have filed u/s 11(2) of the Act but due to punching mistake the assessee had claimed the deduction u/s 11(1) of the Act. it is not the case of the Revenue that the assessee is not eligible for the benefit for the deduction u/s 11 Sub Clause 2 of the Act. The only reason for rejecting the application filed by the assessee is that there is no error apparent from the record of the order passed by the CPC. 8 .... 9. In our considered opinion, the Revenue Authorities have to tax the right person in right manner and shall not disallow the eligible deductions on mere technicalities.” e) Desh Bharti Public School Samiti Vs.ACIT [2022] 139 taxmann.com 231 (LucknowTribunal) f) DCIT Vs. TKR Educational Society – ITA No.511/Hyd/2023 - (Hyderabad Tribunal) g) The ICAI Vs.ACIT – ITA No.2156/Del/2018 – (Delhi Tribunal) 6. Per contra, the Ld. Sr. DR has argued that the assessee had already erred both in filing the Form-10 and also filing the inaccurate particulars in Form-10B i.e., audit report. Therefore, the orders of the Ld. CIT(A) is to be upheld by dismissing the appeal of the assessee. ITA No.702/Chny/2024 :- 9 -: 7. We have heard the rival contentions and gone through the materials available on record, orders of the lower authorities and the various judicial decisions relied by the parties. Admittedly the assessee is a charitable institution carrying on the objectives of education and registered U/s.12A of the Act. During the impugned assessment year 2021-22, the assessee had filed its return of income on 24/02/2022 and the audit report in form 10B and also the Form 10 filed on 02/02/2022 for accumulation of income to the tune of Rs.16,60,000/- for future activities to be spent in next 5 Assessment years. We note that during the impugned assessment year the Trust has received gross receipts of Rs.93,72,559/-, after reducing 15% i.e. Rs.14,05,884/- considering it as deemed application, balance to be spent was Rs.79,66,675/-. Out of which the trust had spent Rs.63,07,214/- towards the objects of the trust and the balance of Rs.16,59,461/- could not be spent on or before 31/03/2021, due to major donation of Rs.39,26,000/- was received on 29/03/2021 i.e. fag end of the financial year. Therefore, the trustees had passed a resolution on 04/12/2021 to accumulate and set apart an amount of Rs.16,60,000/- which is to be spent towards certain activities of the trust and accordingly filed Form 10 on 02/02/2022 to the Assessing officer, before filing the return of income. We note that the assessee had made an error in filling the Income tax return entered the amount ITA No.702/Chny/2024 :- 10 -: of Rs.16,60,000/- wrongly in “Part B – T1 – Sl.No.4 (iv)” instead of correct line “Part B – T1 – Sl.No.4 (vi)” and also erred by omitting in showing the amount of investment made U/s.11(5) of the Act in Form 10B. Thereby, CPC, Bengaluru has disallowed the claim of the assessee made in Form 10, which was confirmed by the Ld.CIT(A), without considering the assessee plea to accept the revised form 10B filed subsequently on 27/03/2024. On perusal of the audited financials, Resolution of the Trust, revised Form 10B filed by the assessee and investment made U/s.11(5) of the Act to the tune of Rs.32,11,068/-, we note that the trust has complied with the requirements of filing of return, audit report and form 10 for accumulation of unspent amount and investing that amount in specified investment as per Section 11(5) of the Act on or before the due dates prescribed. Therefore, the eligible exemption of the assessee trust cannot be denied for mere clerical errors and thus we do not countenance the action of the lower authorities. This view is supported by the following judicial pronouncements relied and cited by the assessee a) Changancherry Co-op. Agrl & Rurla Dev. Bank Ltd Vs.ITO (Supra), b) Shree Vasan Sheri Kelavani Samiti Trust Vs.ITO (Supra), c) The ICAI Vs.ACIT (Supra). ITA No.702/Chny/2024 :- 11 -: 8. Considering the facts and circumstances of the case and respectfully following the above decisions of the Hon’ble Courts, we direct the AO to allow the exemption U/s.11 of the Act to the assessee by setting aside the order the Ld.CIT(A). 9. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 05 th September, 2024. Sd/- (महावीर िसंह) (Mahavir Singh) उपाȯƗ / Vice President Sd/- (एस. आर. रघुनाथा) (S.R. Raghunatha) लेखा सद᭭य /Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated: 05 th September, 2024. JPV आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकर आयुƅ/CIT, Chennai 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF