Form-10 income accumulation delay condonation. When sufficient material is before AO, insistence on the form not warranted as held by Allahabad High Court-ITAT
ABCAUS Case Law Citation:
ABCAUS 1109 (2017) (01) ITAT
Assessment Year : 2010-11
Date of Pronouncement: 11-01-2017
Important Case Laws Cited/relied upon:
CIT Vs Moti Ram Gopi Chand Charitable Trust 360 ITR 598
Brief Facts of the Case:
The assessee was a charitable trust and had filed return of income declaring ‘nil’ income. The assessee has earned income from bank interest and sales of tickets during the period under consideration. During the course of assessment proceedings, the Assessing Officer (AO) observed from the perusal of the Income & Expenditure Statement that assessee trust neither applied 85% of the income for charitable purposes nor accumulated or set apart application towards charitable and religious purposes as required under section 11 and 12 of the Income Tax Act. The assessee had also not filed Form No. 10 as required under section 11(2).
The show cause notice was issued to the assessee as to why the entire income may not be taxed for failure to file Form No. 10 as required. The assessee submitted that out of the total receipts approx 43% had been applied for charitable purposes and balance amount had been accumulated and set apart for application towards charitable and religious purposes in India as required under section 11 and 12. It was submitted that the assessee had invested all its accumulated resources in FDRs and SB account with Bank. The assessee submitted that Form No. 10 could not be filed due to unavoidable circumstances. Same may be condoned. The assessee relied upon CBDT Circular dated 03.06.1980 in this regard.
However, the AO was not satisfied with the reply of the assessee and accordingly he taxed the non-applied approx 57% income of the assessee trust as AOP.
The CIT(Appeals) on the same reasoning, confirmed the addition.
Observations made by the Tribunal:
The Tribunal observed that the Allahabad High Court in the case of Moti Ram Gopi Chand Charitable Trust had allowed the accumulation/setting apart when sufficient material was before the Assessing Officer both in the shape of the information furnished within the prescribed period and the proof of not only setting apart 85 per cent, of the amount to be spent in the next year but also the expenditure of that amount in the next year. It was held that the insistence on furnishing of information in Form 10 as a condition precedent, was insistence on the form and not the substance of the provisions of the Act.
The Tribunal observed that sufficient material was filed before Assessing Officer at the assessment stage to explain that balance amount has been accumulated and set apart for application towards charitable and religious purposes as required under section 11 and 12.
Also in the assessment year 2012- 13, the assessee had filed Form No. 10 with revised form later on and the CIT (A) had on the same matter had allowed the claim of the assessee.
Therefore, the ITAT stated that whether the material before Assessing Officer was sufficient as required on filing Form No. 10 and whether assessee is entitled for condonation of delay shall have to be considered by the authorities below, in the light of the decision of Allahabad High Court in the case of Moti Ram Gopi Chand Charitable Trust.
The orders of the AO and CIT(A) were set aside and the matter was restored to the file of Assessing Officer with direction to re-decide this issue in accordance with law in the light of decision in the case of Moti Ram Gopi Chand Charitable Trust.
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