Bombay High Court Condones 430-Day Delay By Charitable Trust In Filing Declaration For Tax Exemption

The Bombay High Court has condoned a 430-day delay by Bombay Prathana Samaj, a charitable trust, in submitting a mandatory declaration required for claiming a tax exemption benefit, after finding that the trust had shown reasonable cause for the delay and would otherwise suffer genuine hardship.

“The approach of the authority ought to be equitious, balancing and judicious and availing of exemption should not be denied merely on the bar of limitation,” the Court observed while referring to the Gujarat High Court's decision in Sarvodaya Charitable Trust v. ITO (E).

A Division Bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla observed that the authorities ought to adopt a “justice-oriented approach rather than a pedantic one” while considering applications for condonation of delay under Section 119(2)(b) of the Income Tax Act.

The petitioner trust had claimed exemption under Section 11 of the Income Tax Act for Assessment Year 2015–16 and sought permission to accumulate a portion of its income under Section 11(2). However, the benefit was denied on the ground that it had not filed Form No. 10, which is the prescribed declaration for such accumulation, along with its income tax return.

The trust later filed the form and sought condonation of delay. It told the court that its accounts were being finalized by an accountant employed with other organisations who worked with the trust on an honorary basis, due to which the form inadvertently remained to be submitted at the time of filing the return.

The Commissioner of Income Tax (Exemptions) rejected the application for condonation of delay, following which the trust approached the High Court.

The Bench noted that the trust had otherwise regularly complied with the requirements for claiming exemption under Section 11.

“For claiming the benefit of accumulation as per Section 11(2) of the IT Act, the Petitioner was required to file Form No. 10 (Statement of Accumulation). From the record, we are satisfied that there is a reasonable cause for the delay in filing Form No. 10 by the Petitioner,” the Court said.

The court also relied upon the Supreme Court's decision in CIT v. Nagpur Hotel Owners' Association, which held that furnishing Form No. 10 before completion of assessment constitutes sufficient compliance.

The High Court further referred to its earlier decisions in People's Mobile Hospitals v. CIT (E) and KSB Care Charitable Trust v. CIT (E), where a liberal approach had been adopted in similar cases involving delay in filing statutory forms for charitable exemptions.

“Moreover, not condoning such delay would cause genuine hardship to the Petitioner inasmuch as the Petitioner has been denied exemption under Section 11 of the IT Act,” the court observed.

Accordingly, the High Court set aside the order rejecting condonation of delay, condoned the delay of 430 days in filing Form No. 10, and directed the authorities to process the trust's returns by treating the form as filed within time.

For Petitioner: Advocate Bharat Raichandani, along with Advocate Suraj Ghadigaonkar

For Respondents: Advocate Prathamesh Bhosle