Missed Form 10B Deadline? ITAT Says Exemption Still Possible with Valid Reason!

Good news for charitable trusts! The Income Tax Appellate Tribunal (ITAT) has recently ruled that a delay in filing Form 10B should not automatically disqualify a trust from claiming tax exemptions under Section 11 of the Income Tax Act, 1961.  For charitable trusts and institutions in India, maintaining tax-exempt status is essential, and compliance with requirements like filing an audit report in Form 10B is a critical part of the process. In this article, we will explore this important ruling and the key takeaways for charitable organisations.

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Legal Dispute Over Tax Exemption for a Charitable Trust

A charitable trust filed its tax return for the 2016-17 assessment year on July 28, 2016. However, it forgot to submit Form 10B, a required document for claiming tax exemption. As a result, the tax department rejected its exemption claim and taxed Rs. 15,69,680.

The Reason Behind the Delay in Filing Form 10B

• The trust’s auditor had already issued Form 10B on June 16, 2016.
• Due to technical glitches on the Income Tax portal, the trust couldn’t upload the form on time.
• The main trustee passed away in 2019, leading to an administrative mix-up.
• Once the mistake was realized, the trust filed Form 10B on March 20, 2020, along with a request to excuse the delay.

CIT(A) Rejects Exemption Due to Late Form 10B

The trust requested the Commissioner of Income Tax (Appeals) [CIT(A)] to overlook the delay. The CIT(A) denied the request, ruling that the exemption couldn’t be granted because the form was late.

The CIT(A) also pointed out that only the Commissioner of Income Tax (Exemption) [CIT(E)] had the authority to condone such delays.

ITAT Appeal: Delay in Filing vs. Tax Compliance

The trust wasn’t ready to give up! It took the case to the ITAT, arguing that:

• The audit report (Form 10B) was ready before the return was filed, proving compliance with exemption conditions.
• The delay was not deliberate but caused by technical difficulties.
• Several judicial rulings and CBDT circulars state that minor filing delays should not deny tax exemptions.
• The tax department, however, insisted that missing the deadline meant the trust was not eligible for exemption.

ITAT Ruling: Late Form 10B Doesn’t Cancel Exemption

ITAT carefully reviewed the case and ruled that:

• The trust had the audit report before filing the return, meeting the exemption criteria.
• The delay was a procedural error, not tax evasion.
• Courts, including the Delhi High Court and Supreme Court, have upheld that minor delays in Form 10B submission should not result in tax exemption denials.
• ITAT also referred to a past case (ACIT vs. Green Dot Health Foods Pvt. Ltd.) where a delay in filing another tax form (Form 10CCS) was excused because it was submitted before the final assessment.
• The ITAT ruled in favor of the trust, stating that filing Form 10B is a procedural requirement, not a mandatory condition for exemption.
• Since the trust had a history of timely filings and was engaged in genuine charitable activities, the exemption was granted.

Key Takeaways for Taxpayers

• File Form 10B on Time: It’s always best to submit Form 10B along with your tax return to avoid complications.
• Don’t Worry If You Miss the Deadline: If you miss the deadline due to valid reasons, you may still get relief by submitting a condonation request.
• Technical Issues Can Be Considered: If you face portal-related problems, document them and explain the delay to the authorities.
• Legal Precedents Matter: Courts and tribunals have ruled in favor of trusts in similar cases, supporting fair decisions based on intent and compliance.
• Seek Legal Help If Needed: If your exemption is denied, you may have strong grounds to appeal.

The Bottom Line

This ruling is a powerful reminder that genuine taxpayers shouldn’t be punished for minor procedural delays. It reinforces that small technical lapses should never outweigh genuine charitable work.

One key takeaway? Consistent tax compliance matters! Regularly filing returns and meeting tax deadlines can protect you in challenging situations, just like it did for this trust. Timely compliance builds credibility and safeguards exemptions.

Navigating tax compliance can be complex, but timely action can save your exemptions. If you need expert assistance, IndiaFilings professionals are ready to help—anytime, anywhere.

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Frequently Asked Question

Still have questions? Here are answers to some common concerns about Form 10B and tax exemptions for charitable trusts.

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