Delayed Form 10B Upload and Section 11 Exemption: Key Takeaways from ITAT Chennai in T. K. Raja Educational Charitable Trust Vs ITO

The Income Tax Appellate Tribunal, Chennai Bench, in T. K. Raja Educational Charitable Trust Vs ITO, examined whether a charitable trust can be denied exemption under Section 11 merely because Form 10B (audit report for charitable/religious trusts) was not filed along with the return of income, even though the form had been e-filed before the return was processed under Section 143(1).

The decision has significant implications for charitable institutions registered under Section 12A that may have filed Form 10B belatedly but before completion of processing or assessment. The ruling covers two Assessment Years – 2016-17 and 2018-19 – with identical issues in both years.

Background of the Case

Nature of the Assessee and Registration

  • The assessee is T. K. Raja Educational Charitable Trust, a charitable institution engaged in imparting education.
  • The trust holds registration under Section 12A of the Income Tax Act, 1961, vide Registration No. DIT(E) No.902/08-09 dated 29.01.2009.
  • For both Assessment Years 2016-17 and 2018-19, the assessee claimed exemption under Section 11 and filed returns declaring nil income.

Return Filing and Form 10B – AY 2018-19

For Assessment Year 2018-19, which was treated as the lead year:

  • Return of income filed on 01.10.2018 declaring NIL income after claiming exemption under Section 11.
  • Prescribed audit report in Form 10B filed electronically on 08.10.2018.
  • CBDT, by an order under Section 119 dated 08.10.2018, had extended the due date for filing income tax returns and audit reports from 30.09.2018 to 31.10.2018.
  • Despite this, the Centralized Processing Centre (CPC), while processing the return under Section 143(1) on 31.12.2020, denied the Section 11 exemption solely on the ground that Form 10B was not filed along with the return.

The same pattern of denial of exemption was repeated for Assessment Year 2016-17 as well, and both years eventually came up before ITAT Chennai.

Grounds Raised by the Assessee – AY 2018-19

The assessee challenged the intimation under Section 143(1) and the order of the Commissioner (Appeals) on multiple grounds. The main contentions are summarised and rephrased below.

1. Intimation under Section 143(1) is Time-Barred

The assessee contended that the intimation dated 31.12.2020 issued under Section 143(1) was beyond the statutory time limit:

  1. As per the second proviso to Section 143(1), no intimation can be issued after one year from the end of the financial year in which the return is furnished.

  2. The assessee laid out the timeline as follows:

    • Return filed: 01.10.2018
    • End of financial year in which return was filed: 31.03.2019
    • Last permissible date for issuing intimation under Section 143(1): 31.03.2020
    • Actual date of intimation under Section 143(1): 31.12.2020

  3. Based on this, the assessee argued that the intimation was barred by limitation and therefore invalid, rendering the demand raised under that intimation unsustainable.

2. Filing of Form 10B is Directory, Not Mandatory for Claiming Section 11

The second and primary ground related to Form 10B compliance: