The Tax Publishers2013 TaxPub(DT) 2494 (Del-Trib) : (2013) 059 SOT 0197

 

Moti Ram Gopi Chand Charitable Trust v. Addl. CIT

 

INCOME TAX ACT, 1961

--Charitable trust--Exemption under section 11Conditions precedent not satisfied--Assessee was running a school and was registered under the provision of the IT Act for claiming exemption under section 11 of the Act. During the year under consideration, the assessee spent a part of its income for charitable purpose and for the remaining amount it had to file Form No. 10 conveying its intention to carry forward the funds for spending in next year. However, it did not file Form No. 10 and instead during assessment proceedings filed a letter conveying its intention to carry forward the unspent amount in next year for spending in the next year. The contents of Form No. 10 are similar to the contents of letter sent by the assessee. AO denied the exemption on account of technical default by the assessee of not conveying its intention in the prescribed form and signed by authorized person. Held: The Jammu & Kashmir High Court in the case of Zirat Mir Sayed Ali Hamdani (2001) 114 Taxman 642 (J&K) has held that provision of section 11(2) regarding requirement of exercising the option within the specified time was directory and AO. AO has the power to condone the delay in exercise of the option if he was satisfied about the sufficiency of the cause shown for the delay. In the present case, the option was filed with the AO during the course of assessment proceedings though the same was not in the prescribed form, yet the intention was duly conveyed. Moreover, the assessee had filed form No. 10 duly signed by the Secretary of the Society during appellate proceedings. Moreover, it was observe that 15 per cent of the income could be carried forward in the next year even without conveying any option under section 11(2). CIT(A) did not give credit for the same also and he allowed exemption only in respect of capital expenditure which was not justified especially keeping in view the fact that assessee had claimed to have utilized much more than the unspent balance in the next year. It was also apparent that fact of the assessee having spent significant amount in next year was not examined by AO. Therefore, it was appropriate to remit the file to the office of AO to examine the books of account of assessee to ascertain the amount of spending in next year within prescribed period as laid down by law and if the amount of investment exceeds unspent amount within prescribed period, in next year then the AO should condone the delay and irregularity in filing Form No. 10 and should allow the exemption if found to be eligible otherwise.

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