Trust cannot be denied exemption under Section 10

SC Vasudeva

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A  Society  was  granted  registration  under  Section 10(23C)(iv) vide  notification  by  Commissioner of Income Tax from AY 2008-09. The audit report for the AY 2014-2015 in form 10BB was obtained on September 17, 2014 but due to some reasons audit report was filed late along with income tax return on January 17, 2015 i.e. after due date. As per intimation u/s 143(1), CPC had not considered deduction for income applied towards revenue and capital expenditure. I would like to know your suggestions on the following points:

a) Can the income tax return for trusts registered u/s 10(23C)(vi) be filed after due date u/s 139?

b) Can a Trust be denied exemption u/s 10 for income applied in case where income tax return and audit report was filed late? — Gautam Thakur

Your queries are replied hereunder:

a) Section 10(23C)(iv) of the Income-tax Act, 1961 (The Act) provides that the income of any other fund or institution established for charitable purposes which may be approved by the prescribed authority having regard to the objects for the fund or institution and its importance throughout India or throughout any State or States. Such an institution is required to file a return of income as per the provisions of Section 139(4C) of the Act.  Sub-Section (4) of Section 139 of the Act provides that a person who has not furnished the return within the time allowed to him under Section 139(1) of the Act may furnish the return of previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. Therefore, it should be possible for an institution approved under Section 10(23C)(iv) of the Act to file a return within the time limit prescribed under Section 139(4) of the Act if it has not filed such return within the time prescribed under Section 139(1) of the Act.

b) The delay in filing the income tax return should not have any repercussion on the eligibility of exemption of an institution. The income which has been applied should be exempted under Section 10(23C)(iv) of the Act. There are number of decisions wherein it has been held that the audit report in form No. 10BB can be filed during the course of assessment proceedings and the same should be accepted by the authorities for the purposes of framing the assessment.  You may refer to the decision of the Calcutta High Court in the case of CIT vs. Rai Bahadur  Bissesswal Motilal Malwasic Trust (195 ITR 825) and of the Andhra Pradesh High Court in CIT vs. Andhra Pradesh State Road Transport Corporation (285 ITR 147).

I am a Haryana government employee. My total income from salary for F/Y 2015-16 is around Rs 3 lakh. I was allotted a government accommodation from April 2015 to September 2015 which was under litigation and a penal rent of Rs 7,000 pm (50 times normal rent) was being charged from me and a total of Rs 56,000 was deducted from my salary. Please advise whether this amount is to be calculated while computing income tax or not since I have not received this amount in my salary.— Bimal Jain 

In accordance with the provisions of Rule 3(1) of the Income-tax Rules 1962 where unfurnished accommodation is provided by any state government to their employees, the licence fee determined by the state government in accordance with the Rules framed by such government is added as a perquisite to the salary. Such perquisite is reduced by the rent actually paid by the employee for the purpose of adding perquisite value to the total income of the employee. Since the amount of Rs 56,000 has been deducted for the period for which the accommodation was provided to you by the Government of Haryana, no further amount is required to be added to the salary in respect of the accommodation provided by the government. This is because you have paid the rent for the accommodation occupied by you.