Why is Audit of Charitable & Religious Trusts or institutions Required
The principal aim of this audit is
to enable the assessing officer to satisfy himself about the genuineness of the
claim for exemption under clauses (iv), (v), (vi) and (via) of
section 10(23C) or under section 11/12 and also whether the
institution has complied with all the requirements prescribed by the statute.
The accountant shall satisfy himself about compliance with the provisions of
the Act by the institution in respect of maintenance of proper books of
accounts, information and returns from branches and other relevant records. The
accountant has to examine the balance sheet, Income & Expenditure Account and
the profit and loss and give an opinion whether they exhibit a true and fair
view.
Form
10B/10BB is an Audit Report for Charitable Trusts or
institution and applicable to following
(i)
A
fund or institution or trust or any university or other educational institution
or any hospital or other medical institution whose income is exempt under
clauses (iv), (v), (vi) and (via) of section 10(23C).
(ii)
A
fund or institution or trust whose income is
eligible for benefit of section 11/12
(ii)
Form 10B/10BB is required to be filed if
the total income of the eligible trusts, before considering benefit of section
10(23C) or section 11/12 exceeds Rs. 250,000
Rationale Behind New revised Forms
10B and 10BB
§ Pre-amended Form 10B was in force with effect from
01.04.1973 & Form 10BB was in force with effect from 25.07.2006.
§ On 21.05.2019, CBDT released a draft notification with
modified 8 pages of Form 10B, which was also put in the public domain for
public comments but never made effective.
§ Every year, a number of amendments were made for charitable
institutions including bringing uniformity in two regimes [Section 12AB and
10(23C)].
§ Present Form 10B/10BB does not include various data being
used to fill ITR -7.
§ Hence, there seems to be a rationale for modifying Form
10B/10BB in the present context of charity taxation and the requirement of ITR
7 vis-à-vis the requirement of conditions for renewal of registration.
§ The amended Form 10B is very comprehensive, and the key
information is to be filled in (with code number) as mentioned in the notes,
therefore, easy to analyse the data and capture the related information by the
Income Tax department.
Applicability of the revised
Forms 10B and 10BB
The Central
Board of Direct Taxes (CBDT) vide Notification No. 7/2023, Dated 21.02.2023 has
notified new audit reports in Form 10B and Form 10BB to be furnished by
charitable trusts, religious trusts and other institutions.
Shifted the focus of the
applicability of forms for furnishing the tax audit report from the basis of
registration to the basis of total income [With effect from Assessment year
2023-24]
The amendment made by CBDT vide Notification No.
7/2023 in GSR 118(E) dated 21.02.2023 and through Income-tax (3rd Amendment)
Rules, 2023 has shifted the focus of the applicability
of forms for furnishing the tax audit report from the basis of registration to
the basis of total income. Prior to the amendment, Form No. 10B was
required to be filed by a trust or institution registered under section 12A of
the Act while the institutions or funds approved under section 10(23C) were
required to furnish their tax audit reports in Form No. 10BB.
Common Form depending on certain criteria [With
effect from Assessment year 2023-24]
Rule 16CC and
Rule 17B of the Income-Tax Rules, 1962 have been substituted with effect from
01.04.2023 vide Income-tax amendment (3rd Amendment) Rules,
2023 and as per the amended Rules, common
forms have been prescribed for organisations registered under section 12AB and
the organisations registered under section 10(23C) subject
to fulfillment of certain criteria.
Applicable
up to Assessment year 2022-23
While earlier
Form 10B was for organisations registered under section 12AB, and form 10BB was
for organisations approved under section 10(23C), from Financial Year 2023-24, Form 10B shall be
applicable for both, organisations registered under section 12AB and to
organisations registered under section 10(23C) depending on certain factors. In
like manner Form 10BB would be applicable for both, organisations registered
under section 12AB and organisations registered under section 10(23C) depending
on certain factors.
Audit report - Form 10B & 10BB
|
Particulars |
Form 10B |
Form 10BB |
|
Applicability of Form |
Audit Report in Form 10B is required if any one
or more circumstance exists: (ii) The organisation receives any foreign
contribution foreign contribution under FCRA, 2010 (even if the income is
below Rupees Five crore); (iii) The income of
the trust or institution is applied outside India (even if the income is
below Rupees Five crore and the organisation has not received any foreign
contribution). |
Trusts or institutions registered under Section
12AB or under Section 10(23C), Audit Report in Form 10BB is required if any
one or more circumstance exists (i) The total income of the trust or
institution [whether registered under 12AB or 10(23C)] without giving effect
to the provisions of sections 11 and 12 or Section 10(23C) (iv), (v), (vi),
(via) of the Act, is up to Rupees five Crore; (ii) The
trust or institution has not received any foreign contribution during the
previous year; (iii) The trust or
institution has not applied any part of its income outside India during the
previous year. |
|
Category of
Trust/Institution |
Form 10B is basically for a
bigger size specified category of Trust/Institution |
Form 10BB is for other
cases not covered in Form 10B |
Contents of Form 10B and Form 10BB
|
S. No. |
Content |
Form 10B |
Form 10BB |
|
1. |
Clauses |
49 |
32 |
|
2. |
Sections |
22 |
9 |
|
3. |
Schedules |
26 |
6 |
|
4. |
Notes |
12 |
6 |
|
S. No. |
Basis of Difference |
Pre-Amended Position (i.e. up to Assessment
year 2023-24) |
Amended Position (i.e. from Assessment
year 2023-24) |
|
(i) |
Financial Statement to
be examined |
the Balance Sheet and
the Profit & Loss A/c |
The Balance Sheet and
Income & Expenditure Account or Profit & Loss A/c. |
|
(ii) |
Information on place
of maintaining of books of account |
proper books of
account have been maintained by the
head office and branches |
The amended format
requires Auditors to include the following: In my/our opinion, proper books of account
have been maintained at the registered office or at the address
mentioned at row 11/14 of the Annexure |
|
(iii) |
Opinion by the Auditor
on the Financial Statement |
in the case of the
profit and loss account, of the profit or loss of its accounting year ending
on ……… |
in the case of the
Income and Expenditure account or Profit and Loss account, of the income and
application/profit or loss of its accounting year ending on …….. |
|
(iv) |
Certification of
Annexure |
Not Required. |
True and Correct |
[1] Trust or institution or university or other
educational institution or hospital or other medical institution shall keep and
maintain books of account and other documents get its accounts audited [Tenth
proviso to clause (23C) of section 10]
The
Finance Act, 2022, with effect from 01.04.2023 has substituted tenth proviso so
as to provide that such fund or institution or trust or any university or other
educational institution or any hospital or other medical institution shall keep
and maintain books of account and other documents in such form and manner and
at such place, as may be prescribed; and get its accounts audited in respect of
that year by an accountant as defined in the Explanation below
sub-section (2) of section 288 before the specified date referred to in section
44AB (i.e., one month prior to the due date for filing of return under sub-section
(1) of section 139) and furnish by that date.
Text
of tenth proviso to clause (23C) of Section 10
[1][PROVIDED
ALSO that where the total income of the fund or institution or trust or any
university or other educational institution or any hospital or other medical
institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi)
or sub-clause (via), without giving effect to the provisions of the said
sub-clauses, exceeds the maximum amount which is not chargeable to tax in any
previous year, such fund or institution or trust or any university or other
educational institution or any hospital or other medical institution shall –
(a)
keep and maintain books of account and other documents in such form and manner
and at such place, as may be prescribed; and
(b)
get its accounts audited in respect of that year by an accountant as defined in
the Explanation below sub-section (2) of section 288 before the specified date
referred to in section 44AB and furnish by that date, the report of such audit
in the prescribed form duly signed and verified by such accountant and setting
forth such particulars as may be prescribed:]
KEY NOTE
1. Substituted by the Finance Act, 2022, with effect from
01.04.2023. Prior to its substitution, tenth proviso to clause (23C) of Section
10 read as under :
“PROVIDED ALSO that where the total income, of the fund or
trust or institution or any university or other educational institution or any
hospital or other medical institution referred to in sub-clause (iv) or
sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to
the provisions of the said sub-clauses, exceeds the maximum amount which is not
chargeable to tax in any previous year, such trust or institution or any
university or other educational institution or any hospital or other medical
institution shall get its accounts audited in respect of that year by an
accountant as defined in the Explanation below sub-section (2) of section 288
before the specified date referred to in section 44AB and furnish by that date,
the report of such audit in the prescribed form duly signed and verified by
such accountant and setting forth such particulars as may be prescribed:”
Form of report of audit prescribed under tenth proviso to
section 10(23C) [Rule 16CC]
Text of Rule 16CC
[1][16CC. Form
of report of audit prescribed under tenth proviso to section 10(23C)
The
report of audit of the accounts of a fund or institution or trust or any
university or other educational institution or any hospital or other medical
institution which is required to be furnished under clause (b) of the tenth
proviso to clause (23C) of section 10 shall be in—
(a)
Form No. 10B where -
(I) the total income
of such fund or institution or trust or university or other educational
institution or hospital or other medical institution, without giving effect to
the provisions of the sub-clauses (iv), (v), (vi) and (via) of the said clause,
exceeds rupees five crores during the previous year; or
(II) such fund or institution or trust or university or
other educational institution or hospital or other medical institution has
received any foreign contribution during the previous year; or
(III) such fund or institution or trust or university or
other educational institution or hospital or other medical institution has
applied any part of its income outside India during the previous year;
(b)
Form No. 10BB in other cases
Explanation
: For the purposes of sub-clause (II) of clause (a), the expression “foreign
contribution” shall have the same meaning assigned to it in clause (h) of
sub-section (1) of section 2 of the Foreign Contribution (Regulation) Act, 2010
(42 of 2010).]
KEY NOTE
1. Substituted vide Notification No. 7/2023-Income Tax,
dated 21.02.2023 by the Income-tax (3rd Amendment) Rules, 2023, with effect
from 01.04.2023. Earlier, it was inserted by the IT (Eighth Amendment) Rules,
2006 vide Notification No. 194 of 2006, with effect from 25.07.2006. Prior to
its substitution, Rule 16CC read as under:
“16CC.
The report of audit of the accounts of a fund or trust or institution or any
university or other educational institution or any hospital or other medical
institution which is required to be furnished under the tenth proviso to clause
(23C) of section 10 shall be in Form No. 10BB.”
[2]
Where the total income of the Trust or
institution computed without giving effect to the provisions of section 11 and
section 12 exceeds the maximum chargeable to tax; Audit Required [Section 12A(1)(b)]
This
means if the total income of the institution in any previous year before giving
effect to the provisions of the Act is less than the maximum amount which is
not chargeable to income tax, then audit under the Act is not required.
Text of Section 12A(1)(b)
[1][(b) where the total income of the trust or institution
as computed under this Act without giving effect to the provisions of sections
11 and 12 exceeds the maximum amount which is not chargeable to income-tax in
any previous year,
-
(i) the
books of account and other documents have been kept and maintained in such form
and manner and at such place, as may be prescribed; and
(ii) the accounts of the trust or institution for
that year have been audited by an accountant defined in the Explanation below
sub-section (2) of section 288 before the specified date referred to in section
44AB and the person in receipt of the income furnishes by that date the report
of such audit in the prescribed form duly signed and verified by such
accountant and setting forth such particulars, as may be prescribed;]
KEY NOTE
1. Substituted by the
Finance Act, 2022, with effect from 01.04.2023. Prior to its substitution,
Section 12A(1)(b) read as under :
“(b) Where the total
income of the trust or institution as computed under this Act without giving
effect to the provisions of section 11 and section 12 exceeds the maximum
amount which is not chargeable to income-tax in any previous year, the accounts
of the trust or institution for that year have been audited by an accountant as
defined in the Explanation below sub-section (2) of section 288 before the
specified date referred to in section 44AB and the person in receipt of the
income furnishes by that date the report of such audit in the prescribed form
duly signed and verified by such accountant and setting forth such particulars
as may be prescribed;”
Text of Rule 17B
[1][17B. Audit report in the
case of charitable or religious trusts, etc. -
The report of audit of the accounts
of a trust or institution which is required to be furnished under sub-clause
(ii) of clause (b) of sub-section (1) of section 12A, shall be in -
(a) Form No. 10B where -
(I) the total income of such trust or
institution, without giving effect to the provisions of sections 11 and 12 of
the Act, exceeds rupees five crores during the previous year; or
(II) such trust or
institution has received any foreign contribution during the previous year; or
(III) such trust or
institution has applied any part of its income outside India during the
previous year;
(b) Form No. 10BB in other cases.
Explanation : For the purposes of
sub-clause (II) of clause (a), the expression foreign contribution shall have
the same meaning assigned to it in clause (h) of sub-section (1) of section 2
of the Foreign Contribution (Regulation) Act, 2010 (42 of 2010).]
KEY NOTE
1. Substituted vide Notification
No. 7/2023-Income Tax. dated: 21.02.2023 by the Income-tax Amendment (3rd
Amendment) Rules, 2023, with effect from 01.04.2023.
Whether Contributions with specific direction that they shall form part of the corpus included in income mentioned above?
As per guidance note, for determining the ceiling
limit of the maximum amount which is not chargeable to income tax for the
purpose of eligibility to audit under section 12A(1)(b), contributions towards
the corpus of the institution are to be included.
However, incomes exempt under section 10, e.g.
dividends, are not to be included for ascertaining whether the income exceeds
the maximum amount which is not chargeable to income tax.
Audit
report in form 10B not required in case of unregistered institutions
For claiming exemption under
sections 11 and 12 of Income-tax Act, 1961, charitable or religious trust
or institution shall mandatory have to get their accounts audited if the total
income without giving effects to provisions of sections 11 and 12 exceed
maximum amount not chargeable to tax and shall obtain audit report in form 10B.
Form no. 10B is a statutory format as like forms 3CB – 3CD and hence it is
utilized for specified purposes only. Statutory forms are for the purpose
designated and should not be used universally.
So, if a charitable and religious
trust or institution is not registered under section 12A and hence not eligible
to claim exemption under sections 11 and 12 of the Act is not supposed to obtain
audit report in form 10B. Even if such institution is getting its account
audited from a Chartered Accountant by virtue of requirements contained in its
governing statute, the audit report shall not be in form 10B. Instead the audit
report issued in such circumstances shall be in format set out in SA-700 issued
by ICAI.
The trusts are required
to furnish audit report in Form 10B/Form 10BB one month before the due date for
furnishing return of income.
Implications
of not Filing Audit Report
A failure to file the audit report as required by section 12A(1)(b)
will result in a Charitable trust losing exemption under section 10(23C) /
section 11, making it liable to tax on its income.
IMPLICATION FROM ASSESSMENT YEAR 2023-24
From Assessment year
2023-24, the income in such cases shall be computed as per Sections 13(10) and
Section 13(11).
IMPLICATION UPTO
ASSESSMENT YEAR 2022-23
If the audit report is
not submitted as prescribed, then the benefits of Sections 11 and 12 shall be
withdrawn for that year.
The Finance Act, 2022 has inserted a new section 13(10), with effect from 01.04.2023 to tax the income of an organisation for violations of section 13(8) and certain provisions section 12A. It may be noted that under this section the normal tax rates shall apply, further this taxation pertains to basically to those institutions where the benefit of section 11 is totally denied but the 12AB registration is not yet cancelled. This newly inserted section shall be applicable for following violations:
§ Having commercial receipts in excess of 20% of the annual receipts
in violation of the provisions of proviso to section 2(15).
§ Not maintaining the books of accounts and records as prescribed
§ Not getting the books of account audited.
§
Not filing the return of income .
The income chargeable to tax shall be computed after allowing the deduction for the expenditure (other than capital expenditure) incurred in India for the objects. Subject to fulfilment of the following conditions:
§ Expenditure is not from the corpus
§ Expenditure is not from any loan or borrowing
§ Claim of depreciation is not in respect of an asset which has been
claimed as an application of income
§ Expenditure is not in the form of any contribution or donation to
any person.
The Finance Act, 2022 has inserted a new section 13(10), with
effect from 01.04.2023 which provides that for the purposes of determining the
amount of expenditure under sub-section (10) of Section 13, the provisions of
sub-clause (ia) of clause (a) of section 40 and sub-sections (3) and (3A) of
section 40A, shall, mutatis mutandis, apply as they apply in computing the
income chargeable under the head “Profits and gains of business or profession”.
No deduction in respect of any expenditure or allowance or set-off of any loss [Section 13(11)]
No
deduction in respect of any expenditure or allowance or set-off of any loss
shall be allowed to the assessee under any other provision of Income Tax Act,
1961 [Sub-section (11) to section 13 and Twenty third proviso to section
10(23C)]
CBDT issues clarification on reporting of Substantial Contributors in Form 10B/10BB
The CBDT vide Circular No. 17/2023, Dated 09.10.2023 has
clarified that only those substantial contributors whose contributions during
the relevant previous year exceed Rs. 50,000 need to be reported in Form
10B/10BB. The details of relatives of such contributors and concerns in which
these contributors hold substantial interests should also be reported, if
available.
CBDT Circular No.
17/2023 [F. NO. 370142/42/2023-TPL], Dated 09.10.2023
Subject : Section 12A, Read with
section 10(23C) of the Income-tax Act, 1961 - Charitable or Religious Trust - Registration
of - Clarification on reporting of substantial contributors in Form No. 10B / Form
No. 10BB
Audit report in the case
of a fund or trust or institution or any university or other educational
institution or any hospital or other medical institution, under clause (b) of
the tenth proviso to clause (23C) of section 10, or sub-clause (ii) of clause
(b) of sub-section (1) of section 12A of the Income-tax Act, 1961 (the Act), as
the case may be, is required to be furnished in Form No. 10B / Form No. 10BB.
2. Representations have
been received regarding difficulties in filling details of persons who have
made a 'substantial contribution to the trust or institution', that is to say,
any person whose total contribution up to the end of the relevant previous year
exceeds fifty thousand rupees (as referred to in section 13(3)(b) of the Act).
3. The matter has been
examined with reference to the issue raised in paragraph 2 and it is hereby
stated that for the purposes of providing details in (i) Form No. 10B in the
Annexure, in row 41; and (ii) Form No. 10BB in the Annexure, in row 28, for the
assessment year 2023-24:
(a) the
aforesaid details (that is, of persons making substantial contribution) may be
given with respect to those persons whose total contribution during the
previous year exceeds fifty thousand rupees;
(b) details
of relatives of such person, as referred to in (a) above may be provided, if
available.
(c) details
of concerns in which such person, as referred to in (a) above, has substantial
interest may be provided, if available.
CBDT
Circular No. 16/2023 [F. No. 225/177/2023/ITA-II], Dated 18.09.2023
Subject
: Extension of Timelines for Filing of Form 10B/10BB and Form ITR-7 for
Assessment year
On
consideration of difficulties reported by the taxpayers and other stakeholders,
the Central Board of Direct Taxes (CBDT), in exercise of its powers under
Section 119 of the Income-tax Act, 1961 (Act), provides relaxation in respect
of following compliances:-
1. The due date of furnishing
Audit report under clause (b) of the tenth proviso to clause (23C) of section
10 and sub-clause (ii) of clause (b) of sub-section (1) of section 12A of the
Income-tax Act, 1961, in the case of a fund or trust or institution or any
university or other educational institution or any hospital or other medical
institution in Form IOB/Form10BB for the Previous Year 2022-23, which is 30th
September, 2023, is hereby extended to 31st October, 2023.
2. The due date of furnishing of
Return of Income in Form ITR-7 for the Assessment Year 2023-24 in the case of
assessees referred to in clause (a) of Explanation 2 to sub-section (1) of
section 139 of the Act, which is 31st October, 2023, is hereby extended to 30th
November, 2023.
Clarification regarding
electronic mode of payments to be furnishing in audit report in Form No. 10B [CBDT Circular No. 6 of 2023, Dated 24.05.2023]
Considering the representation that description of electronic modes
provided in notes to revised Form 10B/10BB as referred in Rule 6ABBA does not
include account payee cheque drawn on a bank or an account payee bank draft or
use of electronic clearing system through a bank account, it is clarified that
for the purposes of Form No. 10B and Form No. 10BB electronic modes provided in
notes to Form 10B/10BB (Credit/ Debit Card, Net Banking, IMPS, UPI, RTGS, NEFT,
BHIM and Aadhar Pay) are in addition to the account payee cheque drawn on a
bank or an account payee bank draft or use of electronic clearing system through
a bank account.
16. One of the conditions required to be fulfilled by the trusts to be eligible to claim exemption, under the re levant provisions of the Act, is that where the total income of any trust, as computed under the Act, without giving effect to the provisions of section 11 and section 12 of the Act or the provisions of the sub-clauses (iv), (v), (vi) and (via) of clause (23C) of section 10 of the Act, as the case may be, exceeds the maximum amount which is not chargeable to income-tax in any previous year, it is required to get its accounts audited.
17. In order to rationalise the provisions related to audit report of trusts and in view of the significant amendments made to the taxation of trusts over the past few years, revised audit report in Form No. 10B and Form No. 10BB have been notified vide Notification No. 7 of 2023 dated 21.02.2023 so as to provide that the report of audit of the accounts of a trust, shall be furnished in –
(i) the total income of trust, exceeds Rs five crores during the previous
year; or
(ii) such trust has received any foreign contribution during the previous
year; or
(iii) such trust has applied any part of its income outs ide India during the
previous year;
(b)
Form No. 10BB in other cases.
18. With regard to the above it may be noted that Form No. 10B and Form No. 10BB requires the auditor to bifurcate certain payments or application in electronic modes and non-electronic modes. The Notes to the said Forms provide that electronic modes shall be the following modes referred in rule 6ABBA of the Income-tax Rules, 1962:
(a) Credit Card;
(b) Debit Card;
(c) Net Banking;
(d) IMPS (Immediate Payment
Service);
(e) UPI (Unified Payment
Interface);
(f) RTGS (Real Time Gross
Settlement);
(g) NEFT (National Electronic
Funds Transfer); and
(h) BHIM (Bharat Interface for
Money) Aadhar Pay.
19. It has been represented that the above description of electronic modes does not include account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account.
20. It is hereby clarified that for the purposes of Form No. 10B and Form No. 10BB electronic modes referred to in para 18 are in addition to the account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account.
CBDT Circular No. 15/2022, Dated
19.07.2022
Principal
Chief Commissioners of Income-tax/Chief Commissioners of Income-tax to admit
belated applications in Form 10BB if delay is upto 3 years
Subject : Condonation of
delay under Section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No.
10BB for Assessment year 2018-19 and subsequent years - Regarding
In exercise of the powers conferred
under section 119(2) of the Income-tax Act, 1961 (hereinafter referred to as
‘Act’), the Central Board of Direct Taxes (CBDT) by Circular No. 19/2020, dated
3rd November, 2020 issued by F. No. 19711 35/2020-ITA-I has directed that:—
(i) In all the cases of applications for
condonation of delay in filing of Form No. 10BB for years prior to AY 2018-19,
the Commissioners of Income-tax are authorized to admit applications for
condonation of delay under section 119(2)(b) of the Act. The Commissioner while
entertaining such applications regarding filing Form No. 10BB shall satisfy
themselves that the applicant was prevented by reasonable cause from filing
such Form within the stipulated time.
(ii) where there is delay of up to 365 days in
filing Form No. 10BB for Assessment Year 2018-19 or for any subsequent
Assessment Years, the Commissioners of Income-tax are authorized to admit such
applications of condonation of delay under section 119(2) of the Act and decide
on merits.
2. Further to the powers delegated
to the field authorities as discussed above, the CBDT hereby directs that where
there is delay of beyond 365 days upto three years in filing Form No. 10BB for
Assessment Year 2018-19 or for any subsequent Assessment Years, the Pr. Chief
Commissioners of Income-tax/Chief Commissioners of Income-tax are authorized to
admit such applications of condonation of delay under section 119(2) of the Act
and decide on merits.
3. The Pr. Chief Commissioner/Chief
Commissioner or Commissioners of Income-tax, as the case may be, while
entertaining such applications for condonation of delay in filing Form No.
10BB, shall satisfy themselves that the applicant was prevented by reasonable
cause from filing such Form within the stipulated time.
4. Further, the Pr. Chief
Commissioner I Chief Commissioner of Income-tax, as the case may be, shall
preferably dispose the application within three months of receipt of the
application.
CBDT
Circular No. 2/2020 [F. No. 197/55/2018-ITA-I], Dated 03.01.2020
SECTION
119 OF THE INCOME-TAX ACT, 1961 - CENTRAL BOARD OF DIRECT TAXES - INSTRUCTION
TO SUBORDINATE AUTHORITIES - CONDONATION OF DELAY IN FILING OF FORM NO. 10B FOR
ASSESSMENT YEAR 2018-19 AND SUBSEQUENT YEARS
Under the
provision of section 12A of Income-tax Act, 1961 (hereafter 'Act') where the
total income of a trust or institution as computed under the Act without giving
effect to the provisions of section 11 and section 12 exceeds the maximum
amount which is not chargeable to income tax in any previous year, the accounts
of the trust or institution for that year have to be audited by any accountant
as defined in the Explanation below sub-section (2) of section 288 and the
person in receipt of the income is required to furnish along with the return of
income for the relevant assessment year the report of such audit in the
prescribed from duly signed and verified by such accountant and setting forth
such particulars as may be prescribed.
2. As per
Rule 17B of the Income-tax Rules, 1962 (hereafter 'Rules') the audit report of
the accounts of such a trust or institution is to be furnished in Form No. 10B.
As per Rule 12(2) of the Rules, such audit report is to be furnished
electronically. The failure to furnish such report in the prescribed from along
with the return of income results in disentitlement of the trust or institution
from claiming exemption under sections 11 and 12 of the Act.
3.
Representations have been received by the Board/field authorities stating that
Form No. 10B could not be filed along with the return of income for A.Y.
2016-17 and A.Y. 2017-18. It has been requested that the delay in filing of
Form No. 10B may be condoned. Previously, vide instruction in F.No.
267/482/77-IT(part) dated 9-2-1978, the CBDT had authorized the ITO to accept a
belated audit report after recording reasons in cases where some delay has
occurred for reasons beyond the control of the assessee.
4.
Accordingly, the CBDT issued Circular No. 10/2019 circulated through F.No.
197/55/2018-ITA-I in supersession of earlier circular/Instruction issued in
this regard, and with a view to expedite the disposal of applications filed by
such trust or institution for condoning the delay in filing Form No. 10B and in
the exercise of the powers conferred under section 119(2) of the Act, the
Central Board of Direct Taxes vide Circular No. 10/2019 dated 23rd May, 2019
and Circular No. 28/2019 dated 27th September, 2019 both issued vide F.No.
197/55/2018-ITA-I has directed that :—
(i) The delay in filing of Form
No. 10B for A.Y. 2016-17 and A.Y. 2017-18, in all such cases where the Audit
Report for the previous year has been obtained before the filing of return of income
and has been furnished subsequent to the filing of the return of income but
before the date specified under section 139 of the Act is condoned.
(ii) In all other cases of belated
applications in filing Form No. 10B for years prior to AY. 2018-19, The
commissioner of Income-tax are authorized to admit and dispose off by 31-3-2020
such applications for condonation of delay u/s 119(2)(b) of the Act. The
Commissioner will while entertaining such belated applications in filing Form
No. 10B shall satisfy themselves that the assessee was prevented by reasonable
cause from filing such application within the stipulated time.
5. In
addition to the above, it has also been decided by the CBDT that where there is
delay of upto 365 days in filing Form No. 10B for Assessment Year 2018-19 or
for any subsequent Assessment Years, the Commissioners of Income-tax are hereby
authorized to admit such belated applications of condonation of delay under
section 119(2) of the IT Act and decide on merits.
6. The
Commissioners of Income-tax shall, while entertaining such belated applications
in filing Form No. 10B, satisfy themselves that the assessee was prevented by
reasonable cause from filing such application within the stipulated time.
CBDT
Circular No. 10/2019, Dated 22.05.2019
Condonation
of delay in filing of Form No. 10B by Trust/Institution [CBDT Circular No.
10/2019, dated 22.05.2019]
Condonation of delay in filing of
Form No. 10B (audit report by trust/ institution) for Assessment Years 2016-17
and 2017-18 by CBDT vide Circular No. 10/2019, dated 22.05.2019 subject to
fulfilment of conditions prescribed by CBDT.
Subject : Condonation of delay in filing of Form No.
10B for years prior to Assessment year 2018-19 - Regarding
Under the provisions of section 12A
of Income-tax Act, 1961 (hereafter ‘Act’) where the total income of a trust or
institution as computed under the Act without giving effect to the provisions
of section 11 and section 12 exceeds the maximum amount which is not chargeable
to income-tax in any previous year, the accounts of the trust or institution
for that year have to be audited by an accountant as defined in the Explanation
below sub-section (2) of section 288 and the person in receipt of the
income is required to furnish along with the return of income for the relevant
assessment year the report of such audit in the prescribed form duly signed and
verified by such accountant and setting forth such particulars as may be
prescribed.
2. As per rule 17B of the
Income-tax Rules, 1962 (hereafter ‘Rules’) the audit report of the accounts of
such a trust or institution is to be furnished in Form No. 10B. As per rule
12(2) of the Rules, such audit report is to be furnished electronically. The
failure to furnish such report in the prescribed form along with the return of
income results in disentitlement of the trust from claiming exemption under
sections 11 and 12 of the Act.
3. Representations have been
received by the Board/field authorities stating that Form No. 10B could not be
filed along with the return of income for A.Y. 2016-17 and A.Y. 2017-18. It has
been requested that the delay in filing of Form No. 10B may be condoned.
Previously, vide Instruction in F. No. 267/482/77-IT (Part), dated 09.02.1978,
the CBDT had authorised the ITO to accept a belated audit report after
recording reasons in cases where some delay has occurred for reasons beyond the
control of the assessee.
4. Accordingly, in supersession of
earlier Circular/Instruction issued in this regard, and with a view to expedite
the disposal of applications filed by such trusts or institutions for condoning
the delay in filing Form No. 10B and in exercise of the powers conferred under
section 119(2) of the Act, the Central Board of Direct Taxes hereby directs
that:
(i) The delay in filing of Form No. 10B for
A.Y. 2016 17 and A.Y. 2017- 18, in all such cases where the Audit Report for
the previous year has been obtained before the filing of return of income and
has been furnished subsequent to the filing of the return of income but before
the date specified under section 139 of the Act is condoned.
(ii) In all other cases of belated applications
in filing Form No. 10B for years prior to A.Y. 2018-19, the Commissioners of
Income-tax are authorised to admit such applications for condonation of delay
under section 119(2)(b) of the Act. The Commissioners while entertaining such
belated applications in filing Form No. 10B shall satisfy themselves that the
assessee was prevented by reasonable cause from filing such application within
the stipulated time. Further, all such applications shall be disposed off by
30.09.2019.
CBDT F.
No. 267/482/77-IT (Part), dated 09.02.1978 - CBDT Bulletin Tech. XXIII/582:
Subject : Charitable trust-Requirement
of filing audit report in Form 10B - Section 12A(1)(b) - Instructions regarding
The Board have considered whether
the requirement under Section 12A(1)(b) of filing audit report ‘along with the
return of income’ is mandatory so as to disentitle the trust from claiming
exemption under Sections 11 and 12 in case of omission to furnish such report
in the prescribed form along with the return.
Normally, it should be possible for
a charitable or religious trust or institution to file the auditor’s report
along with the return of total income, where such trust or institution claims
exemption under Sections 11 and 12. However, in cases where for reasons beyond
the control of the assessee some delay has occurred in filing the said report
the exemption as available to such trust under Sections 11 and 12 may not be
denied merely on account of delay in furnishing the auditor’s report and the
Income-tax Officer should record reasons for accepting a belated audit report.”
Benefit of exemption under sections 11 and 12 could not be denied to assessee-trust merely on account of delay in furnishing audit report in Form 10B and it was permissible for assessee to produce audit report at a later stage, either before Assessing Officer or appellate authority
Assessee, a public
charitable trust registered under section 12A, filed its return of income
declaring income of certain amount. However, assessee did not furnish audit
report in Form No. 10B. Thereafter, assessee filed audit report in Form no. 10B
during assessment proceedings and sought to condone such delay. Assessing
Officer rejected same and disallowed exemption under sections 11 and 12 to
assessee. The Commissioner (Appeals) observed that it was merely a procedural
lapse on part of assessee to not file Form 10 along with return of income. The
Commissioner (Appeals), thus, observed that the assessee submitted the audit
report at a later stage after filing the return of income, and thus, the
benefit of exemption under section 11 cannot be denied merely on account of
delay in furnishing audit report. Benefit of exemption under sections 11 and 12
could not be denied to assessee-trust merely on account of delay in furnishing
audit report and it was permissible for assessee to produce audit report at a
later stage, either before Assessing Officer or appellate authority. It is
found that the observation of the Commissioner (Appeals) does not suffer from
any infirmity and there is no reason to interfere in the order of the Commissioner
[In favour of assessee] (Related Assessment year : 2014-15) – [DCIT (Exemption) v. State Institute of Health
& Family Welfare (2023) 153 taxmann.com 740 (ITAT Jaipur)]
Assessee-trust had substantially satisfied all conditions for availing benefit of exemption under section 11/12, exemption could not have been denied due to belated filing of audit report in Form No. 10B
Assessee
was a public charitable trust engaged in imparting education. Admittedly, assessee
was granted exemption certificate under section 12A as well as recognition
under section 80G(5). Assessee filed its return of income claiming exemption
under section 11/12 which was disallowed by CPC/Assessing Officer only for
reason that Form No. 10B was not filed alongwith or before filing return of
income. Commissioner (Appeals) confirmed action of CPC/Assessing Officer by
holding that assessee had not furnished any application for seeking condonation
of delay in filing Form No. 10B from Commissioner (Exemption). Where assessee
trust had substantially satisfied all conditions for availing benefit of
exemption under section 11/12, exemption could not have been denied for belated
filing of audit report in Form No. 10B. Therefore, matter was to be restored
back to file of Assessing Officer to verify contents of Form No. 10B for all
assessment years and grant necessary exemptions by passing order in accordance
with law. [Matter remanded] (Related Assessment years : 2017-18 to 2019-20) – [Navbharat
Charitable Trust v. ITO (2023) 200 ITD 812 : 150 taxmann.com 311 (ITAT Surat)]
Delay in furnishing audit report in Form no. 10B by assessee-trust had already been condoned by Commissioner, assessee could not be denied benefit of exemption under sections 11 and 12
Assessee,
a public charitable trust, filed its return of income belatedly claiming
exemption under section 11. Audit report in Form no. 10B was also filed
belatedly. Commissioner (Exemption) had condoned delay in filing of Form no.
10B. However, he denied exemption under section 11 to assessee and taxed trust
on gross basis. Once delay in filing Form no. 10B had already been condoned by
Commissioner (Exemption), assessee could not be denied benefit of exemption
under sections 11 and 12. [In favour of assessee] (Related
Assessment year : 2020-21) - [Shri Rajkot Vishashrimali Jain Samaj v. ITO
(2023) 150 taxmann.com 361 (ITAT Rajkot)]
Section 11 exemption can not be denied merely on ground of non-filing of Form 10B along with return of income
Assessing Officer denied exemption under
section 11 to assessee-trust on ground that Form 10B was not filed along with
return of income and raised a demand. Thereafter, assessee filed rectification
application under section 154 and contended that though audit report in Form
10B was available at time of filing of return of income, however, due to new
procedural and technical requirements of e-filing Form 10B, there was a delay on
part of auditor in uploading same. Assessing Officer rejected rectification
application filed by assessee.
The Hon’ble
jurisdictional High Court in case of CIT v. Xavier
Kalavani Mandal (P) Ltd. (2014) 41 taxmann.com 184 (2014) held that in
order to claim exemption under section 11, the assessee can filed audit report
in Form 10B even at later stage either before the Assessing Officer or before
appellate authority by showing a sufficient cause. Further, Hon’ble
jurisdictional High Court decision in case of Sarvodaya charitable
Trust v. ITO (Exemption) (2021) 278 Taxman 148 (Guj.) also
held that where the assessee is a public charitable trust registered under
section 12A of the Act and substantially satisfied condition for availing
benefit of exemption as a charitable could not be denied exemption, the
assessee merely on bar of limitation in furnishing audit report in Form 10B.
Considering the aforesaid and legal discussion, we find that though the assessee
has not filed any return of income at the time, however, it was available
before the Id. CIT(A) as it was uploaded much before filing application under
section 154. Therefore, respectfully following the decisions of Hon'ble
jurisdictional High Court in case of CIT v. Xavier
Kalavani Mandal (P) Ltd. (supra) and in Sarvodaya
charitable Trust v. ITO (Exemption) (supra),
we find that the assessee has complied the procedural requirement, therefore,
the Assessing Officer/CPC is directed to verify the claim of the assessee and
grant necessary deduction under section 11 of IT Act. In the result, the appeal
of the assessee is allowed for statistical purposes.
As in the present case also the assessee
has complied with the procedural requirement of obtaining and filing Form 10B,
therefore, respectfully following the aforesaid decision of the Co-ordinate
Bench of the Tribunal, the Assessing Officer is directed to decide the claim of
the assessee under section 11 on merits, after accepting the Form 10B filed by
the assessee. Accordingly, grounds raised by the assessee are allowed for
statistical purposes. [In favour of assessee] (Related Assessment year :
2016-17) – [Shree Bhairav Seva Samiti v. ITO (Exemption) [2023] 149
taxmann.com 478 (ITAT Mumbai)]
Upholds denial of exemption
under Section 11 exemption for Form 10B delay where no condonation application
preferred
Raipur ITAT upholds denial
of exemption under Section 11 to Assessee on delayed filing of audit report in
Form No.10B along with return of income; However, remits the back to Revenue
with a direction to consider Assessee’s claim for deduction of expenses as
debited in the income and expenditure account to the extent allowable under the
law; Assessee-Trust registered under Section 12AA(1)(b)(i) filed return of
income under Section 139(4) for Assessment year 2016-17 on 28.03.2018 and
claimed exemption of Rs. 24.83 Lac under Section 11(2) which was denied by CPC
in the intimation under Section 143(1) on the ground that audit report in Form
10B along with return of income was not furnished within due date specified
under Section 139(1) but subsequently uploaded on June 21, 2019 i.e., during
the course of CIT(A) proceedings; ITAT observes that Assessee
obtained audit report in Form 10B on 30.09.2016 i.e., prior to filing of return
of income on 21.06.2018 but the third condition stipulated in para 4(i)
of Circular No. 10 of 2019 dated 22.05.2019 which requires that audit
report in Form 10B should be filed before the date specified under Section 139
is not found to be satisfied; Observes that the term ‘specified date’ defined
in Explanation 1 to Section 139 for subject Assessment year was 30.06.2016,
however, the audit report was uploaded on 21.06.2019 which clearly establishes
that it was filed beyond the date specified under Section 139; Accordingly,
holds that the case clearly falls beyond scope of Para 4(i) of Circular No.
10/2019 and since the Assessee failed to file any application for
condonation of delay under Section 119(2)(b) as mandated in Para 4(ii) of the
said circular, the delay cannot be condoned. [In favour of revenue] – [Jain Shwetamber Murtipujak Sangh v. ITO
(Exemption) [TS-273-ITAT-2023(RAI)] – Date of Judgement : 22.05.2023 (ITAT Raipur)]
Trust’s Audit Report delay
for Assessment year 2017-18 condonable by CBDT
Circular, application not required
Bangalore ITAT allows
Assessee’s appeal, deletes addition made by CPC towards denial of deduction
claimed towards application/accumulation of funds under Section 11(1) due to
delay in furnishing audit report in Form 10B for Assessment year 2017-18; Holds
that Circular No. 10 of 2019 dated 22.05.2019 condones the delay in
case Form 10B is furnished before the due date stipulated in Section 139(1) and
no separate condonation petition is required; During Assessment year 2017-18,
Assessee-Trust received a sum of Rs. 99.08 Lac towards corpus receipts and
filed return of income for Assessment year 2017-18 declaring Nil income by
setting apart Rs. 58.02 Lac towards application of income towards object of
trust under Section 11 and Rs.39.45 Lac towards capital expenses; However, the
audit report in Form 10B was subsequently filed on 28.08.2017; CPC processed
the return under Section 143(1) and made an addition of Rs.97.48 Lac claimed
towards application of funds and accordingly, denied the deduction towards
accumulation under Section 11(1) due to delay in furnishing the Form 10B which
ought to have been filed on or before filing of return of income; CIT(A)
dismissed Assessee’s appeal and relied on CBDT Circular No. 10 of 2019 dated
May 22, 2019 to held that only CIT (Exemption) is authorized to condone delay
in filing of Form No. 10B up to 365 days and in the present case, Assessee did
not mention anything about condonation petition in the written submission nor
did it state whether condonation petition is pending before Commissioner
(Exemption) or whether such delay has actually been condoned; Before ITAT,
Assessee relied on Circular No 10 of 2019 and contended that the said
Circular condones the delay in filing Form 10B for Assessment year 2016-17 and
2017-18 on furnishing it before the due date stipulated under Section 139 and
no separate condonation petition is required; Contended that Form 10B was filed
on Aug 28, 2017 which is much before the due date stipulated under Section
139(1) i.e., Oct 31, 2017; While Revenue contended that a separate petition
seeking condonation of delay is mandatory and in absence of same, CIT(A)
rightly denied the deduction; ITAT observes that on perusal of Circular No. 10
of 2019, it is clear that for Assessment year 2016-17 and 2017-18 the delay in
filing Form 10B is condoned where the audit report is obtained before filing
the return of income and filed before due date specified under Section 139,
although, no such default condonation is available for other years and
CIT(Exemption) is authorized to admit the application and condone in case of
reasonable cause; Accepts Assessee’s argument and observes that there no
requirement to file condonation application as the circular itself has condoned
the delay for the year under consideration; Accordingly, holds that the Assessee
cannot be denied the deduction towards application and accumulation of funds
and the addition is liable to be deleted. [In favour of assessee] (Related Assessment year : 2017-18) – [Mulki Sundar Ram
Shetty Nagar Ayyappa Swamy Temple Trust v. ITO (Exemption) [TS-65-ITAT-2023(Bang)] – Date of Judgement : 08.02.2023
(ITAT Bangalore)]
Assessee, a public charitable trust
registered under section 12A, had substantially satisfied condition for
availing benefit of exemption as a trust, it could not be denied exemption
merely on bar of limitation in furnishing audit report in Form no. 10B.
Registration Procedure (Condonation
of delay in filing Form 10B) - Assessee, a public charitable trust registered
under section 12A, filed its return of income declaring income of certain
amount. Assessee had not furnished audit report in Form No. 10B. Thus,
Assessing Officer denied exemption to assessee-trust. Thereafter, assessee
filed audit report in Form No. 10B belatedly and sought to condone such delay.
Same was rejected for reason that no ground for condonation of delay was made
out by assessee. Since assessee was a public charitable trust for past 30 years
who substantially satisfied condition for availing benefit of exemption,
assessee could not be denied exemption merely on bar of limitation to submit
Form no. 10, especially, when legislature had conferred wide discretionary
powers to condone such delay on authorities concerned. [In favour of assessee]
(Related Assessment year : 2016-17) - [Sarvodaya Charitable Trust v. ITO
(Exemption) (2021) 278 Taxman 148 : 125 taxmann.com 75 (Guj.)]
Directs
trust to move CBDT with belated Form 10B; Upholds CIT(E)’s rejection of
condonation application
Bombay
High Court upholds CIT(E) order rejecting assessee’s application to condone the
delay in filing Form 10B for Assessment year 2018-19 beyond 365 days, however
directs assessee to approach CBDT under section 119(2)(b) for such condonation
of delay beyond 365 days and thereafter to deal with the said claim on merit
and in accordance with law;
Assessee,
a charitable trust, filed its return of income on 25.07.2018 declaring nil
income. Form No. 10B was obtained from auditor, however, instead of uploading
Form No. 10B in income tax portal, assessee uploaded Form No. 10BB inadvertently.
Accordingly, exemptions under sections 11 and 12 were denied and demand was
raised vide order, dated 17.10.2019. Thereafter, assessee uploaded Form No. 10B
on income tax portal on 06.11.2019 and also filed an application for
condonation of delay - However, Commissioner (Exemptions), following Circular
No. 2 of 2020 of CBDT, dated 03.01.2020, rejected application of assessee for
condonation of delay. As per Circular, dated 03.01.2020, Commissioners are
authorized to condone delay in filing of Form No. 10B up to 365 days in filing
of Form No. 10B for assessment year 2018-19 and subsequent assessment years.
However, since Form No. 10B was filed by assessee after lapse of more more than
365 days of due date of filing of return of income, case of assessee was not
covered under CBDT Circular, dated 03.01.2020, hence, Commissioner expressed
inability to condone delay and rejected application for condonation of
delay. Fixing a period of 365 days of
delay for condonation of delay in filing Form No. 10B for assessment year
2018-19 and onwards could not be said to be arbitrary or irrational, therefore
general order passed by CBDT in this regard under section 119(2)(b) could not
be faulted. However, having regard to mandate of section 119(2)(b), even at
this stage, assessee may approach CBDT under section 119(2)(b) to authorize
Commissioner (Exemptions), to condone delay in filing Form No. 10B for
assessment year 2018-19 which was beyond 365 days and thereafter to deal with
same on merit in accordance with law. [Partly
in favour of assessee] (Related Assessment year : 2018-19) – [Little Angels
Education Society v. Union of India (2021) 127 taxmann.com 473 :
[TS-254-HC-2021(BOM)] (Bom.)]
Allows exemption to Trust, delayed submission of Form 10B attributable to delayed registration
Delhi ITAT dismisses
Revenue’s appeal, holds audit of Trust’s accounts subsequent to grant of
registration under section 12AA did not vitiate the
authenticity of the accounts; Assessee-Trust (Hardayal Charitable & Educational
Trust) was granted registration under section 12A vide order dated 07.01.2014
w.e.f. 01.04.2010 was denied the benefit of exemption for a corpus donation of
Rs. 7.13 Lakhs on failure to get its accounts audited and obtain the audit
report within the prescribed time; CIT(A) deleted the addition against which
Revenue preferred the instant appeal; Revenue submitted that it was not the
case that Assessee failed to submit the audit report in Form 10B along with the
return, but in the instant case, the audit report itself was obtained after
filing of the income tax return; Assessee submitted that Revenue had not given
any finding to the effect that the corpus donation was bogus, and since the
Assessee was granted registration w.e.f. April 2010 on 07.01.2014, Assessee
could not have submitted the Form 10B report before the grant of registration;
On perusal of the CIT(A)’s order, ITAT finds that Revenue did not point out any
defects in the Assessee’s accounts; Remarks that merely because the accounts
were audited after grant of registration under section 12AA of the Act under
the peculiarity of the present case, would not ipso facto vitiate the
authenticity of the accounts so furnished before the Revenue; ITAT further
observes that Revenue failed to make any enquiry regarding the accounts of the
Assessee and affirms the CIT(A)’s order deleting the addition. [In favour of
assessee] (Related Assessment year) – [DCIT(Exemption), Ghaziabad v. Hardayal
Charitable & Educational Trust [TS-1141-ITAT-2021(DEL)] – Date of Judgement : 24.11.2021
(ITAT Delhi)]
In section
10(23C)(iiiad) cases, there is no need to file Form 10BB
Assessee-society was running a
school and its receipts from said activity was below Rs. one crore. Assessee
filed its return claiming exemption under section 10(23C)(iiiad). Assessing
Officer rejected assessee’s claim on two grounds, firstly, objects of assessee-society
were not confined to advancement of education alone and, secondly, assessee did
not file audit report in Form 10BB alongwith return of income. Since assessee
was carrying on sole activity of education during relevant year, exemption
could not be denied to it on basis that it had other objects also in its trust
deed. As regards other objection, since tenth proviso was applicable only to
clauses (iv), (v), (vi) and (via) of section 10(23C), whereas assessee was
claiming exemption under section 10(23C)(iiiad), there was no need to file
audit report in Form No. 10BB. In view of aforesaid, assessee’s claim for
exemption was to be allowed. [In favour of assessee] (Related Assessment years
2009-10 and 2010-11) – [ITO, Ludhiana v. Shri Balaji Prem Ashram & Nikhil
Vidyalaya (2015) 64 taxmann.com 112 (ITAT Chandigarh)]
Trust registration in Delhi involves legally establishing an entity for charitable, religious, or educational purposes. This process requires detailed documentation and adherence to regulatory standards. Expert consultants can simplify the registration, ensuring compliance with all legal requirements efficiently.
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