184. Delay in filing application in Form No. 10 - Board’s order under section 119(2)(b) authorising Commissioner to admit belated applications

1. Charitable and religious trusts are entitled to exemption from income-tax under section 11 after they fulfil the requirements enumerated in sections 11 to 13.  These trusts are allowed to accumulate or set apart income derived by them from property held under trust provided they fulfil the conditions spelt out in section 11(2) read with rule 11 of the Income-tax Rules and Form No. 10.

2. Very often trusts are not able to file the application in Form No. 10 within the time allowed under section 139(1)/139(2) as extended by the Income-tax Officer.  The Board is then approached by these trusts for condoning the delay for filing applications.  The Board by virtue of the powers vested in it under section 119(2)(b) has been condoning the delay in individual cases after satisfying itself that certain conditions are satisfied.

3. With a view to expediting the disposal of applications filed by trusts for condoning the delay, the Board has passed a general order under section 119(2)(b) by which the Commissioners have been authorised to admit belated applications under section 11(2) read with rule 17.  A copy of this order is enclosed.  All applications for condoning the delay under section 11(2) will, henceforth, be disposed of by the Commissioner in terms of the enclosed Order No. 120/57/80-IT(A-I), dated 3-6-1980 [Annex ].

Circular : No. 273 [F. No. 180/57/80-IT(A-I)], dated 3-6-1980.

ANNEX - ORDER DATED 3-6-1980 REFERRED TO IN CLARIFICATION

In exercise of the powers conferred under section 119(2)(b ) of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby authorise the Commissioners to admit applications under section 11(2) read with rule 17 of the Income-tax Rules, 1962 from persons deriving income from property held under trust wholly for charitable or religious purposes for accumulation of such income to be applied for such purposes in India when the aforementioned applications are filed beyond the time stipulated.  The Commissioners will, while entertaining such applications, satisfy themselves that the following conditions are fulfilled:

 (a)  that the genuineness of the trust is not in doubt;

 (b)  that the failure to give notice to the Income-tax Officer under section 11(2) of the Act and investment of the money in the prescribed securities was due only to oversight;

  (c)  that the trustees or the settlor have not been benefited by such failure directly or indirectly;

 (d)  that the trust agrees to deposit its funds in the prescribed securities prior to the issue of the Government sanction extending the time under section 11(2); and

  (e)  that the accumulation or setting apart of income was necessary for carrying out the objects of the trust.

JUDICIAL ANALYSIS

APPLIED IN - The above circular was applied in CIT  v. Anjuman Moinia Fakharia [1994] 208 ITR 568 (Raj.), with the following observations :

"From the circular issued by the Department dated June 3, 1980, and the judgment of the Apex Court referred to above, it can be considered that the requirement to prescribe (sic ) the time-limit is only directory and not mandatory. Non-compliance within the stipulated time should not disentitle an assessee from the exemption to which he is otherwise entitled...." (p. 572)

EXPLAINED IN - Gujarat Institute of Desert Ecology v. CIT  [2003] 131 Taxman 274 (Guj.) with the following observations :

"Very often trusts are not able to file the application under section 11(1)/(2) of the Act within time limit allowed by the provisions and thereafter the trusts are required to approach the Board for condoning the delay in filing application. With a view to expedite the disposal of application filed by the trusts for condoning the delay, the Board has passed a general order under section 119(2)( b) by which the Commissioners of Income-tax have been authorised to admit belated application under section 11(2), read with rule 17 of the Income-tax Rules, 1962. Accordingly, all the Commissioners of Income-tax were instructed to dispose of all the applications for condoning delay under section 11(2) in terms of the order dated 3-6-1980."