Whether Exemption u/s 11 & 12 available even if audit report in Form 10B is filed after filing Income Tax Return?

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Exemption u/s 11/12 if belated return

Whether Exemption u/s 11 & 12 available even if audit report in Form 10B is filed after filing Income Tax Return?

We all know that audit report is mandatory (Form No. 10B) if trust wants to claim exemption under Section 11 and 12 of the Income Tax Act, 1961.

In this regard Section 12A(b) reads as under:

“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 and the person in receipt of the income furnishes 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”

The relevant details are incorporated in Rule 17B. The rule reads as under:

“ The report of audit of the accounts of a trust or institution which is required to be furnished under clause (b) of section 12A, shall be in Form No. 10B.”

The audit report is required in Form 10B is attached below

Form 10B

Now, the question arises is that if the audit report is furnished after the return is submitted whether exemption will be admissible or not?

Section 12A(b) incorporates the words “Furnishes Along With the Return of Income” which means that for exemption filing of audit report along with the income tax return is a precondition for exemption

In is important to note here that Section 12A(b) of the Income Tax Act, 1961 has not been changed after e-filing mechanism is introduced by the department.

Earlier, there was a system of physical filing of Return wherein report u/s 12A(b) in Form 3B was required to be attached with it.

Now, in the new e-filing mechanism, both the functions i.e. Income Tax Return filing and Audit Report uploading need to be performed independently.

Both the function cannot be done at the same point of time i.e. with single hit. Either audit report uploading can precede or succeed the Income Tax Return Filing.

Technically, filing of Audit Report along with Income Tax Return cannot be done as was possible during the physical filing of Return.

In this scenario, it is technically not possible to comply with the law in verbatim.

Filing of Audit Report in Form 10B is a mere technical formality. It’s filing or non-filing logically should not affect the tax liability.

In such scenario, even if Form 10B is filed belated i.e. after filing the return of income exemption under section 11 and 12 of the Income Tax Act, 1961 should be granted.

It would be better if Central Board of Direct Taxes (CBDT) issues suitable clarification for the public at large.

 

However, as a precautionary measure, Auditor/ Trust should upload audit report first & then only return should be uploaded so as to avoid the denial of exemption u/s 11 & 12 of Income Tax Act-1961.

 

 

 


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