Delay of 260 days in submitting Form No. 10 for Assessment Year 2019-20 condoned under Section 119(2)(b) of the Income Tax Act; denial of exemption set aside to prevent genuine hardship to Cine Artist Welfare Trust
In a significant judgment delivered on October 19, 2026, the Bombay High Court (Division Bench comprising Justices B. P. Colabawalla and Farhan P. Dubash) ruled in favor of the Cine Artist Welfare Trust, setting aside the Income Tax Department's rejection of the Trust's claim for accumulation of income under Section 11(2) of the Income Tax Act, 1961 for the Assessment Year 2019-20.
The dispute arose due to a delay of 260 days by the Trust in furnishing Form No. 10, a prescribed statement supporting the claim for accumulation of income. Though the Trust filed its original Return of Income within the due date on October 5, 2019, claiming accumulation of Rs. 70,00,000 and also disclosed the same in the audit report (Form No. 10B), it inadvertently filed Form No. 9A instead of Form No. 10 along with the revised return. The error was discovered following a defect notice, after which the Trust submitted the correct Form No. 10 on July 18, 2020, well before the processing of the return and issuance of intimation under Section 143(1) dated December 12, 2020.
The Commissioner of Income Tax had rejected the Trust's application for condonation of delay under Section 119(2)(b), leading to the denial of the accumulation claim and exemption under Section 11, which would have resulted in a substantial tax liability, adversely affecting the Trust's corpus and its charitable activities.
The Court thoroughly examined the facts and noted that the claim for accumulation was never an afterthought but was clearly disclosed in the original Return and audit report. The inadvertent mistake in filing the wrong form was accepted as a bona fide error supported by contemporaneous documents. The Court also observed that the Trust had invested the accumulated amount in fixed deposits with scheduled banks, thereby complying with the prescribed modes of investment under Section 11(5).
Relying on precedents, including the recent ruling in Shree Jain Swetamber Murtipujak Tapagachha Sangh v. Commissioner of Income Tax (2024) and other authoritative decisions, the Court emphasized that provisions for condonation of delay are beneficial and intended to alleviate undue hardship caused by non-wilful default. It further held that procedural requirements such as filing Form No. 10 are directory in nature, and substantial compliance suffices.
The Court quashed the impugned order dated March 18, 2025, condoned the delay in filing Form No. 10, and set aside the denial of accumulation claim and the consequent tax demand. The Income Tax authorities were directed to reprocess the Trust's return treating Form No. 10 as duly furnished and consider the accumulation claim of Rs. 70,00,000 in accordance with law.
This judgment reaffirms the principle that procedural lapses, when inadvertent and without mala fide intention, should not result in penal consequences that thwart the charitable objectives of trusts. It also underscores the discretionary power of the Commissioner under Section 119(2)(b) to condone delays, balancing strict compliance with equitable relief to genuine taxpayers.
Bottom Line:
Income Tax - Charitable trust - Delay in filing Form No. 10 for claiming accumulation under Section 11(2) of the Income-tax Act can be condoned under Section 119(2)(b) where claim of accumulation was disclosed in original return and audit report, omission was inadvertent, Form No. 10 was filed before processing of return, and refusal to condone would cause genuine hardship to trust.
Statutory provision(s):
Income Tax Act, 1961 Sections 11(2), 11(5), 119(2)(b), 139(9), 143(1)
