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November 6, 2020

Income Tax Department allows condonation of delay in filing audit report by Trusts

by CA Shivam Jaiswal in Income Tax

Income Tax Department allows condonation of delay in filing audit report by Trusts

The economic impact of the 2020 coronavirus pandemic in India has been largely disruptive. The lockdown though necessary has led to a disastrous impact on the economy. With an ever-increasing corona virus cases, lockdown was considered as an only solution to flatten the curve. However, the measures which were implemented to avoid a human disaster, have in turn led to the birth of several issues such as unemployment, recession, hindrance to economic growth, financial instability and so on.

The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states, to sector related incentives and tax deadline extensions. With the ongoing COVID -19 pandemic a lot of income tax due dates were extended. The Income Tax Department has allowed condonation of delay in submitting audit reviews by trusts, establishments, universities and hospitals who declare tax exemptionin Form 10BB.

What is Form 10BB?

Section 11 and 12 of the Income tax Act provides exemptions on the income charitable and religious organisations. While the exemptions available u/s 11 are general and available to all the charitable organisations, Section 10(23C) of the Act is a specific exemption available to certain Government and non-government universities and educational institutions.

Any 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) of section 10(23C) is required to file their Audit report in Form 10BB

Form 10BB is required to be given by:

  • a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949); or
  • any person who, in relation to any State, is, by virtue of the provisions of section 226(2) of the Companies Act, 1956, entitled to be appointed to act as an auditor of the company registered in that State.

Who should get required to get the Audit Report in Form 10BB?

Any funds, trusts, establishments together with instructional and medical universities or hospitals claiming revenue tax exemption should get their accounts audited if their complete revenue of that year exceeds the maximum amount not chargeable to tax.

Income tax law mandates that such institutes can claim tax benefits available to them only after furnishing the tax audit report in form 10BB before the prescribed time.

Condonation of Delay in Submitting Form 10BB

Condonation of delay is a doctrine mentioned in the Limitation Act, 1963. This doctrine is an exception to the limitation period. According to this, if the aggrieved party can furnish “sufficient cause” for causing a delay in institution of suit leading to the expiry of the limitation period, the Court can, with discretionary jurisdiction disregard the delay or “condone the delay” and proceed with the case.

CBDT in a round mentioned that revenue tax commissioners would admit belated functions in submitting Form 10BB for years previous to evaluation year (AY) 2018-19 for “condonation of delay”.

The Commissioner, while entertaining such applications regarding filing Form 10BB, shall satisfy themselves that the applicant was prevented by reasonable cause from filing such application within the stipulated time.

Further all such applications shall be disposed of by 31stMarch, 2021.

Thus, aid to condone delay in submitting audit reviews of trusts, establishments, universities, and hospitals is far anticipated, as comparable aid was given to different charitable organisations initially of 2020.Many NGOs were not able to claim any tax benefits available to them from AY 2016-17 for non-furnishing of tax audit reports. With a deadline to dispose of such condonation applications for earlier years, such organisations would be hopeful to claim their tax benefits for past years.

Many organisations had filed an illustration earlier than the tax authorities that they have been unable to file their return together with an audit report and to condone the identical so as to declare profit and to keep away from litigation.Taking into consideration their plea, the authority issued a round on 3rdNovember for condonation of delay for submitting kind 10BB.

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