The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the requirement to submit Form No. 9A at least two months before the income-tax return deadline, introduced by the Finance Act, 2023, cannot be applied retrospectively to Assessment Year 2019-20.
The bench of Siddhartha Nautiyal (Judicial Member) and Vikram Singh Yadav (Accountant Member) directed the Income Tax Department to allow a charitable trust’s claim of ₹52.90 lakh as deemed application of income. It also permitted a separate claim of ₹9.34 lakh as statutory accumulation under Section 11(1)(a) of the Income-tax Act, 1961.
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The assessee is a charitable public trust claiming exemption under Sections 11 and 12 of the Income-tax Act.
It filed its return of income on October 1, 2019, declaring a total income of ₹23.40 lakh. Its auditor had uploaded the audit report prescribed under Section 12A(1)(b) on September 30, 2019.
In its return, the trust claimed ₹9.34 lakh as income accumulated or set apart within the permissible 15% limit under Section 11(1)(a). It also claimed ₹52.90 lakh as deemed application of income under clause (2) of Explanation 1 to Section 11(1), owing to a shortfall in applying 85% of its income during the relevant financial year.
The Centralised Processing Centre, while processing the return under Section 143(1), denied both claims. The total exemption disallowed by the CPC amounted to ₹62.24 lakh.
The trust subsequently filed a rectification application under Section 154 on January 13, 2025.
It submitted that both its return and Form No. 9A had been filed on October 1, 2019. The Central Board of Direct Taxes had extended the return filing deadline for the relevant assessment year to October 31, 2019.
Accordingly, the trust contended that it had exercised the option for deemed application within the prescribed time and had also filed its return within the period allowed under Section 139(4A), read with Section 139(1).
The CPC, however, passed a rectification order on April 28, 2025, without allowing either claim. The trust then approached the CIT(A).
The CIT(A) accepted that the deadline for filing the return for the relevant assessment year had been extended to October 31, 2019.
However, it held that filing Form No. 9A within the extended return deadline was not sufficient. According to the appellate authority, the option for deemed application was required to be exercised at least two months before the due date specified under Section 139(1).
Taking October 31, 2019, as the applicable return deadline, the CIT(A) concluded that the trust should have exercised the option at least two months before that date. Since Form No. 9A was filed only on October 1, 2019, the claim of ₹52.90 lakh was rejected.
The CIT(A) also sustained the disallowance of ₹9.34 lakh claimed as statutory accumulation, though it did not record a separate finding explaining why that amount was inadmissible.
The trust argued that the CIT(A) had incorrectly applied the law introduced by the Finance Act, 2023, to Assessment Year 2019-20.
The assessee pointed out that under the provision applicable to AY 2019-20, Form No. 9A merely had to be furnished before the expiry of the time allowed for filing the return under Section 139(1).
As the return filing deadline had been extended to October 31, 2019, and both the return and Form No. 9A were filed on October 1, 2019, the trust maintained that the statutory condition stood satisfied.
The Tribunal examined clause (2) of Explanation 1 to Section 11(1) as it stood during AY 2019-20.
It observed that the provision then required a charitable or religious trust to exercise the option for deemed application “before the expiry of the time allowed” under Section 139(1).
The requirement to exercise the option “at least two months prior to the due date” did not form part of the provision applicable to AY 2019-20, the Bench clarified.
The Tribunal noted that the Legislature replaced the earlier expression through the Finance Act, 2023. The amendment advanced the deadline for furnishing Form No. 9A to at least two months before the return filing due date.
Referring to the explanatory material accompanying the Finance Act, 2023, the ITAT observed that the amendment took effect from April 1, 2023, and applied from Assessment Year 2023-24 onwards.
“The assessee’s compliance has to be seen with reference to the statutory provision as relevant to the assessment year under consideration and not with reference to a subsequent amendment,” the Tribunal observed.
It held that the CIT(A) had committed an error by applying to AY 2019-20 a procedural time limit introduced only subsequently.
Since the trust furnished Form No. 9A on October 1, 2019—well before the extended deadline of October 31, 2019—the Tribunal found no basis for denying the deemed-application claim merely because the form had not been filed two months before the due date.
The Assessing Officer and CPC were accordingly directed to allow the ₹52.90 lakh claim, subject to satisfaction of the other conditions prescribed under Section 11.
The ITAT explained that Section 11(1)(a) independently permits a charitable or religious trust to accumulate or set apart up to 15% of its income for application towards charitable or religious purposes in India.
The filing of Form No. 9A relates to the option for deemed application under Explanation 1 to Section 11(1). The statutory accumulation of up to 15% under Section 11(1)(a), however, does not depend upon exercising that option, the Tribunal clarified.
It further noted that the CIT(A) had given no reason for rejecting the trust’s claim of ₹9.34 lakh. There was also no finding that the amount exceeded the permissible limit under Sections 11 and 12.
The Tribunal therefore held that the disallowance could not be sustained and directed the Assessing Officer/CPC to allow the ₹9.34 lakh claim.
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