Charitable Trust Cannot Lose Tax Exemption For Late Filing Of Form Declaring Future Use of Income: Madras HC

The Madras High Court has held that a charitable trust cannot be denied tax exemption merely because it filed Form 10 late, when the return of income and audit report were filed within time. Form 10 is the declaration through which a charitable trust informs the tax department that it intends to set aside part of its income for charitable use in future years.

A single-judge bench of Justice C Saravanan said the tax department, in effect, treated a procedural delay as a ground to deny a substantive benefit.

“Since the substantial benefit available to the assessee as a trust registered under Section 12A of the Income Tax Act cannot be denied for a mere technical breach, the delay in filing Form 10 ought to have been condoned,” the court observed.

The case involved the Sindhi Educational Society, a charitable trust. For the 2015–16 assessment year, the trust filed its income tax return on time. It also submitted its audit report before the deadline. However, Form 10 was filed later, with a delay of 530 days.

Under the Income Tax Act, charitable trusts are exempt from paying tax on income used for charitable or religious purposes.

This benefit is available under Section 11. To claim it, the trust must file Form 10, stating how much income it plans to retain and spend on charitable activities in subsequent years. In this case, while the returns were on time, the declaration was delayed.

Because of the delay in filing the form, the tax department denied the exemption and then raised a tax demand as part of processing the return.

Following this, the trust then sought condonation of the delay from the Principal Commissioner of Income Tax.

The request was rejected on the ground that it was made more than six years from the end of the relevant assessment year, relying on a CBDT circular.

The High Court disagreed with this approach. The High Court, in substance, found that the department had focused on technical compliance while overlooking the trust's substantive entitlement.

The court set aside the rejection order, condoned the delay in filing Form 10, and directed the assessing officer to pass a fresh order giving effect to the condonation. 

Case Title: Sindhi Educational Society v. The Principal Commissioner of Income Tax

Citation: 2026 LLBiz HC (MAD) 20

Case Number: W.P.No.20037 of 2023

Counsel for Petitioner: Advocate A. S. Sriraman

Counsel for Respondent: Junior Standing Counsel, A.M.R. Jayapratab