Law:

Section:

Section 11, read with section 12A(b), of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment years 1974-75 to 1976-77 - Board's Instruction No. 1/1148 dated 9-2-1978 lays down that exemption under section 11 should not be rejected merely on ground that there had been delay in filing report by accountant in terms of section 12A(b) - Revenue, however, disallowed exemption under section 11 to assessee on account of failure to furnish audit report along with return, even though same was furnished before final assessment was made - Whether department had no right to challenge a circular issued by Board on any ground whatsoever including ground that it was inconsistent with statutory provision - Held, yes - Whether, therefore, Tribunal relying upon aforesaid instruction of Board rightly allowed benefits to assessee under section 11, holding that provisions contained in section 12A(b) were only directory in nature and not mandatory - Held, yes Circulars and Instructions: Instruction No. 1/1148, dated 9-2-1978 issued by the CBDT FACTS The Andhra Pradesh High Court in Andhra Pradesh State Road Transport Corporation v. CIT [1975] 100 ITR 392, declared that the assessee corporation was entitled to exemption under section 11 holding it to be a charitable institution in view of its objects. This decision had been affirmed by the Supreme Court in CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 . According to the Revenue, since the audit report was not furnished in terms of From No. 10B as laid down by section 12A(b) read with rule 17B of the Income-tax Rules 1962, therefore, there was no question of grant of exemption under section 11 even if the institution was a charitable institution. The assessee however contended that the requirement of a report by the accountant in terms of section 12A(b) was not mandatory, and in any case, this report was furnished before the final assessment was made. The assessee further contended that the Board had issued instructions being Board's Instruction No. 1/1148 on 9-2-1978, and these instructions laid down that in case where for reasons beyond the…

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