ITAT Mumbai holds mistaken reference to section 10(23C)(iv) and wrong audit form cannot defeat section 11 exemption claim

The Mumbai bench of the Income Tax Appellate Tribunal has held that a charitable assessee’s inadvertent claim of exemption under section 10(23C)(iv), instead of section 11, could not by itself defeat its substantive entitlement to exemption where valid registration under section 12A was in force. The Tribunal also noted that the prescribed ITR-7 for assessment year 2015-16 contemplated claims under both provisions and separately called for particulars of registration under section 12A/12AA.

United Sisters Foundation, a section 25 company registered under section 12A, had filed its return declaring nil income for assessment year 2015-16. It later explained before the Assessing Officer that the wrong statutory reference in the return was an inadvertent error. It also pointed out that, although it had furnished Form 10BB with the return, the correct audit report in Form 10B had been obtained and produced during the assessment proceedings, along with a request that its eligibility be examined under sections 11 and 12.

The dispute arose from sponsorship receipts connected with the organisation of “Pinkathon”, a women’s marathon described as being aimed at fitness, health, awareness and empowerment. The lower authorities treated those receipts as arising from an activity in the nature of trade, commerce or business and, on that basis, denied exemption by invoking the proviso to section 2(15) read with section 13(8), bringing the surplus of ₹2,58,39,236 to tax.

On the material before it, the Tribunal focused on the assessee’s valid registration and the statutory design of the return form, and accepted that an incorrect provision cited in the return or an initially furnished wrong audit form could not, by themselves, extinguish the exemption claim. The appeal was accordingly disposed of in favour of the assessee on the exemption issue.