ITR Delay Condoned: Karnataka High Court Protects Trust’s Legitimate Tax Exemption Rights

The Karnataka High Court held that technical issues and errors should not prevent a genuine benefit, especially when a similar relief has already been granted in earlier years. Consequently, the delay in filing ITR for AY 2017-18 is condoned. 

The tax authorities had denied the petitioner’s request seeking condonation of the delay in filing the income tax return (ITR) for the assessment year 2017-18, vide an order dated October 27, 2025.

The petitioner claimed that during filing its income tax return (ITR) for the AY 2017-18, it had mistakenly claimed exemption under a different provision of Section 10(23C)(iv) of the Act; however, being a recognised PF trust, its income is exempt under Section 10(25) of the Income Tax Act, 1961. This led to a significant delay in filing. The petitioner further claimed that the mistake was not intentional; however, the tax department still denied its request for condonation of delay.

The petitioner highlighted that similar situations have already occurred in AY 2021-22 and 2023-24, where the department had condoned the delay in filing returns by exercising its power. Further pointed out that denying the Section 10(23C)(iv) exemption for AY 2017-18 will cause a significant loss of trust. 

When the court heard the case, it noted that although there was a delay, the trust had a valid claim for exemption under Section 10(23C)(iv) of the Act. The court highlighted that technical errors should not prevent taxpayers from claiming genuine benefits, especially when similar relief had already been granted in earlier years.

Considering the same, the court set aside the impugned order dated October 27, 2025, and condoned the delay caused in filing the return, ruling in favour of the petitioner. The tax authorities are directed to process the return in accordance with the law.