THE NAGAR VACHANALAYA VITA,SANGLI vs. INCOME TAX OFFICER, EXEMPTION, WARD- KOLHAPUR, KOLHAPUR

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ITA 1000/PUN/2023Status: DisposedITAT Pune06 November 2023AY 2017-185 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that tax is charged on income, which is arrived at after deducting eligible expenses from receipts. If exemption is denied, it is only the excess of receipts over deductible expenses that can be taxed.

What were the facts?

The assessee, a charitable trust, incurred expenses for charitable purposes. The CIT(A) denied exemption under Section 11 and 12 as the trust was not registered under Section 12A. The assessee contended that if exemption was denied, expenses should be allowed as deductions.

What were the issues?

Whether expenses incurred for charitable purposes are deductible when exemption under Section 11 is denied due to lack of Section 12A registration.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 12A,Section 143(1),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC BENCH, PUNE

Before: SHRI R.S. SYAL

For Appellant: Smt. Deepa Khare
For Respondent: Shri Arvind Desai

proceeding to dispose them off by this consolidated order for the sake of convenience.

2.

At the outset, it is relevant to mention that the additional ground raised by the ld. AR was not pressed at the time of hearing. The same is, therefore, dismissed as ‘not pressed’.

3.

The only issue raised through the solitary effective ground is the disallowance of expenses incurred for charitable purposes after the denial of exemption.

4.

Briefly stated, the facts of the case, are that the assessee is a Public Charitable Trust providing Books, Magazines, Newspaper etc. to the public at large. For the A.Y. 2016-17, the assessee received a grant from the State Government and incurred expenses which were not allowed by the Centralized Processing Centre (CPC), Bengaluru at the time of processing the return u/s.143(1) of the Act. The assessee contended before the ld. CIT(A) that deduction be allowed towards expenses incurred, if exemption was not to be allowed. The ld. CIT(A) opined that registration u/s.12A was a pre-requisite for claiming exemption u/s.11 & 12. Since the assessee was not registered in terms of section 12A, the ld. CIT(A) denied the benefit of exemption, without expressing any specific opinion on the deductibility of expenses.

5.

I have heard the rival submissions and perused the relevant material on record. It is an undisputed fact that the assessee was not granted exemption u/s.11. The ld. AR was fair enough not to press for the grant of benefit of exemption u/s.11. The limited relief contended before the ld. CIT(A) as well as the Tribunal is that the income should be charged to tax and not the gross receipts. The ld. AR furnished details of certain expenses and requested for the granting of necessary relief. There can be no dispute on the fact that the tax is charged on income and income is deduced by reducing the deductible expenses/allowances from the revenue receipts. If exemption u/s.11 is allowed, then the excess of receipts over expenses gets exempted subject to the stipulated ceilings. In case the exemption is denied, then it is only the excess of receipts over eligible and deductible expenses/allowances that can be charged to tax. In the facts and circumstance of the case, the AO charged to tax the gross receipts without granting any deduction towards expenses and deductions. I, therefore, set-aside the impugned order and remit the matter to the file of AO for deducing the total income in accordance with law after considering the deductibility of various expenses noted in the Income and Expenditure account on the touchstone of the relevant provisions.

Needless to say, the assessee will be allowed reasonable opportunity of hearing.

6.

Both the sides are in agreement that the facts and circumstances in the appeal for A.Y. 2017-18 are mutatis mutandis similar.

Following the view taken hereinabove for the A.Y. 2016-17, the impugned order for the A.Y. 2017-18 is also set-aside and the matter is remitted to the file of the AO for deciding the issue in conformity with the directions given above.

7.

In the result, both the appeals are partly allowed for statistical purposes. Order pronounced in the Open Court on 06th November, 2023.

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