BERACHAH PROPHETIC MINISTRIES,CHENNAI vs. ITO, EXMEMPTIONS WARD-3,, CHENNAI

At the outset, we notice that there is a delay of 60 days in filing the present appeal by the assessee before us. We have carefully considered the petition

The brief facts of the case are that the assessee is a Christian religious trust duly registered u/s.12A(a) of the Act. For the A.Y.2016-17, the assessee filed its return of income on 17.10.2016 declaring Nil total income after claiming exemption u/s.11 of the Act. The return of income was selected for complete scrutiny through CASS, and accordingly, notice u/s.143(2) of the Act dated 10.08.2017 was issued. Subsequently, statutory notices u/s.142(1) of the Act, were also issued and duly complied with by the assessee. After considering the details and explanations furnished during the course of assessment proceedings, the AO completed the assessment u/s.143(3) of the Act vide order dated 04.12.2018, determining the total income of the assessee at Rs.56,39,309/- by denying exemption u/s.11 of the Act to the extent of the alleged shortfall / deficit in the application of income and consequently making an addition of Rs.56,39,309/-. To arrive at the addition to be made, the AO had considered 85% of the gross receipts as Rs.3,18,14,370/- along with the unutilised amount carried forward of Rs.70,70,058/- totalling to Rs.3,88,84,428/- against the Gross receipts & unutilised amount carried forward of Rs.4,03,15,177/-.

Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). The Ld.CIT(A), vide the impugned appellate order dated 20.11.2025, upheld the action of the AO and sustained the addition of Rs.56,39,309/-. Aggrieved by the order of the Ld.CIT(A), the assessee is now in further appeal before us.

We have heard the rival submissions, carefully perused the orders of the authorities below and examined the material available on record. We have also considered the computation of income, return of income and the financial statements placed before us.

On a careful appreciation of the facts, we find that the gross receipts of the assessee-trust for the assessment year under consideration amounted to Rs.3,74,28,670/-. In terms of the provisions of section 11(1)(a) of the Act, the assessee was required to apply at least 85% of its income towards its charitable and religious objects during the relevant previous year, which works out to Rs.3,18,14,370/-.

From the computation of total income and the return of income filed by the assessee, it is evident that the assessee has actually applied an aggregate sum of Rs.3,32,45,119/- out of the income of the current year. The said application comprises revenue expenditure of Rs.1,88,32,193/- and capital expenditure of Rs.1,44,12,926/-, both incurred towards the objects of the trust. Apart from the above, the assessee had separately utilised towards application of fund of Rs.70,70,058/- out of the unutilised funds carried forward from earlier year. Hence, the total amount applied towards objects of the trust during the impugned assessment year was Rs.4,03,15,177/-. Hence, we find that there is no shortfall of application of funds against the gross collections along with the carried forward unutilised amount. It is well settled that, for the purposes of section 11, expenditure incurred on acquisition of capital assets for carrying out the charitable objects of the trust also constitutes application of income, provided the same is otherwise in accordance with law. The Revenue has not brought any material on record to demonstrate that either the revenue

Thus, the total application of income attributable to the current year's receipts, amounting to Rs.3,32,45,119/-, is admittedly in excess of the statutory requirement of Rs.3,18,14,370/-, apart from utilisation of entire amount towards application out of unutilised carried forward amount of Rs.70,70,058/-. Consequently, the factual premise on which the AO proceeded to hold that there was a shortfall in the application of income is found to be contrary to the material available on record. Once the assessee has satisfied the statutory condition of applying not less than 85% of its income during the relevant previous year, there remains no basis for making any addition on account of an alleged deficit or shortfall in the application of income.

In our considered view, therefore, the addition of Rs.56,39,309/- made by the AO towards the alleged shortfall in application of income is wholly unsustainable both on facts and in law. The Ld.CIT(A), in affirming the said addition, has failed to properly appreciate the computation of application of income furnished by the assessee and the relevant material available on record. We, therefore, set aside the findings of the Ld.CIT(A) on this issue and direct the AO to delete the addition of Rs.56,39,309/- by accepting the computation of income provided by the assessee. Accordingly, the grounds of appeal raised by the assessee stand allowed.

In the result, the appeal of the assessee stands allowed.