ST. JOHNS MARTHOMA SYRIAN CHURCH ,MIRA ROAD EAST vs. ASSESSING OFFICER, THANE

Per Arun Khodpia, AM:

The present appeal by the assessee arises from the order of Commissioner

of Income Tax Appeals Additional/ JCIT(A)-Bhubaneshwar [“the Ld. CIT(A)] vide

order dated 26.11.2025, for the assessment year 2020-21, resulted from the

appeal against intimation under section 143(1) of the Income Tax Act, 1961 (“the

Act”) passed by Central Processing Centre, Bangaluru on 21st March, 2022. The

grounds of appeal raised by the assessee are as under:

“1. On the facts and circumstances of the case, the learned Commissioner of Income-Tax (Appeals) erred in law and on facts in upholding the disallowance made by CPC of expenses amounting to Rs. 34,18,281/and thereby confirming the tax demand of Rs. 14,69,450/-. 2. The learned CIT(A) erred in confirming the action of CPC in denying exemption under section 11 of the Income Tax Act, 1961 merely on the ground that the appellant trust was not registered under section 12A/12AB, without appreciating that the denial was purely technical and without proper examination of facts and law. 3. Without prejudice to Ground No. 2, the learned CIT(A) erred in law and on facts in rejecting the appellant's alternative claim for deduction under section 57(iii) of the Income Tax Act, 1961 solely on the ground that such claim was not made in the original return of income. 4. The learned CIT(A) failed to appreciate that appellate authorities, have powers to admit and adjudicate fresh legal claims and deductions not claimed in the return of income, provided the relevant facts are already on record. 5. The learned CIT (A) failed to consider and apply the provisions of Section 57(iii) of the Act, which mandate that income chargeable under the head "Income from Other Sources shall be computed after allowing deduction of expenses incurred wholly and exclusively for the purpose of earning such income. 6. The learned CIT(A) erred in law in not directing the Assessing Officer to compute the correct taxable income in accordance with law by allowing legitimate expenditure incurred wholly and exclusively for earning income, resulting in taxation of gross receipts instead of real income.

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church 7. The learned CIT (A) failed to recognize that the appellate proceedings are intended to rectify errors and ascertain the correct taxable income as per law, regardless of the form or manner in which the claim was originally made in the return of income. 8. The appellant hereby craves the leave to add to, alter or amplify the aforesaid grounds of appeal, as and when the nest arises at the time of hearing.” 2. The brief facts of the case are, that the assessee is a Public Charitable

Trust registered under The Maharashtra Public Trust Act, 1950 with effect from

10th March, 2022. The assessee filed its return of income for the relevant

assessment year on 15th February, 2021 declaring total income at NIL. The return

of assessee was processed u/s. 143(1) and the income of assessee was

determined at Rs. 43,07,406/- against the Nil taxable income declared by the

assessee.

appeal before the Ld. CIT(A) agitating with the issue that the CPC had erred in

its decision to disallow the deduction of actual expenses incurred by the trust

against the income received. The denial of deduction is contrary to the

provisions of Section 57(iii) of the Income Tax Act. It was the contention that the

actual expenses directly related to the generation of income must be allowed as

deduction as per the statutory provisions and established principle of taxation.

The Ld. CIT(A) considered the submissions of assessee, however, was not

convinced, therefore, had dismissed the appeal of assessee with following

observations:

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church “6. Consideration of issues under appeal and reasons for decision:-

6.1. Brief fact about the case is that the Appellant is a public charitable trust. For the AY-2020-

21, the Appellant filed its Return of Income (ROI) on 15.02.2021. The ITR was processed and

Intimation order u/s 143(1) was issued on 21.03.2022.the appellant contested the

disallowance of deduction u/s 57(iii) of Rs. 43,07,406/-on account of expense incurred on

earning income from other sources.

6.2. Grounds 1&2:-

6.2.1. Upon perusal of document available on record it is found that the appellant is a trust not

registered u/s 12A/12AA of the act. The CPC has rightfully disallowed the deduction u/s 11 of

the act as the appellant himself accepted it in his submission. The relevant part is produced

below.

1.4. During AY 2020-21, the trust was not registered under Section 12A of the Income-

tax Act, 1961. Consequently, the provision of section 11 of the Income Tax Act, 1961

was not applicable to the trust. However, the trust should have been assessed as an

Association of Persons (AOP) and any donations received by the trust are chargeable

to tax under the head "Income from Other Sources.

6.2.2. The appellant has not claimed deduction u/s 57(iii) of the act in the ITR so the addition

of CPC of Rs 43,07,406/- is justified as neither the AO not the appellate authority have been

vested with powers by the statute to modify the filed ITR. Appellant may explore other legal remedies like revising the return with application for condonation, if applicable in its case.

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church

present appeal before us.

the appeal filed by the assessee is barred by limitation i.e., it is delayed by 38

days. To substantiate the reasons for delay, the Ld. AR of the assessee furnished

an affidavit dated 5th March, 2026, duly signed by the trustee of the assessee

trust, wherein it is stated that upon receipt of unfavorable order passed by the

Ld. Commissioner of Income Tax Appeals, the trust was required to seek proper

legal guidance regarding appropriate remedy available under the Act. The

trustees were unaware about the intricacies of the Act and owing to lack of

clarity and the time required to identify and consult a suitable professional

advisor, a delay of 38 days had occurred. Upon consultation, the assessee was

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church advised to preferred an appeal before the Hon’ble ITAT. It is further submitted

that the delay was on account of genuine and bona fide reasons and the

assessee had not derived any undue benefit from the delay. It is submitted that

in the interest of justice and equity the delay of 38 days be condoned. The Ld.

DR had not objected to the request of the assessee. After considering the

reasons for delay, we find it appropriate to condone the delay in present case.

assessee trust was not registered u/s. 12A/12AA of the Act during the year under

consideration. Consequently, the deduction u/s. 11 of the Income Tax Act was

not allowed to the trust by the CPC. The assessee requested for allowability of

eligible expenses under the provisions of Section 57(iii) of the Act. However, the

Ld. CIT(A) rejected such contentions of the assessee, stating that neither the

assessing officer nor the appellate authority have the vested powers under the

statute to modify the ITR filed by the assessee. The assessee was, therefore,

advised to revise the return of income.

Hon’ble Apex Court in the case of National Thermal Power Company Limited

Vs. CIT (1998) 229 ITR 383 (SC) and Jute Corporation of India Limited Vs. CIT

(1991) AIR 241 the appellate authorities are vested with wide powers to

entertain the additional claim of the assessee and to allow lawful deductions

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church even if not claimed in the return of income. The Ld. AR also referred to the

decision of Hon’ble Apex Court in the case of Goetz India Limited Vs CIT (2006)

157 taxman 1 (SC) and submitted that the limitations with the assessing officer

are not applicable to the Appellate Authorities.

the Ld. AR relied on the reason of ITAT “D” Bench, Mumbai in the case of

Mahakalp Arogya Pratisthan Vs. ITO vide ITA No. 2368/Mum/2022 for the

assessment year 2018-19, wherein an identical issue was decided by the

Tribunal and had allowed the appeal of assessee by observing that the assessee

is entitled for deductions u/s. 57(iii) of the Act.

authorities.

available on record and the jurisprudence relied upon by the assessee.

Admittedly, in present case the assessee is a charitable trust duly registered

under the Maharashtra Public Trust Act. The assessee has claimed the

expenditure incurred as application of income u/s. 11 of the Act, which was

denied by the CPC, as the assessee was not holding an approval for registration

u/s. 12A/12AB of the Act. The assessee raised this issue before the Ld. CIT(A)

and had alternatively claimed the deduction under the provisions of Section 7

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church 57(iii) of the Act. The applicable provisions of section 57(iii) are extracted as

under:

“The income chargeable under the head "Income from other sources" shall be computed

after making the following deductions, namely:-

(i) [***]

(ii) [***]

(iii) any other expenditure (not being in the nature of capital expenditure) laid out or

expended wholly and exclusively for the purpose of making or earning such income;

(iv) [***]”

Delhi High Court in the case of DDIT Vs. Petroleum Sports Promotion Board

(2014) 111 DTR Delhi 55, wherein the Hon’ble High Court on the aforesaid issues

had held as under:

“The learned standing counsel for the revenue submitted that the order of the Tribunal is

untenable since it indirectly confers the benefit of Section 11 upon the assessee. We are,

however, not inclined to accept the contention. The CIT (Appeals) has actually not held so. He

never examined the question whether the assessee was eligible for the exemption under

Section 11 since there was no ground before him, taken by the assessee, to that effect. All that

the assessee claimed before the CIT (Appeals) was that the entire expenditure should be

allowed as a deduction since it was incurred for the very objects for which the assessee was

established in 1979 i.e. promotion of sports and, therefore, the assessing officer was not

justified in restricting the allowance of expenditure to Rs.1,20,000/- only for all the three years.

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church It was this claim that was accepted by the CIT (Appeals). The objection of the learned standing

counsel for the revenue that since the grants were assessed under the residual head, there was

no scope for allowing the expenditure incurred on the promotion of the sports activities is not

acceptable since even under Section 57(iii), any expenditure incurred for the purpose of making

or earning the income is allowable as a deduction. It is open to the income-tax authorities to

deny the exemption under Section 11 of the Act in the absence of registration under Section

12A and if they do so, then the assessment has to be completed in accordance with the

provisions of the Income Tax Act; if the income is assessed under the residual head full play

must be allowed to Section 57(iii). Though prima facie it would appear that the phraseology

employed in Section 57(iii) is different from Section 37(1), it has been held by the Supreme

Court in CIT vs. Rajendra Prasad Moody, 115 ITR 519 that Section 57(iii) must be construed

broadly and the somewhat wider language of Section 37(i) should not affect the interpretation

of Section 57(iii). The assessee in the present case was created in 1979 with the object of

promoting sports; there was no other object and all its constituents were giving grants/ funds

only for that purpose. In truth and reality the assessee was merely acting as a custodian or

conduit to the constituents for the purpose of promoting sports activity inside and outside the

country. The expenditure incurred by the assessee is only for the purpose of promoting the

sports events and activities and in this respect there is no challenge to the finding of fact

recorded by the Tribunal. If such expenditure is not allowed, it may amount to taxing the gross

receipts of the assessee and not the income, which is not permissible under the income tax

law. Moreover, upto the assessment year 2002-03 the assessee was exempt from tax under

Section 10(23C); from the assessment year 2006-07 it has been granted registration or a

charitable institution under Section 12A making it eligible for the exemption under Section 11.”

section 11 was denied by the Ld. AO as well as by the Ld. CIT(A), and rightly so,

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church as the assessee was not holding the valid registration u/s. 12A/12AB. However,

the provisions of section 57(iii) cannot be denied to the assessee, as per

observations of the Hon’ble Delhi High Court in the case of DDIT Vs. Petroleum

Sports Promotion Board (supra).

order of Ld. CIT(A) and direct the Ld. AO to allow the claim of deduction by the

assessee, as claimed before the Appellate Authorities, which is well within

powers of appellate authorities and acceptable in terms of decision of Hon’ble

Apex Court in the case of Goetz India (supra).

verification. Therefore, the Ld. AO is directed to verify the veracity of income as

well as expenditure of the assessee and allow the entitled claim in accordance

provisions of section 57(iii) of the Act.

Order pronounced in the open court on 02-07-2026.

Sd/- Sd/- (ANIKESH BANERJEE) (ARUN KHODPIA) ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 02-07-2026. Soumili Das, PS

ITA No. 2625/Mum/2026; St. Johns Marthoma Syrian Church

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai