SURABHI CHARITABLE TRUST,THIRUVALLUR vs. COMMISSIONER OF INCOME TAX(EXEMPTION) WARD 3, CHENNAI

ITA 1184/CHNY/2026Status: DisposedITAT Chennai07 October 2026AY 2021-226 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the orders of the CPC and the CIT(A) ignored well-established legal principles for taxing the receipts of a trust without registration. It was clarified that in such cases, only the net income, after allowing legitimate expenses from gross receipts, can be taxed, not the gross receipts themselves. The Tribunal referred to the decision in DDIT(E) vs Petroleum Sports Promotion board, where it was held that if exemption under Section 11 is denied due to lack of registration, the assessment must be completed under other applicable provisions, and Section 57(iii) must be given full play. The Tribunal also cited a coordinate bench decision in Rana Educational Trust V. ITO(E), which emphasized the distinction between denial of exemption under Section 11 and the computation of taxable income, stating that gross receipts and taxable income are conceptually distinct and that admissible expenditure must be considered. Consequently, the Tribunal directed the AO to tax only the net income of the assessee after allowing expenses from gross receipts. The appeal of the assessee was allowed.

What were the facts?

The assessee, Surabhi Charitable Trust, filed its return of income for Assessment Year 2021-22 on 25.12.2021, declaring Nil income and claiming exemption of Rs. 27,38,079/- under Section 11 of the Income Tax Act, 1961. The trust obtained Section 12A registration on 02.10.2021, valid from AY 2022-23 to 2026-27. An intimation order under Section 143(1) dated 23.08.2022 disallowed the Section 11 exemption due to lack of valid registration for the impugned AY, raising a demand of Rs. 8,04,630/-. The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the assessee's appeal, upholding the intimation order. The assessee is in appeal before the Income Tax Appellate Tribunal (ITAT) against the CIT(A)'s order.

What were the issues?

1. Whether the ITAT can allow deduction under Section 57(iii) of the Income Tax Act, 1961, for expenses incurred by a charitable trust in the absence of Section 12A registration for the relevant assessment year. Assessee's contention: The assessee argued that even without Section 12A registration, expenses incurred should be deducted from gross receipts to arrive at taxable income, which would be Nil in this case as expenditure exceeded donations. They relied on Section 57(iii) and cited Joharimal High School V. ITO(E) and other precedents. They also contended that the CPC had allowed similar exemptions in preceding and succeeding years and that the proviso to Section 12AA of the Act could make the registration retrospective as it was obtained before the return filing date for AY 2021-22. Revenue's contention: The Revenue supported the orders of the Assessing Officer (AO) and the CIT(A), urging that the disallowance of exemption claimed under Section 11 of the Act be upheld.

Which sections of the Income-tax Act were involved?

Section 11,Section 12A,Section 12AA,Section 143(1),Section 57(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA

Hearing: 04.09.2026Pronounced: 07.10.2026

PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee against the order dated 21.12.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the intimation order dated 23.08.2022 passed u/s.143(1) of the Income Tax Act, 1961 (hereinafter re

The order continues below.

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