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Facts
The assessee, a trust registered for charitable objects, was granted registration under Section 12AA. However, due to amendments, it failed to renew its registration under Section 12AB. The assessee filed its return claiming exemption under Section 11, but the CPC disallowed it, taxing the entire gross receipts.
Held
The Tribunal held that while the assessee might not be eligible for exemption under Section 11 due to lack of renewed registration, the gross collection cannot be taxed as income. Commercial prudence dictates allowing deductions for expenditure and depreciation incurred for charitable activities.
Key Issues
Whether the entire gross receipts of a trust are taxable if its registration under Section 12A/12AB is not renewed, or only the net surplus after deducting expenses and depreciation is taxable.
Sections Cited
154, 11, 12AA, 12AB, 80G
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH
Before: SHRI PAWAN SINGH & SHRI GIRISH AGRAWAL
O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2024-25/1069046121(1), dated 24.09.2024 passed against the assessment order/notice by Centralized Processing Centre (CPC) u/s. 154 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 24.09.2024 for Assessment Year 2022-23.
Grounds taken by the assessee are reproduced as under: 1. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) disposed of the appeal without fixing hearing and giving opportunity of being heard.
2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Centralized Processing Centre (CPC), Bengaluru in disallowing claim of exemption under section 11 of the Income Tax Act, 1961 without assigning any particular reason, and merely on the basis of providing old registration number allotted under section 12AA instead of providing new registration number to the trust under new section 12AB of the Income Tax Act, 1961.
On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Centralized Processing Centre (CPC), Bengaluru in bringing to tax an amount of RS. 3,227,675 comprising of Gross Receipts of RS. 3,041,163 in as much as net surplus of RS. 186,512 in place of only net surplus of RS. 186,512 to tax.
4. Your Appellant craves leave to add to, amend, alter, modify, and/or delete any of the above grounds of appeal
at or before final disposal of appeal.
3. Brief facts of the case are that assessee is a trust registered with Charity Commissioner, Maharashtra, Mumbai. It is stated that object of the assessee trust is to impart education and pursue other charitable objects. Assessee is engaged in imparting and training merchant navy candidates by running various courses at subsidized rates. Assessee was granted registration u/s.12AA by DIT(Exemption) vide Registration No.42018 dated 01.11.2010. Owing to amendment brought in by Finance Act, 2021, registered trust were required to make application for renewal of their registration u/s.12AB of the Act. Without complying with the requirement to make fresh application as required under the amended law, assessee filed its return of income for the year under consideration reporting total income at Rs.1,86,512/- after claiming exemption u/s.11 of the Act, by mentioning the old registration number. CPC processed the return whereby total income was determined at Rs.32,27,675/-. Assessee filed an application before CPC u/s. 154 of the Act, claiming for rectification of mistake apparent from record which was processed and order was passed on 24.08.2023 against which assessee went in appeal before the Ld. CIT(A). 3.1 Assessee claims that CPC has denied exemption u/s.11 of the Act, resulting into addition of the entire gross receipts. According to the assessee, without prejudice, it was claimed that even on commercial prudence, entire gross receipts cannot be brought to tax. Corresponding expenditure incurred by the assessee to carry on its activities during the year ought to be allowed as a deduction against the gross receipts of the year. It is only the net which alone can be brought to tax. Ld. CIT(A) had passed an ex-parte order dismissing the appeal against which assessee is in appeal before the Tribunal.
Before us, Ld. Counsel for the assessee placed on record, provisional registration granted to it u/s.12A and u/s.80G vide Form No.10AC. The date of provisional registration granted is 05.01.2024 for the period from AY 2024-25 to AY 2026-27. Assessee also placed on record its computation of total income and tax liability to demonstrate that total receipts for the year are Rs.30,41,163/- and after incurring expenditure on the charitable activities undertaken by it as well as depreciation, the surplus remained for the year is Rs.1,86,512/-. Thus, according to the assessee, what can be brought to tax for the year under consideration in absence of renewed registration u/s.12A is the surplus of Rs.1,86,512/- alone. In this regard, the income and expenditure statement for the year under consideration is extract below for ready reference:
Per contra, Ld. Senior DR submitted that there is no registration available with the assessee u/s.12A to justify claim of exemption u/s.11 of the Act. Accordingly, its income is subjected to tax for the year under consideration.
We have heard both the parties and perused the material available on record. We note that Ld. CIT(A) has passed an ex-parte order without dealing with the merits of the case. Admittedly, it is a fact on record that assessee does not have the renewed registration u/s.12A of the Act for the year under consideration. Ld. Counsel for the assessee admitted that in absence of such registration for the year under consideration,