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Facts
The assessee, an association registered under the Bombay Public Trusts Act and Income-tax Act, appealed against orders disallowing exhibition expenses for AY 2017-18 and 2018-19. The Assessing Officer treated gross receipts as taxable income despite incurred expenses.
Held
The Tribunal held that even if exemption u/s.11 is not available, total income should be computed considering genuine expenses against gross receipts, not taxing gross receipts themselves. The matter was remanded for verification of exhibition expenses.
Key Issues
Whether exhibition expenses incurred by the assessee are allowable against gross receipts for computing taxable income, especially when exemption u/s.11 is claimed and the AO disallowed such expenses.
Sections Cited
250, 143(3), 11, 11(2), 12AA(1)(b)(i)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC”, PUNE
Before: DR.MANISH BORAD
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeals at the instance of assessee pertaining to Assessment Years 2017-18 and 2018-19 are directed against the separate orders dated 17.02.2025 of National Faceless Appeal Centre, Delhi passed u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) arising out of the respective Assessment Orders passed u/s.143(3) of the Act.
Since common issues have been raised in both the impugned assessment years, I proceed to dispose these appeals by way of this consolidated order for the sake of convenience.
At the outset, Learned Counsel for the assessee advanced two principal submissions. Firstly, it is contended that the Learned Assessing Officer erred in treating gross receipts as taxable income, notwithstanding the fact that incidental expenses were incurred and duly reflected in the audited financial statements. Secondly, it is argued that the Learned AO improperly disallowed exhibition related expenses totalling ₹50,87,641 for Assessment Year 2017-18 and ₹57,30,751 for AY 2018-19. These expenses were incurred through banking channels and supported by bills and vouchers, however the same could not be filed before the ld. Assessing Officer. Ld. Counsel requested for an opportunity to go before the ld. Jurisdictional Assessing Officer for verification of the exhibition expenses, assuring that all requisite documentation would be submitted.
Au Contraire, ld. Departmental Representative supported the orders of the lower authorities.
I have heard the rival submissions and examined the record. Given that the issues raised are identical for both years, I begin with the facts pertaining to A.Y. 2017-18. The assessee is an association registered under the Bombay Public Trusts Act vide order dated 30.06.1993 and is also registered u/s.12AA(1)(b)(i) of the Income-tax Act, 1961 vide order dated 24.10.2016 and is prima facie eligible for exemption u/s.11, subject to fulfilment of statutory conditions enumerated in section 11.
For AY 2017-18, the assessee filed the original return on ₹51,791, 27.09.2017 declaring income of which was subsequently revised on 21.02.2018. Due to late filing of Form 10 and substantial accumulation u/s.11(2), case selected for scrutiny followed by validly serving of statutory notices. Ld. Assessing Officer noted that while in the original return assessee has shown gross receipts from exhibition and incidental expenses incurred for exhibition separately but in the revised return merely reported the net figure. Accordingly, ld. Assessing Officer disallowed exhibition expenses of ₹50,87,641 and computed taxable income at ₹41,61,779. The assessee’s appeal before the CIT(A) yielded no relief.
Similarly, for A.Y. 2018-19 assessee filed return of income on 21.08.2018 claiming exempt income of ₹14,44,963. Ld. Assessing Officer while carrying out proceedings u/s.143(3) of the Act noticed that assessee has shown gross exhibition receipts at ₹71,73,901 but could apply the amount to the extent of ₹18,13,050. For this assessment year, ld. Assessing Officer disallowed the claim of exhibition expenses amounting to ₹57,30,751 and assessed income at ₹42,84,766.
Though the assessee is eligible for benefit of exemption u/s.11 of the Act but in the instant case ld. AO has not allowed the claim of expenses. It has been consistently held that even if the benefit of exemption u/s.11 is not available, then also the total income needs to be computed in accordance with regular provisions of the Act and in case the expenses have been incurred against the gross receipts then such incidental and genuine expenses should also be allowed rather than charging the tax on the gross receipts of the assessee.
I note that for both the assessment years, the common factor is disallowance of Exhibition expenses. For A.Y. 2017- 18, the assessee in the original return gave bifurcation of gross receipts from Exhibition and Actual Exhibition expenditure incurred but then in the revised return the amount was netted off and only the net income from Exhibition activity has been shown. Same is the situation for A.Y. 2018-19. It prima-facie indicates that the person who was entrusted with the duty to file the income-tax return has entered the figures improperly as against the right column and is also not aware of mentioning the application of income in the correct column.
It is an admitted fact that the assessee initially failed to provide bills and vouchers before the ld. Assessing Officer to prove the genuineness of Exhibition expenses. On perusal of audited Income & Expenditure account produced before me for A.Y. 2017-18, placed at page 10 of the paper book, I observe that assessee has incurred exhibition expenses of ₹50,87,641/-. Assessee has furnished a detailed breakdown of exhibition expenses on page 62 of the paper book which contains 13 items and the major expenses are towards Advertisement Expenses – Expo at ₹13,81,581 and Stall Erection/Exh Management at ₹31,56,434. Further, pages 63 to 138 of the paper book are the bills and vouchers for each of the expenditure. It is also claimed that major portion of the expenditure incurred towards Exhibition are through banking channel. Similar is the situation for A.Y. 2018-19 for which complete details of exhibition expenses have been filed before me in the form of paper book. A perusal of these bills and vouchers shows that the assessee has maintained all proper records for the expenditure incurred for arranging the Exhibition. However, verification of all these expenses needs to be carried out at the end of Jurisdictional Assessing Officer. Ld. DR did not object if the matter is restored to the file of ld. JAO.
Coordinate Bench, Jaipur in the case of Kund Kund Kahan Digamber Jain Vs. ITO (Exemption) – 168/JP/2019, dated 29.05.2019 has held that where the exemption claimed u/s.11 of the Act has been denied by the Assessing Officer what can be brought to tax is the Net income in the hands of assessee trust and not the gross receipts. This decision of Jaipur Bench referred (supra) is squarely applicable on the facts of the given case. In the given case, though the assessee has raised various grounds of appeal but if the claim of Exhibition expenses is found to be correct then all the other grounds of appeal will become infructuous and there will no positive income left to be taxed.
Therefore, considering the facts and circumstances of the case and being fair to both the sides, I hereby direct the ld. JAO to examine the veracity of claim of Exhibition expenses for A.Y. 2017-18 and A.Y. 2018-19 for which details placed before me shall be placed by the assessee before the ld. JAO. After giving reasonable opportunity to the assessee, ld. JAO shall examine the Exhibition expenses and if they are found to be in order then the claim of Exhibition expenses for both the impugned expenses should be allowed to the assessee against the gross receipts. Grounds of appeal raised in connection with Exhibition expenses are allowed for statistical purposes.
In the result, both the appeals of the assessee are allowed for statistical purposes.
Order pronounced on this 09th day of July, 2025.