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Facts
The assessee, a charitable society, filed its return of income declaring NIL income for AY 2019-20. The case was selected for scrutiny due to issues with its registration. The AO disallowed exemption under Section 11, treating the gross receipts as income, and made an addition. The CIT(A) dismissed the appeal.
Held
The Tribunal held that the benefit of Section 11 was denied due to non-registration under Section 12AA. However, subsequent to the CIT(A)'s order, the assessee obtained registration under Section 12AA, which was made applicable retrospectively. This removed the sole ground for disallowance.
Key Issues
Whether the denial of exemption under Section 11 and 12 for non-registration under Section 12AA was justified, especially when registration was subsequently granted.
Sections Cited
143(1), 250, 143(2), 142(1), 11, 12, 234A, 234B, 234C, 12A, 12AA, 80G, 13(10), 143(1)
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 92/JPR/2025
vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.
This is an appeal filed by the assessee against the order of ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi, dated 25.11.2024 passed under section 250 of the I.T. Act, 1961, for the assessment year 2019-20.
The assessee has raised the following grounds of appeal :- “1.1 The impugned intimation/assessment order u/s 143(1) dt. 17.02.2021 is bad in law, illegal, invalid, void ab-initio on facts of the case, for want of jurisdiction, and also barred by limitation and various other reasons and hence the same may kindly be quashed.
Ratnawali Gaushala Anand Dham, Jaipur. 1.2 The ld. CIT (A) has grossly erred on law as well as on the facts of the case in passing the exparty order in gross breach of law, without providing the adequate opportunity of being heard to the assessee and also erred in not considering the true material and facts. Hence the order so passed and the additions/disallowance so made may kindly be deleted in full.
2. Rs. 97,37285/-: The ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs. 97,37,285/- made by the ld. AO by disallowing the entire expenses or revenue expenses of Rs. 1,01,49,790/- i.e. grossly erred in taking the entire gross receipts of Rs. 1,01,49,790/- as income or receipts in place of deficit of Rs. 4,12,5054/- and not allowed the exemption u/s 11 and 12. Hence the addition/disallowance so made by the AO and confirmed by the ld. CIT (A) is being totally contrary to the provisions of law and facts on the record and hence same may kindly be deleted in full. 3.1 The ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the action of the ld. AO in not allowing the exemption u/s 11 and 12 so denied by the AO and confirmed by the ld. CIT (A) is being totally contrary to the provisions oflaw and facts on the record and hence same may kindly be directed to allow the same and addition be deleted in full. 3.2 Alternatively and without prejudice to above the ld. CIT (A) has grossly erred in law as well as on the facts of the case in confirming the action of the ld. AO in treating the assessee as an AOP in place of trust, however, if the AO has treated the assessee as an AOP then there is no question of making the addition of Rs. 97,37,285/- by applying the provision section u/s 11 and 12. Hence either exemption/claim u/s 11 and 12 so denied by the AO and confirmed by the ld. CIT (A) is allowed if not allowed then the disallowance may kindly be deleted in full being an AOP not applicable provisions of section 11 and 12 and hence additions may kindly be deleted in full.
The ld. AO has grossly erred in law as well as on the facts of the case in charging interest u/s 234A, 234B and 234C.The appellant totally denies it liability of charging of any such interest. The interest so charged being contrary to the provisions of law and facts, may kindly be deleted in full.
5. The appellant prays your honour indulgences to add, amend or alter of any of the grounds of the appeal on or before the date of hearing.”
The brief facts of the case are that the assessee Ratnawali Gaushala Anand Dham is a Public Charitable Society incorporated for the welfare and maintenance of astray/sick/old Cows and to provide protection to them following the old vedic Ratnawali Gaushala Anand Dham, Jaipur. tradition of India where cows were worshipped as mothers. The members have no vested interest or benefits in the society. Assessee has filed its Return of Income for assessment year 2019-20 declaring the total income of Rs. NIL on 31.10.2019, which was processed by the CPC under section 143(1) of the IT Act, 1961. The case was selected through compulsory scrutiny for the reason that registration/approval under various sections of I.T. Act, 1961 have not been granted or have been cancelled/withdrawn. Accordingly, a notice under section 143(2) of the IT Act, 1961 was issued to the assessee on 29.09.2019 which was e- mailed to the assessee on its mailing address. During the assessment proceedings, notice under section 142(1) of the IT Act, 1961 was issued on 21.01.2021. No submission has been made by the assessee. As per return of income filed, assessee has shown gross receipts of total income at Rs. 97,37,285/- and applied total income at Rs. 1,01,49,790/-. Thus, there was an excess application of income at Rs. 4,12,505/-. During the assessment proceedings, the assessee was asked to furnish the audit report in Form 10B and also to furnish copy of the registration under section 12A/12AA, in view of exemption claimed under section 11 as there was a taxable income at its end. Further, the assessee was asked to explain as to why the exemption claimed under section 11 may not be disallowed in view of the above. As the appellant failed to make any such submission with supporting proofs as needed as called for by 05.02.2021, the exemption so claimed under Ratnawali Gaushala Anand Dham, Jaipur. section 11 of the IT Act, 1961 was disallowed by the AO for the reasons discussed by the AO in his order. Thus, the AO assessed the total income of the assessee at Rs. 97,37,285/- vide his order dated 17.02.2021. Being aggrieved, the assessee preferred appeal before the ld. CIT (Appeals). The ld. CIT (A) observed that the assessee was non-responsive during scrutiny before the AO and could not produce any such proof to adduce the claim of exemption under section 11 and 12 of IT Act, 1961 as reasoned in detail by the AO in the assessment order for AY 2019-20. The ld. CIT (A) further observed that it is clear that the appellant is not having valid registration u/s 12A or 12AA of the IT Act, as applicable for the assessment year 2019-20 and AY 2020-21 as needed as per the amended provision of IT Act to trust as applicable from assessment year 2018-19 onwards etc., all these finer facts as involving appellant clear failure, having no proof of such valid registration as filed before AO as available for its consideration as per law. Accordingly, ld. CIT (A) dismissed the appeal of the assessee as not maintainable. Now, aggrieved by the order of the ld. CIT (A), the assessee has come in appeal before the Tribunal on the grounds reproduced herein above.
4. At the time of hearing before us, the ld. A/R of the assessee submitted his written submission as under :-
Ratnawali Gaushala Anand Dham, Jaipur. “1. Correct facts not considered in their true perspective and sense: At the very outset we would like to bring the correct facts and submission which have not been considered by the lower authorities in their true perspective and sense despite available on record. As the assessee is a Public Charitable Society incorporated for the welfare and maintenance of astray/sick/old Cows and to provide protection to them following the old vedic tradition of India where cows were worshipped as mothers. The members have no vested interest or benefits in the society.
The society does not carryon any business/commercialactivities nor alleged so by the lower authorities. In pursuance of its charitable activities by wayof Gaushala, the societyreceives five products from the cows milk, ghee, yogurt, cowdung/Gobar Khad, and cowurine. These five products, arecalled pancha-gavya, are alsorequired in all ritualisticceremonies performedaccording to the Vedicdirections. The society sellsthese products to meet out thecost of the Gaushala and itsobjectives for which it was made or created.Besides thesethe society alsoreceives the donation andcontribution from public as wellas from the founder andmembers of the society andsubsidy from the Government.
The society is registeredunder the Rajasthan SocietiesRegistration Act, 1958 with theRegistrar Societies, Ajmer,Rajasthan vide registrationnumber 360/AJMER/2010-11on 17.03.2011. The society is alsoregistered under the RajasthanGaushala Act,1960 with theRegistrar Gaushalayen, Ajmer,Rajasthan vide registrationnumber 1220/12 on 19.09.2012. The society is alsoregistered u/s 12A/AA/AB ofIncome-tax Act, 1961 , and alsoregistered u/s 80G (V) ofIncome tax Act, 1961.The society is also approved by the State Government ofRajasthan under subsidy program for feeding astray cows being granted subsidies accordingly. All these admitted facts and registration proves that the society is a charitable and also not doubted by the lower authorities.
Hence the assessee society has submitted its ITR in Form ITR 7vide acknowledgement Number243576810311019 on31.10.2109 declaring NIL Income. And for A.Y. 2020- 21has submitted its ITR in Form ITR 7 vide acknowledgement Number260773921150221 on dt. 15.02.2021 declaring NIL Income.
The assessee society for A.Y. 2019-20 has disclosed gross receipts of Rs. 93,46,386 in the ITR from its main objects and also disclosed a sum of Rs. 97,56,530 towards Revenue expenditure incurred during the year and amount applied to stated objects of the trust/institution during the previous year.
The assessee society for A.Y. 2020-21 has disclosed gross receipts of Rs.1,03,25,679 in the ITR from its main objects and also disclosed a sum of Rs. 1,02,69,371 towards
2. Directly covered matter: In the case of DDIT(E) Inv. v/s Petroleum Sports Promotion Board362 ITR 235 (Delhi) the Honble Delhi High Courts held that Income from other sources—Deductions—Assessees claim for exemption of entire income u/s 11 was denied on ground of non registration u/s 12A—Rs. X received by assessee as grants from various oil companies was brought to tax under head “income from other sources” and estimated expenditure of Rs.Y was deducted from aforesaid amount as expenditure incurred in collecting grant and balance was assessed to tax—CIT(A) reversed order of AO and Tribunal upheld same—Held, assessee before CIT (A) claimed that entire expenditure should be allowed as deduction since it was incurred for very objects for which assessee was established i.e. promotion of sports,, therefore, AO was not justified in restricting allowance of expenditure—It is open to income-tax authorities to deny exemption u/s 11 in absence of registration u/s 12A and if they do so, then assessment has to be completed in accordance with provisions of IT Act; if income is assessed under residual head full play must be allowed to Section 57(iii)—Assessee in present case was created with object of promoting sports; there was no other object and all its constituents were giving grants/ funds only for that purpose—Assessee was merely acting as custodian or conduit to constituents for purpose of promoting sports activity inside and outside country—Expenditure incurred by assessee is only for purpose of promoting sports events and activities and in this respect there is no challenge to finding of fact recorded by Tribunal—If such expenditure is not allowed, it may amount to taxing gross receipts of assessee and not income, which is not permissible”. Copy of order is enclosed Here also the same position.
3.Following sub-sections (10) and (11) of Sec. 13 by the Finance Act, 2022, w.e.f. 1-4- 2023: which provides as under :
(10) Where the provisions of sub-section (8) are applicable to any trust or institution or it violates the conditions specified under clause (b) or clause (ba) of sub-section (1) of section 12A, its income chargeable to tax shall be computed after allowing deduction for the expenditure (other than capital expenditure) incurred in India, for the objects of the trust or institution, subject to fulfilment of the following conditions, namely:— (a)such expenditure is not from the corpus standing to the credit of the trust or institution as on the end of the financial year immediately preceding the previous year relevant to the assessment year for which income is being computed;(b)such expenditure is not from any loan or borrowing;(c)claim of depreciation is not in respect of an asset, acquisition of Ratnawali Gaushala Anand Dham, Jaipur. which has been claimed as application of income, in the same or any other previous year; and(d)such expenditure is not in the form of any contribution or donation to any person.Explanation.—For the purposes of determining the amount of expenditure under this sub-section, the provisions of sub-clause (ia) of clause (a) of section 40 and sub- sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head "Profits and gains of business or profession". The learned NFAC erred in disallowing expenditure incurred towards attainment of objects of the trust whereas Finance Act 2022 clarified by amending provisions of section 13(10) that in case of denial of exemption to a charitable trust, the expenditure incurred towards attainment of object should be allowed as a deduction from income earned by the charitable trust from charitable activity. The intention of said amendment has been explained in Memorandum of the Finance Act in Sub-Clause ii) of Clause 5.1 having heading “Allowing certain expenditure in case of denial of exemption” whereby situation applicable to the appellant trust is explained that in cases of submission of late audit report, entire receipt is taxed and no deduction of expenditure is allowed by the department. Since the amendment is clarificatory being beneficial to the assessee, the appellant would like to contend that the said amendment is retrospective and would apply for present appeal also.
4. Further the provisions of section 143(1) of the Act do not encompass within its scope disallowance of expenditure claimed by the assessee in its computation of income. Accordingly, even if it were to be assumed that the assessee is not eligible to claim deduction u/s. 11 of the Act, even otherwise the expenses claimed by the assessee cannot be denied u/s. 143(1) of the Act. The CPC processed the order u/s. 143(1) without prior intimation to the assessee as to which specific adjustment so made by the assessee is in contravention of the first and second proviso to sub-section (1) of section 143. Accordingly, the order passed by CPC u/s. 143(1) of the Act is erroneous in law and hence liable to be quashed. 5.1 Hence the Expenses claimed by the assessee in the ITR and exemption claimed u/s11 cannot be disallowed u/s 143(1), being debatable issues, needs further information and enquiry, as such the disallowance made by the CPC and confirmed by the ld. CIT(A) are unjustified, illegal and without jurisdiction hence the same needs to be quashed by your honor.
5.2 Looking to the above the facts and circumstances of the case and in law the CPC as well as the ld. CIT(A) have erred in not allowing the exemption u/s 11 and12 consequently adding Gross Receipt of Rs.93,43,386/- and 1,03,25,679/- respectively to the total income of the assessee even without allowing the deduction of revenue expenses Ratnawali Gaushala Anand Dham, Jaipur. of Rs.97,56,530/- and Rs.1,02,69,371/- respectively incurred by the assessee for the purpose of society and its aims and objects which have never been doubted. In fact the assessee incurred loss/deficit and surplus only of Rs.56,308/- respectively during the year, on which no tax is chargeable even if the assessee has not been granted approval u/s12A/12AA during the year. The action of theCPC and also ignoring the by the ld. CIT(A) is illegal and unjustified arbitrary and against the fact of the case and settled legal position of law.
5.3 As if the assessee is not registered u/s 12A and not it is required to file the form 10B and if it is assumed that the it is an AOP then the only surplus can be taxed not the entire income nor entire expenses can be disallowed. We are enclosing herewith the audit report or income and expenditure account.
Prayer: Therefore in view of above facts, circumstances, submission legal position of law it is requested that the additions so made by the ld. AO and confirmed by the ld. CIT(A) may kindly be deleted in full and oblige.”
On the other hand, the ld. DR relied on the orders of the lower authorities.
We have heard the rival contentions, perused the material on record and gone through the orders of the lower authorities. We observe that benefit of section 11 was not allowed to the appellant on account of its non registration u/s 12AA of the Income tax Act, 1961. During the proceedings before us the ld. AR has submitted copy of order passed by ld. CIT (E), Jaipur dated 10/05/23023 which has been passed in pursuance of order of the Tribunal dated 10.03.2022 passed in in the case of the appellant vide which order of non granting of registration u/s 12AA by the ld. CIT (E) was set aside to the file of ld. CIT (E) for reconsideration and through this referred order dated 10.05.2023 the ld. CIT (E)
Ratnawali Gaushala Anand Dham, Jaipur. has granted registration to the appellant society u/s 12AA applicable for the AY 2018-19 to AY 2020-21 which covers this present assessment year also. Since the only ground of non allowing benefit of section 11 was non registration and with this approval granted by ld. CIT (E) the disallowance made by ld. AO and sustained by ld. CIT (A) is quashed and the appeal stands allowed. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 26/09/2025.
Sd/- Sd/- ¼ xxu xks;y ½ ¼MkWa-,l-lhrky{eh½ (GAGAM GOYAL) (Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 26/09/2025 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Ratnawali Gaushal Anand Dham, Jaipur. 2. izR;FkhZ@ The Respondent- ITO Exemption, Ward-1, Jaipur. 3. vk;djvk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File By order,
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