SRINIVASA EDUCATIONAL TRUST,KRISHNAGIRI vs. ITO EXEMPTIONS WARD, SALEM

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ITA 1328/CHNY/2019Status: DisposedITAT Chennai05 September 2019AY 2013-145 pages
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What did the Tribunal hold?

The Tribunal held that since registration under Section 12AA was not available, the income should be computed commercially by allowing all expenditures incurred. The net income after deducting expenses should be brought to tax.

What were the facts?

The assessee trust claimed exemption under Section 11 of the Income-tax Act. However, registration under Section 12AA was not available for the assessment year. The Assessing Officer rejected the exemption claim and taxed the entire receipts.

What were the issues?

Whether the assessee trust is eligible for exemption under Section 11 without registration under Section 12AA, and if not, how the income should be computed.

Which sections of the Income-tax Act were involved?

Section 11,Section 12AA,Section 143(1),Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO

For Respondent: Shri Sridhar Dora, JCIT
Hearing: 05.08.2019Pronounced: 05.09.2019

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

1.

Both the appeals of the assessee are directed against the respective orders of the Commissioner of Income Tax (Appeals), Salem, for the assessment year 2013-14. Since common issue arises for consideration in both the appeals, we heard these appeals together and disposing the same by this common order.

2.

There was a delay of 24 days in filing the appeal by the assessee in . The assessee has filed a petition for condonation of delay. We have heard the Ld. counsel for the assessee and the Ld. D.R. We find that there was sufficient cause for not filing the appeal before the stipulated time. Therefore, we condone the delay and admit the appeal.

3.

Shri G. Baskar, the Ld.counsel for the assessee, submitted that the assessee filed the return of income claiming exemption under Section 11 of the Income-tax Act, 1961 (in short 'the Act'). The return was processed under Section 143(1) of the Act.

According to the Ld. counsel, since no registration was available on the date of filing of the return, the claim of deduction under Section 11 of the Act was rejected and the entire receipt of money without considering the expenditure was taken as income and tax was levied. According to the Ld. counsel, the assessee filed petition under Section 154 of the Act which was rejected by the Assessing Officer. For the subsequent year, registration was granted under Section 12AA of the Act. According to the Ld. counsel, since admittedly registration was not available under Section 12AA of the Act for this assessment year, the income has to be computed commercially and the income over the expenditure alone needs to be taken into consideration. In respect of corpus donation received by the assessee, the receipt has to be taken as income under the provisions of the Act. Therefore, according to the Ld. counsel, the total expenditure has to be reduced from the total receipt and the balance has to be brought to taxation for the year under consideration. The Ld.counsel submitted that the matter may be remitted back to the file of the Assessing Officer for reconsideration and bring to tax only the net income available with the assessee after allowing the expenditure.

4.

We heard Shri Sridhar Dora, the Ld. Departmental Representative also. We find some substance in the submission of the Ld.counsel for the assessee. Admittedly, registration under Section 12AA of the Act was not available to the assessee during the year under consideration. Therefore, income of the assessee has to be computed commercially by allowing all the expenditure for earning the income. In other words, the total expenditure incurred by the assessee for earning the income has to be reduced and whatever remains has to be brought for taxation. As rightly submitted by the Ld.counsel for the assessee, the corpus donation has also to be taken as income / receipt. Since such an exercise was not done, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the Assessing Officer is directed to take the net income after reducing the expenditure and levy tax thereon. We are conscious that proceeding arises for considering is under Section 143(1) of the Act. This is prima facie adjustment, therefore, the Assessing Officer while considering the matter, has to keep in mind the provisions of Section 143(1) of the Act which enables him to make prima facie adjustment.

5.

With the above observation, both the appeals filed by the assessee are allowed for statistical purposes.

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