VISAKHA MATSYAKARULA KALANJIA SAMAKYA,VISAKHAPATNAM vs. INCOME TAX OFFICER, EXEMPTION WARD, VISAKHAPATNAM

In the above cited assessee’s appeal, this mutually aided charitable Trust (an NGO) formed for the benefits of fisherman community, filed its return of income, declaring total income of Rs.Nil. As against the same, CPC, Bengaluru disallowed exemption claimed by the Trust u/s 11 of the Act and processed the return of income u/s 143(1) of the Act on 23.08.2022, determining the total income at Rs.13,06,389/-. The CPC, Bengaluru noted that the assessee did not obtain new registration certificate and hence the entire income was treated as net profit, while processing the return of income. After getting the demand notice and intimation order, the assessee has filed a rectification application before CPC, stating that this Charitable Trust is for the benefit of fisherman community, consisting of 117 Self Help Groups (“SHGs”) with a total number of 1460 female members, who are all below poverty line and illiterates. Each member contributes an amount of Rs.200/- per month towards savings and the same is deposited in the bank. The bank sanctions loan to the SHGs, depending upon the amount of deposit they have made. These SHGs would be saved from obtaining loans from private money lenders at high rate of interest and hence, they formed a Trust in the name of “Visakha Matsyakarula Kalanjia Samakya”. As this is a non profit making organisation, serving the members of SHGs and the principle

Aggrieved by the addition made by the CPC, an appeal was filed before the CIT(A). The Ld.CIT(A) rejected the contentions of the appellant Trust and confirmed the addition made by the CPC, stating that the law is well settled that registration u/s 12A/12AB is precondition for availing exemption u/s 11 and 12 and in the absence of such registration, the assessee is not eligible to claim the said exemption. Moreover, no revised return was filed within the time prescribed u/s 139(5) of the Act to change the ITR form or declare income under different status. To sum up, since there was no proper registration to claim exemption u/s 11 of the Act, it was held that action of AO/CPC, denying the exemption u/s 11 was upheld.

As the assessee did not get relief before the first appellate authority, an appeal was filed before ITAT with almost the same grounds. In other words, the AO/CPC and the Ld.CIT(A) were not correct in taxing the entire income, without allowing the expenditure, which is eligible for deduction, even if the assessee is not entitled for exemption u/s 11 of the Act on the principles of commercial basis. During the proceedings before the Bench, learned AR of the assessee has filed a small paper book again with the request to consider the case by taxing the net income and not gross income on the gross receipts of the SHGs. Even if the exemption u/s 11 is denied, the principles of natural justice demand that, only the net income is to be taxed. The Trust has claimed certain expenditure relating to the income earned and pleaded that the net income may be taxed as per law.

The Ld.DR has argued that since there is no registration, entire income is to be taxed at maximum marginal rate and no further deduction should be given.

After hearing both sides, it is decided that the gross receipts should never be taxed and it is always the net profit which should suffer the tax and on this cardinal principle, the Income Tax Act itself

In the result, the appeal of the assessee is allowed for statistical purpose.

The Principal Commissioner of Income Tax, Visakhapatnam 4. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपट्िम / The DR, ITAT, Visakhapatnam 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER LOKIREDDI RAMA cn=LOKIREDDI RAMA c=IN o=INCOME TAX APPELLATE TRIBUNAL ou=INCOME TAX APPELLATE TRIBUNAL 2026-02-17 12:11+05:30 Sr. Private Secretary ITAT, Visakhapatnam