ACIT., CIRCLE-1(1), HYDERABAD, TELANGANA vs. CH VENUGOPAL REDDY EDUCATIONAL SOCIETY, HYDERABAD

At the outset Learned AR submitted that the assessee is an educational society running educational institutions; that against the order dated 17/10/2019 passed under section 143(1) of the Income Tax Act, 1961 (“Act”), whereunder the entire receipts of the assessee, ignoring the expenditure were brought to tax; and that when the assessee preferred appeal, learned CIT(A) held that when the assessee claimed the expenditure in the financials as per the provisions of the Act and were audited by competent persons, disallowing the expenditure incurred for the purpose of earning the revenue is not justified. Learned AR submitted that Revenue preferred appeal against the learned CIT(A) allowing the expenditure, whereas, assessee filed cross objections justifying the same.

Learned AR placed reliance on the decisions of in the case of Annadaneshwara Charitable Trust vs. ITO [2023] 156 taxmann.com 270 (Bang.Trib.) and Sri Ramalingeswara Swamy Temple Vs. ADIT in & 492/Hyd/2023 dated 12/01/2024 and argued that when the assessee, according to the Revenue, does not enjoy the registration under section 12AA or 10(23) of the Act and exemption thereunder, instead of taxing the gross receipts, the net income alone is required to be taxed, after allowing the allowable expenditure and the assessee is required to be assessed as AOP and entitled to the deduction of expenses.

Learned DR submitted that the assessee based its claim on the provisions under section 11 and 12 of the Act and the learned CIT(A) missed the fact that the assessee claimed exemption under section 10(23C)(vi) of the Act in the return of income and the assessee also did not file the audit report within the stipulated time, and therefore, the disallowance of the Revenue and capital expenditure is justifiable.

We have gone through the record in the light of the submissions made either side. In Annadaneshwara Charitable Trust (supra) and Sri Ramalingeswara Swamy Temple (supra), it is held that once the assessee has no registration under section 10(23) of the Act, then the income of the assessee is required to be computed under normal provisions of the Act as AOP and, therefore, the net income alone is required to be taxed. Since these decisions are applicable to the facts of the case on all fours, while respectfully following the same, we do not find any illegality or irregularity in the findings of the learned CIT(A) and, therefore, uphold the same.

In the result, appeal is dismissed and CO is allowed.