CANCER RELIEF SOCIETY,NAGPUR V. DCIT/ACIT, CIRCLE -EXEMPTION, NAGPUR

ITA 627/NAG/2024

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The case involves the Cancer Relief Society, a charitable institution operating a cancer hospital in Nagpur, which appealed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre. The primary dispute was regarding the non-acceptance by the Assessing Officer of certain provisions made by the assessee for gratuity, leave encashment, and doubtful debts, which were claimed as deductions under the Income Tax Act. The Tribunal examined whether these provisions were justifiably excluded from the application of income towards charitable purposes as claimed by the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 843925 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 21-12-2024
• Other Referred Cases: Maharshi Karve Stree Shikshan Samstha Karvenagar vs. ITO, ADIT vs. A.L.N. Rao Charitable Trust, CIT vs Programme for Community Organisation, DIT vs. Raghuvanshi Charitable Trust, Anandilal & Ganesh Podar Society vs. ITAT, Apeejay Education Trust vs. DCIT, DCIT vs. National Association of Software and Services Companies, Indraprastha Cancer Society and Research Centre vs. ITAT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURJIT KUMAR SAHA
• Assessee Lawyers: MISS. SHIKHA LOYA
• Keywords: Bad and doubtful debts; Capital expenditure; Charitable institution
• Section: 11

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “NAGPUR” BENCH, NAGPUR BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI KHETTRA MOHAN ROY, ACCOUNTANT MEMBER ITA No. 627/NAG/2024 (A.Y.: 2018-19) (Physical hearing) Cancer Relief Society Manewwada Road, Sant Tukdoji Chowk, Nagpur – 440027. PAN: AAATC2814J Vs DCIT/ACIT, Circle – Exemption 1stFloor, BSNL Building, Seminary Hills, Nagpur – 440001. Appellant /Assessee Respondent /Revenue Assessee by Miss. Shikha Loya, CA Revenue by Shri Surjit Kumar Saha, SR. DR Date of hearing 19.02.2026 Date of pronouncement 16.03.2026 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC) [for short “CIT(A)”], for assessment year 2018-19. The assessee has raised following grounds of appeal; (1) That the learned CIT(A) erred in confirming the order of the Additional/Joint/ Deputy/ Assistant Commissioner of Income Tax/ Income Tax Officer, National e-Assessment Centre, Delhi which is bad in law and wrong on facts. (2) That the learned CIT(A) erred in law and on facts in confirming the action of AO in not considering the provisions of Rs.1,26,95,749/- as expenditure being application of income towards objects of the trust. On the facts and circumstances of the case, the provisions are accounted for in the books of accounts on the basis of accrual system of accounting and therefore the action of the AO in making addition is improper and unjustified. Printed from counselvise.com ITA No.627/Nag/2024 (AY 2018-19) Cancer Relief Society 2 (3) That the learned CIT(A) and AO erred in law and on facts in disregarding the fact that the provision for gratuity of Rs. 7,71,976/ is done in compliance with Payment of Gratuity Act, 1927 and hence its deduction is allowed being in nature of expense towards objects of trust. The action of authorities is unjustified and liable to be quashed. (4) That the learned CIT(A) and AO erred in law and on facts in disregarding the fact that the provision for leave encashment of Rs. 3,48,642/- is done on basis of employment agreements and existing labour laws and its deduction is allowed being in nature of expense towards objects of trust. The action of authorities is unjustified and liable to be quashed. (5) That the learned CIT(A) erred in law and on facts in disregarding the fact that the provision for Doubtful Debts of Rs.1,15,75,131/- was made by specifically identifying outstanding balances of parties from whom amount was not recovered from past more than 2 years. The action of authorities is unjustified and liable to be quashed. (6) Without prejudice to above, the learned CIT(A) and the AO erred in law and on facts in not admitting the alternative plea in case accrual system of accounting is not accepted, being to treat the provisions made of Rs. 1,26,95,749/- as income accumulated or set apart in accordance with the provisions of section 11(1)(a). On the facts and circumstances of the case, the accumulation or set apart of income u/s 11(1)(a) is automatically allowed upto 15% of the income of the trust where 85% of The action of the the income is applied for the objects of the trust. learned authorities in disregarding the claim made during assessment proceedings is highly unjustified. (7) The learned CIT(A) erred in law and on facts in holding that u/s. 11(1)(a) amount to extent of 15% of receipts can be accumulated only after informing the authority in Form 10 regarding its purpose and depositing in modes specified u/s. 11(5). On the facts and circumstances of case and on basis of provisions of Act, there is no such requirement that the Form 10 shall be filed for approval of authorities and amount to be invested in modes u/s. 11(5). The action of authorities is based on conjectures and surmises and incorrect. (8) That for any other ground with kind permission of your honour at the time of hearing of appeal. Printed from counselvise.com ITA No.627/Nag/2024 (AY 2018-19) Cancer Relief Society 3 2. Rival submissions of both the parties have been heard and record perused.The ld. Authorised Representative (AR) of the assessee submits that a very short dispute is involved in the present appeal. The assessee is a charitable institution, operating cancer hospital in Nagpur. The assessee have been registered u/s. 12AA/12AB. The assessee trust in his existence from 1964. The Divisional Commissioner is the Ex-Officio Chairman in the committee of the assessee-trust. The assessee is claiming exemption u/s. 11 since its inception and is being allowed as such. The Assessing Officer (AO) during the assessment has considered the gross receipt as per income and expenditure account and reduced revenue and capital expenses to compute difference of Rs. 1.26 crores. The gross receipt of the assessee is Rs. 20.59 crores. Copy income and expenditure account is placed on record at page no. 55 of paper book. The assessee incurred capital expenditures of Rs. 2.76 crores and revenue expenses of Rs. 17.98 crores. Entire amount has been utilised on the object of the trust. Considering the provision of Section 11 of the Act, the income was reported as Nil in the return of income. The AO has not accepted the claim of income applied for charitable purposes in respect of provision for leave encashment, provision for gratuity and for doubtful debts aggregating of Rs. 1.26 crores and brought such amount to levy of tax. The addition made by AO is unjustified and unsustainable in law. The AO failed to consider the deduction allowable in term of provision of Section 11(1)(a) @15% of gross receipt of Rs. 20.59 crores. The AO failed to appreciate that statutory allowances of 15% has to be granted u/s. 11(1)(a) of the Act. To Printed from counselvise.com ITA No.627/Nag/2024 (AY 2018-19) Cancer Relief Society 4 support its submission, the ld. AR of the assessee relied upon following decisions:  Maharshi Karve Stree Shikshan Samstha Karvenagar vs. ITO(2019) 101 taxmann.com 175 (Pune Trib)  ADIT vs. A.L.N. Rao Charitable Trust (1995) 216 ITR 697 (SC)  CIT vs Programme for Community Organisation (2001) 248 ITR 1 (SC)  DIT vs. Raghuvanshi Charitable Trust (2010) 78 CCH 0601 (Del) 3. The ld. AR of the assessee further submits that provision for gratuity and provision for leave encashment are allowable deduction on commercial principle. Further, provision for doubtful debt is to be allowed for determining income under commercial principle in case of trust while determining income in terms of Section 11. To support such view the ld. AR relied upon the following decisions:  Anandilal & Ganesh Podar Society, ITAT order in ITA No.5962/Mum/2019, vide order dated 03/08/2021  Apeejay Education Trust vs. DCIT (2021) 130 taxmann.com 436 (Kol. Trib.)  DCIT vs. National Association of Software and Services Companies (2012) 21 taxmann.com 213 (Del)  Indraprastha Cancer Society and Research Centre, ITAT order in ITA No.2555/Del/2015 vide order dated 02/07/2018. 4. The ld. AR of the assessee further submits that ld. CIT(A) in para 5.6 of his order noted that 15% accumulation is to be in the modes prescribed u/s. 11(5). Such observation in contrary to the statutory provision of law as has been held by Hon'ble Apex Court in ALN Rao Charitable Trust 216 ITR 697 (SC). The difference compute by AO of Rs. 1.26 crores is only 6.16% which is Printed from counselvise.com ITA No.627/Nag/2024 (AY 2018-19) Cancer Relief Society 5 less than 15% of statutory provision, thus, the order of lower authorities is absolutely unjustified. 5. On the other hand, ld. CIT-DR for revenue supported the order of lower authorities. 6. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that during assessment the AO noted that assessee has made certain provision for expenditure and debited these provisions as application of income. The AO prepared summary of such provision in para 6.1 of assessment order, wherein he has recorded the details of such provisions consisting leave encashment, gratuity and doubtful debts aggregating to Rs. 1.26 crores. The AO while passing the assessment order levied tax on such amount of Rs. 1.26 crores. The ld. CIT(A) confirmed the action of AO. We find that gross receipt of assessee of Rs. 20.59 crores is not in dispute. There is no dispute of assessee’s charitable institution and have valid registration u/s. 12AB. The assessee is eligible for application of income u/s. 11/12 of the Act. Further, 93.84% of the receipts are incurred on object of the assessee, which is more than the threshold limit of 85%. We find that once 85% of receipt of assessee incurred on its object/charitable activities no further disallowance/addition is justified. Even otherwise, we find that provision for gratuity and leave encashment as well as doubtful debt are allowable expenses on commercial principle as has been held in serious decisions which has been relied by ld. AR of the assessee. Hence, we direct the AO to delete Printed from counselvise.com ITA No.627/Nag/2024 (AY 2018-19) Cancer Relief Society 6 the entire addition of Rs. 1.26 crores. In result, the grounds of appeal raised by the assessee are allowed. 7. In the result, the appeal of the assessee is allowed. Order was pronounced on 16.03.2026 as per Rule 34 of the Income Tax (Appellate Tribunal) Rules, 1963. Sd/- KHETTRA MOHAN ROY ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER Mumbai, Dated: 16/03/2026 Karishma J. Pawar, SR. PS Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file. By Order Assistant Registrar/Senior Private Secretary ITAT, Nagpur Printed from counselvise.com "