The Misabahulhuda Educational And Charitable Trust, Bangalore V. Assistant Director of Income Tax, CPC, Bangalore

ITA 970/BANG/2022

AI Insights

The case revolves around the disallowance of exemption under section 11 of the Income Tax Act, 1961, by the ADIT, CPC, Bengaluru, due to the belated filing of the income tax return by M/s. The Misabahulhuda Educational and Charitable Trust. The Trust, engaged in charitable activities, filed its return declaring total receipts of Rs.21,76,740, all of which were applied towards charitable activities, resulting in no taxable income. The CPC's disallowance was based solely on the belated filing, which was contested by the Trust at the CIT(A) and subsequently at the Tribunal. The Tribunal's decision highlighted the importance of considering the net income (or loss) after accounting for expenditures, which in this case, resulted in a loss, thereby not attracting tax under section 11.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299823 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-01-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 29-09-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 11; 139; 143(1); 139(1); 139(4)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - A” BENCH : BANGALORE BEFORE SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA No.970/Bang/2022 Assessment Year : 2020-21 M/s. The Misabahulhuda Educational and Charitable Trust, No.18, Malikbhai Road, Ayothidasnagar, Devarjeevanahalli, Bengaluru – 560 045. PAN : AABTT 9043 M Vs. ADIT, CPC, Bengaluru. APPELLANTRESPONDENT Assessee by:Shri.Srinivas K. P, CA Revenue by :Shri.Ganesh R. Gale, Standing Counsel Date of hearing:12.01.2023 Date of Pronouncement:30.01.2023 O R D E R This is an appeal filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, order dated 10.08.2022, challenging the order passed by CIT(A) by making addition by CPC, Bengaluru, of Rs.21,76,740/- for not allowing exemption under section 11 of the Income Tax Act, 1961 (hereinafter called ‘the Act’), and not following the section 10(23C)(iiiad) of the Act r.w.r 2BC. 2. The brief facts of the case are that the assessee is engaged in the public charitable activities and running school, providing food, books and uniforms to poor school children and also providing food to needy poor people. It filed its return of income on 31.03.2021 declaring total revenue receipts of Rs.21,76,740/- and entire amount was applied as per section 11 of the Act. - ITA No.970/Bang/2022 Page 2 of 4 for charitable activities and surplus under section 11(1) of the Act is Rs.Nil. The return was processed under section 143(1) on 29.11.2021 by the ADIT(CPC), Bengaluru, disallowing the exemption under section 11 to the entire receipts of Rs.21,76,740/- for being the return filed belatedly. 3. Aggrieved form the above order, the assessee filed appeal before the CIT(A). The CIT(A) after discussing the provisions of sections 11, 12A(ba) and sections 139(1) and 139(4) and Circular No.2/2018 cited by the assessee dismissed the appeal of the assessee. 4. Aggrieved from the above order, the assessee filed appeal before the Tribunal. The learned AR reiterated the submissions made before the lower authorities and filed Paper Book containing pages 1 to 188 relying on some judgments. He further submitted that the CIT(A) has wrongly interpreted sections 11 and 12(ba) of the Act r.w.s. 139(1), 139(4) and 139(4A) of the Act. During the impugned Assessment Year there was no income earned by assessee therefore there is no question for disallowance to the entire receipts of the assessee as done by the CPC. He also referred to the Circular No.2/2020. 5. The learned DR supported the order of the lower authorities. 6. After hearing the rival contentions I noted that the assessee filed the return of income on 31.03.2021 declaring Nil income. Total receipts of the assessee is Rs.21,76,740/- before allowing any expenditure incurred towards earning of these receipts. The CPC has not granted exemption on the entire receipts under section 11 only on the premise that the assessee filed return belatedly. The income has been defined in section 2(24) of the Act., the income should ITA No.970/Bang/2022 Page 3 of 4 be construed in its general meaning but not to the entire receipts if the assessee has incurred any expenditure towards earning the income. There may be disallowance made if the expenditures are not in conformity within the provisions of the Income Tax Act. In this case, the assessee has filed return as per section 139(4) and 139(4) prescribed that all other provision of the Act shall apply as if it were a return required to be furnished under sub-section (1) of section 139 of the Act. The income is arrived after deducting the expenditure. In the impugned case on hand the total receipts filed by the assessee which is placed at Paper Book page Nos.34 and 35 there is excess of expenditure over income of Rs.3,13,982/- which is loss suffered by the assessee. Therefore, in this case the claim of deduction from income under section 11 and 12(ba) of the Act does not arise. No doubt that the assessee has filed his return of income belatedly but he was required to compute his income and the income is below the threshold limit, in this case it is loss. Considering the facts of the case, I set aside the order of the CIT(A) and no addition can be made on the entire receipts of the assessee. Accordingly, appeal of the assessee is allowed. 7. In the result, appeal of the assessee is allowed. Pronounced in the open court on the date mentioned on the caption page. Sd/- (GEORGE GEORGE K) Sd/- (LAXMI PRASAD SAHU) Judicial Member Accountant Member Bangalore, Dated: 30.01.2023. /NS/* ITA No.970/Bang/2022 Page 4 of 4 Copy to: 1.Appellants2.Respondent 3.CIT4.CIT(A) 5.DR, ITAT, Bangalore.6. Guard file By order Assistant Registrar, ITAT, Bangalore.