KSHATRIYA KACHELIYA TELI SAMAJ SAMITI DELWARA,DELWARA DISTT. RAJSAMAND V. THE INCOME TAX OFFICER, WARD-1 RAJSAMAND, INCOME TAX OFFICE COMMERCE HOUSE OPP. TELEGRAM OFFICE COLLECTRATE ROAD RAJNAGAR RAJSAMAND

ITA 415/JODH/2023

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The case involves Kshatriya Kacheliya Deli Samaj Samiti, a charitable trust, which appealed against the decision of the Learned Commissioner of Income Tax (Appeals)-12 Mumbai. The primary contention was the disallowance of expenses amounting to Rs. 14,20,697 incurred while computing the total income for the assessment year 2021-22. The trust, registered under section 12AA of the Income Tax Act, 1961, did not apply for registration under section 12AB, leading to the denial of exemption claims by the Central Processing Center (CPC) and upheld by the CIT(A). The ITAT, however, acknowledged the need to examine the direct nexus between the donations received and the expenditures incurred, particularly on building repairs and maintenance, and thus remanded the matter back to the AO for a detailed examination.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31834 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-10-2024
• Assessment Year: 2021-2022
• Appeal Filed On: 03-11-2023
• Other Referred Cases: Kund Kund Kahan Digamber Jain Mumokshu Ashram Vs. ITO(E), Shri Krishna Mandir Trust Vs. ACIT, Saroj Gopal Educational Society Vs. ITO(E)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KARNI DAN
• Assessee Lawyers: P.C. PARWAL
• Keywords: Condonation of delay; Opportunity of being heard; Charitable institution
• Section: 154; 143(1); 11; 12AA; 13; 12; 119(2)(b); 10B; 10(23C)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No.415/Jodh/2023 Assessment Year: 2021-22 Kshatriya Kacheliya Deli Samaj Samiti Near Laxminarayan Temple village DelwaraTeh. Nathdwara, Distt. Ramsamand. [PAN: AADAK7758H ] (Appellant) Vs. The ITO, Ward-1, Rajsamand. (Respondent) Appellant by Sh. P.C. Parwal, FCA Respondent by Sh. Karni Dan, Addl.CIT Date of Hearing 15.10.2024 Date of Pronouncement 27.11.2024 ORDER Per:DR. S. Seethalakshmi, JM: This appeal is filed by the assessee aggrieved from the order of the Learned Commissioner of Income (Appeal)-12 Mumbai dated 25.09.2023 [Here in after referred as “CIT(A)”] for the assessment year 2021-22. 2. In this appeal, the assessee has raised following grounds: - “1. The Learned Assessing Officer has erred and also Learned Add/JCIT (appeals) authority has erred in disallowing expenses of Rs. 1420697.00 incurred while computing the total income which is bad in law and deserve to be allowed. ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 2 2. The Learned Assessing Officer has erred and also Learned Add/JCIT (appeals) authority has erred in levying tax and charging interest amounting to rupees 298732.00 on the total income arrived after disallowing of the expenses incurred which is bad in law and deserve to be deleted. 3. The assessee craves the right to add or alter the grounds of appeal on or before the hearing the appeal.” 3. Brief facts of the case are that the assesseeis a charitable trust registered u/s 12AA of the IT Act, 1961 vide order dated 23.08.2018. However, it has not applied for registration u/s 12AB of the Act. Thus for the year under consideration it is not registered under the Income Tax Act, 1961.The assessee filed the return declaring Nil income by showing receipt of Rs.14,39,105/-and claiming expenditure of Rs. 14,20,697/-. The CPC while processing the return considered the receipt as total income of assessee without allowing the deduction towards expenditure for the reason that since the assessee is not registered u/s 12AB of the Act, exemption claimed is not allowable.The Ld. CIT(A)/ NFAC held that since assessee is not registered u/s 12AB of the Act, CPC has rightly denied him the status of trust and disallowed the expenses. 4. Aggrieved from the said action of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:- “3. Decision and Reasons - ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 3 3.1. Ground No. 1 to 3 The sole ground taken by the appellant is regarding disallowance of expenses of Rs. 14,20,697/- incurred while computing the total income which as per the appellant, is bad in law and deserves to be allowed. 3.2. In this regard, it is stated that the CPC had disallowed the expenses of Rs. 14,20,697/- citing the following reason - In Schedule Part A General -\"Details of registration or approval under Income Tax Act\" details of Section 12AB or 10(23C) (iv)/ 10(23C)(v)/ 10(23C)(vi)/ 10(23C)(via) is not provided in the column \"Section under which the registration is applied\". The Act has been amended from 01/06/2020, and all the entities have to get new registration/approval u/s 12AB or 10(23C)(iv)/10(230)(v)/ 10(230)(vi)/ 10(23C)(via) to be eligible for exemption. Since in your case, new registration/approval details are not available, exemption claimed in St. No. 4i to 4vili in Schedule Part B-TI is not allowable. 3.3. Later on, the appellant had approached CPC vide rectification request vide rectification request no. 629805480091022 dated 09/10/2022 and stated that there is a mistake in the said intimation u/s 143(1) which is apparent from record within the meaning of Section 154 of Income Tax Act, 1961. 3.4. The CPC passed rectification on 15.12.2022 without giving any relief to the appellant. 3.5. The sole contention of the appellant is that expenses of the Rs. 14,20,697/- should be allowed to him as he is a registered trust u/s 12AA of the Income Tax Act, vide registration no. AADAK7758H/08/2017-18/S- 1508/12AA dated 23.08.2018. 3.6. The appellant has also stated in his statement of facts that he after enactment of section 12AB effective from 01.04.2020 the trust was required for apply for registration under newly inserted section 12AB of the Act but due to then prevailing circumstances, no application could be made. 3.7. In this regard, it is stated that a new section was inserted in the IT Act, 1961 with effect from 01.04.2021 wherein all registered trusts were required to re-register themselves in order to be eligible for exemption u/s. 11. The procedure for fresh registration has also been described in the Act. ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 4 3.8. The appellant is well aware of this fact and has not re-registered himself u/s 12AB of the IT Act, 1961. Thus by failing to do so and ignoring his statutory obligation, the appellant has now become in-eligible for claiming benefits u/s. 11 of the IT Act, 1961. 3.9. Further, in the case of Checkmate Services Private Limited, the Hon'ble Supreme Court of India had held that - One of the rules of interpretation of a tax statute is that if a deduction or exemption is available on compliance with certain conditions, the conditions are to be strictly complied with. This rule is in line with the general principle that taxing statutes are to be construed strictly, and that there is no room for equitable considerations. That deductions are to be granted only when the conditions which govern them are strictly complied with. 3.10. Therefore, since the appellant had not complied with statutory requirement of registering itself under 12AB of the Act, the CPC had rightly denied him the status of trust and disallowed the expenses. 3.11. No interference is required in the order passed by the CPC. 3.12. In view of the above, Ground Nos. 1 to 3 are hereby dismissed. 4. In the result, the appeal of the appellant is dismissed.” 5. As the assessee did not receive any favour from the appeal so filed before the ld. CIT(A)/NFAC, prefers the present appeal. The ld. AR appearing on behalf of the assessee has placed its written submission on record and the same is extracted here in below:- “Facts:- 1. The assessee is a charitable trust registered u/s 12AA of the IT Act, 1961 vide order dt. 23.08.2018. However, it has not applied for registration u/s 12AB of the Act. Thus for the year under consideration it is not registered under the Income Tax Act, 1961. 2. The assessee filed the return declaring Nil income by showing receipt of Rs.14,39,105/-and claiming expenditure of Rs. 14,20,697/-. The CPC while processing the return considered the receipt as total income of assessee without allowing the deduction towards expenditure for the reason that since the assessee is not registered u/s 12AB of the Act, exemption claimed is not allowable. ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 5 3. The Ld. CIT(A), NFAC held that since assessee is not registered u/s 12AB of the Act, CPC has rightly denied him the status of trust and disallowed the expenses. Submission:- 1. There is no dispute as to the fact that assessee is not registered u/s 12AB of the Act and thus not eligible for exemption u/s 11 of the Act. However, the issue is that if a trust is not registered u/s 12AB of the Act, whether it is eligible for deduction of expenditure against its receipt or not in computing its total income. 2. From the P&L A/c (copy enclosed) it may be noted that against the donation receipt (Rs.13.39,444/-) and interest & rent receipt (Rs.99,661/-) totaling to Rs. 14,39,105/-, the assessee incurred expenditure of Rs.14,20,696/ The major expenditure incurred is on building repair & maintenance of Rs. 12,98,000/- In fact the major donation was raised to carry out the repair & maintenance of dharamshala in as much as building repair & maintenance expenses was incurred during the month of May, 2020 to March, 2001 and during this period the donation received is Rs. 12,46,644, Thus there is direct nexus of the donation receipt and the expenditure incurred on repair & maintenance. Hence expenditure on repair & maintenance is incurred wholly and exclusively for getting the donation. It is a settled principle of law that gross receipt cannot be taxed as income. Income is ascertained after allowing the expenditure. Therefore in computing the total income of assessee the expenditure ought to have been allowed to the assessee. Reliance in this connection is placed on the following cases:- Kund Kund Kahan Digamber Jain Mumokshu Ashram Vs. ITO(E) ITA No.165/JP/19 to 168/JP/19 order dt. 29.05.2019 (Jaipur) (Trib.) The relevant Para 8 of the decision is reproduced as under:- “8. We have heard the rival contentions and perused the material available on record. We find that where the exemption claimed under section 11 and 12 has been denied by the Assessing officer, what can be brought to tax is the net income in the hands of the assessee trust and not the gross receipts. In all these years, we find that while denying the exemption under section 11 and 12 for want of registration under section 12AA, the Assessing officer has brought gross receipts to tax which is against the basic tenets of law where only the real income which is determined after deducting expenses from gross receipts can be brought to tax. We therefore agree with the alternate contention so advanced by the Id AR and without going into merit of the other contention which is left open, the matter is set-aside to the file of the Assessing officer to examine the claim of the expenditure so claimed by the assessee trust against the gross receipts for each of the relevant years and where the Assessing officer determines the net receipts as not exceeding the maximum amount not chargeable to tax, allow the necessary relief to the assessee trust.” Following the decision of Kund Kund Kahan Digamber Jain Mumokshu Ashram, Hon'ble ITAT, Jaipur Bench in case of Shri Krishna Mandir Trust Vs. ACIT ITA No.255/JP/2022 order dt. 31.08.2022 has again held that gross receipt cannot be taxed as income and what can be taxed as income is only the surplus. Saroj Gopal Educational Society Vs. ITO(E) (2023) 203 ITD 62 (Raipur) (Trib.) The relevant Para 12 & 13 of the decision is reproduced as under:- ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 6 “12. Before proceeding any further, we may herein observe that the declining of the assessee's claim for exemption under ss. 11 and 12 of the Act, per se would not justify assessing its gross receipt as its income for the year under consideration. Even though the assessee society may not be entitled to exemption under ss. 11 and 12 of the Act, its income under any circumstance must be deduced per commercial principles, i.e., after considering its claim of expenses per extant law. Our view above is fortified by the order passed by the Tribunal. \"SMC\" Bench, Raipur, in the case of Jain ShwetamberMurtipujak Sangh (supra). wherein involving identical facts, though declining of the assessee's claim for exemption under ss. 11 and 12 of the Act for delayed filing of \"Form 10\" was upheld by the Tribunal but its alternative claim that the AO was obligated to have considered its claim for deduction of expenses raised in the income and expenditure account was accepted. The matter was restored to the file of the AO to consider the assessee's claim for deduction of expenses as debited in the income and expenditure account under the provisions of the Act. For the sake of clarity, the relevant observations of the Tribunal in the case above is culled out as under: \"15. Be that as it may, as the assessee-trust does not cumulatively satisfy the set of conditions specified in para 4(1) of the CBDT Circular No. 10 (supra), and also had not filed any application for condonation of delay under s. 119(2)(b) of the Act as provided in para 4(ii) of the said circular, therefore, there remains no occasion for condoning the delay involved in filing of Form 10B by the assessee beyond the stipulated time period 1, thus, on the basis of my aforesaid observations, find no infirmity in the view taken by the lower authorities who had rightly declined the assessee's claim for exemption under s. 11 of the Act. However, I may herein observe that the AO after declining the assessee's claim for exemption under s. 11 of the Act could not have summarily held its gross receipts of Rs. 24,83,562 as its income. In sum and substance, the AO after treating the assessee as an unregistered trust was obligated to have considered its claim for deduction of expenses as were raised in the income and expenditure account. Accordingly, on the basis of my aforesaid deliberations, I though uphold the declining of the assessee's claim for exemption under s. 11 of the Act, but at the same time, restore the matter to the file of the AO with a direction to consider the assessee's claim for deduction of expenses as debited in the income and expenditure account, ie. to the extent the same are allowable under the Act. Needless to say, the AO shall grant a reasonable opportunity of being heard to the assessee in the course of set-aside proceedings.\" 13. Adopting a similar view, we herein, on similar lines, restore the case of the assessee appellant to the file of the AO with a direction to consider its claim for deduction of expenses as debited in the income and expenditure account, i.e., to the extent the same was allowable under the Act. In view of above, AO be directed to compute the total income after allowing deduction of expenditure.” ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 7 6. Per contra, the ld. DR relied on the order of the ld. CIT(A). 7. We have heard the rival contentions and perused material available on record. The Ld AR for the Assesee submitted that the major expenditure incurred is on building repair & maintenance of Rs. 12,98,000/- and the major donation was raised to carry out the repair & maintenance of dharamshala in as much as building repair & maintenance expenses was incurred during the month of May, 2020 to March, 2001 and during this period the donation received is Rs. 12,46,644,and there is direct nexus of the donation receipt and the expenditure incurred on repair & maintenance. Further the ld. AR for the assessee also prayed to give one more opportunity to submit the evidences concerning the issue in question, with grounds so raised by the assessee, to decide it afresh by providing one more opportunity of hearing. Hence, we the matter of the assessee to the file of the AO to verify the claim for deduction of expenses as debited in the income and expenditure account and to charge as AOP as PEO provision of section 164(2) of the Act. 8. Thus, the Ld. AO will decide the issue based on evidence and submission of the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings before the ld. AO. Before parting, we may make it clear that our decision to restore the matter ITA No.415/Jodh/2023 Kshatriya Kacheliya Teli Samaj Samiti 8 back to the file of the ld. AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the ld. AO independently in accordance with law. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on. 27/11/2024 Sd/- Sd/- (RathodKamleshJayantbhai) (DR. S. Seethalakshmi) Accountant Member Judicial Member Santosh- Sr. P.S Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order "