Once registration granted u/s 12A entire receipts can not be taxed as income without allowing any expenses. Disallowances can be made only on violation of conditions.
ABCAUS Case Law Citation:
ABCAUS 3262 (2020) (02) ITAT
In the instant case, appeal had been filed by the assessee against the impugned order passed by Commissioner of Income Tax (Appeals) for the quantum of assessment passed u/s 143(3) of the Income Tax Act, 1961 (the Act).
The assessee was a society which was established to promote and provide education in various fields, which was running an educational institute. Based on its aims and objects, registration u/s 12A had been granted to it.
However, during the scrutiny proceedings, the Assessing Officer (AO) had made various additions, denying exemption u/s 11(1) of the Act on various grounds.
On appeal by the assessee, the CIT(A) not only confirmed the action of the Assessing Officer, made huge enhancement by adding the entire fees received from the students as well as donations on account of on a violation of Section 11(4A) as compared to assessment made by the Assessing Officer.
Before the Tribunal, the assessee contended that the CIT(A) exceeded in his jurisdiction and erred in law as well as on merits in holding that no deduction shall be allowed without finding of any basis and material.
The assessee informed that the CIT(A) had passed an ex-parte order, because the notices were sent on wrong address, and therefore, no intimation or notice could be received about the date of hearing. He informed that in Form no.35, address for sending the notice had been duly mentioned and the notice had been sent on the address mentioned in the assessment order. Thus, in the interest of justice, the matter should be restored back to the file of the assessee to decide the issue afresh.
The Tribunal noted that not only the CIT(A) had denied the benefit of Section 11 to 13 but had taxed the entire receipts from carrying out the activity of education, denying all the expenses including the donations.
Once registration granted u/s 12A entire receipts can not be taxed as income without allowing expenses
The Tribunal opined that once registration is granted u/s 12A then the computation of such charitable Trust/Society has to be done in accordance with Section 11 to 13 and only those additions/disallowances can be made if they are in violation of conditions therein.
The Tribunal said that It was unfathomable that the entire receipts and donations receipt could be taxed as income of the assessee without allowing any expenses debited to the income and expenditure account.
The Tribunal stated that once it is a fact that assessee was running an educational institution and was registered as a charitable society, then it was incumbent upon the CIT (A) to compute the income as per section 11 to 13 of the Act.
Since the impugned order was ex-parte, the Tribunal remanded the matter back to the file of the CIT(A) to be decided afresh and in accordance with law.
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