Even when Trust not registered u/s 12A, only net income can be taxed not gross receipts

Even when the trust is not registered u/s 12A, taxes can be levied on the net income and taxing of the entire receipts without any deduction towards expenditure is wrong and illegal – ITAT

In a recent judgment ITAT Chandigarh has held that even when the Trust is not registered under section 12A, the taxes are to be levied on the net income and action of the AO taxing the entire receipts without deduction of the claim of expenditure is wrong and illegal

ABCAUS Case Law Citation:
4559 (2025) (05) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) confirming the action of the AO in taxing gross receipts of the trust instead of net income. 

During the year under consideration, the assessee was not registered as charitable trust u/s 12A of the Income Tax Act. The assessee claimed deduction u/s 11 of the Income Tax Act, however, the same was denied by the Assessing Officer. However, while the computing the taxable income of the assessee, the Assessing Officer added the entire receipts without deduction of the claim of expenditure.

Being aggrieved, the assessee preferred the appeal before the CIT(A) which was delayed. It was pleaded before the CIT(A) that the delay had occurred due to change of the management of the assessee trust. The CIT(A) admitted the said appeal and condoned the delay. However, on merits, he declined the plea of the assessee that assessee is entitled to the deduction of expenditure for the purpose of computation/assessment of its income.

The Tribunal observed that it is the basic principle for the levy of income tax that the taxes are to be leviedon the net income after deduction of expenditure from the total receipts. Therefore, the denial of deduction of expenditure on the part of the lower authorities was wrong and illegal.

Accordingly, the Tribunal set aside the impugned order of the CIT(A) and directed the Assessing Officer to duly consider the contention of the assessee to examine the records and ensure that only the net total income of the assessee is taxed after deduction of the admissible expenditure.

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