Mysore Association Bombay Vs ITO (ITAT Mumbai)
Only Real Income Can Be Taxed: ITAT Mumbai Deletes Entire Addition Where Trust Incurred Loss; Section 11 Denial Becomes Academic
Mumbai ITAT granted substantial relief to Assessee-trust registered u/s 12A by deleting the entire addition made by AO.
AO had denied exemption u/s 11 by treating rental income from auditorium & conference hall, interest income, life membership fees, admission fees, miscellaneous receipts & excess provision written back as commercial income, alleging violation of proviso to section 2(15). AO taxed entire gross receipts & simultaneously disallowed expenditure of ₹32.12 lakh incurred on educational & charitable activities.
Tribunal noted that as per audited financial statements, Assessee had gross receipts of ₹40.55 lakh & expenses of ₹52.05 lakh, resulting in a loss of ₹11.50 lakh. There was no adverse finding that the expenses were non-charitable. Reiterating the settled principle that only real income can be taxed, ITAT held that once Assessee had incurred a loss, no amount could be brought to tax, irrespective of the characterisation of receipts.
Accordingly, ITAT deleted the entire addition. Tribunal held that the controversy regarding whether renting of halls constituted commercial activity, applicability of proviso to section 2(15), & denial of exemption u/s 11 became purely academic for the year under consideration & was therefore left open. The appeal was partly allowed.
