Charging tax on entire gross receipts without deducting expenditure is unjustifiable

H M V Educational Cultural & Social Trust Vs ITO (ITAT Bangalore)

ITAT Bangalore held that charging the income tax on the entire gross receipts without giving effect of the expenditures incurred by the assessee towards earning of the income.

Facts- The assessee is a Trust registered u/s. 12A of the I.T. Act, 1961. The assessee filed return of income on 19.03.2019 claiming exemption u/s. 12AA of the Act. The assessee Trust is running educational institution since 2008. The return was processed u/s. 143(1) of the Act by the CPC on 17.10.2019 by adopting the gross total income of Rs. 10,22,94,076/- without giving any deduction of expenditure incurred. The CPC did not grant any exemption claimed u/s. 11 of the Act and intimation was sent to the assessee.

Aggrieved, the assessee filed appeal before CIT(A). CIT(A) by observing as under did not grant exemption since the assessee did not file his return of income within the time limit prescribed under section 139(4A) of the Act., therefore provision of section 11 & 12 will not apply.

Conclusion- Held that the CPC has charged the income tax on the entire gross receipts without giving effect of the expenditures incurred by the assessee towards earning of the income. The income has been defined in section 2(24) of the Act., the income should be construed in its general meaning but not to the entire receipts, if the assessee has incurred any expenditure towards earning the income, in such case, the assessee is entitled for deduction of expenditure incurred as prescribed in the Income Tax Act. There may be disallowances of the expenditures, which are not in conformity within the provisions of the Income Tax Act.

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