Lala Gauri Mal Butail Trust Vs ITO (ITAT Chandigarh)
ITAT Chandigarh rules advance receivables qualify as application of income u/s 11(2), deleting Rs.56,947 shortfall and directing AO to accept claim.
The Income Tax Appellate Tribunal (ITAT) in Chandigarh has ruled in favor of the Lala Gauri Mal Butail Trust, deleting a tax assessment of ₹56,947 for the Assessment Year 2016-17. The case, which arose from an assessment under section 143(3) of the Income Tax Act, was heard after being restored by the Tribunal in a previous order dated November 19, 2020. The core issue revolved around the trust’s claim for accumulation of income under section 11(2) and a dispute over the application of its income towards its charitable objects.
The assessee-trust had filed a tax return claiming a shortfall of ₹56,947 in the application of income, which the Assessing Officer (AO) brought to tax. After the Tribunal’s initial order, which directed the AO to re-adjudicate the matter, the trust submitted its receipts and payments account. The total receipts were ₹53.09 lakhs, of which 85%, or ₹45.13 lakhs, was required to be applied for charitable purposes. The trust reported an application of ₹40 lakhs, which included an increase in ‘advance receivables’ amounting to ₹59,483. The AO disregarded this specific claim, leading to the assessment of the shortfall.
