Trust for Particular Community Not Eligible for Section 11 Benefits: ITAT Ahmedabad

Ahmedabad Kadi Vijapur Pragana Shrimali Soni Uttejak Mandal Vs ITO (ITAT Ahmedabad)

AO had assessed the trust as an AOP and made an addition of ₹8,36,509, holding it ineligible for exemption u/s 11 since it was not registered u/s 12AA

Assessee’s Arguments

• Claimed assessment selection was incorrect & beyond CBDT guidelines.
• Stated that the trust neither had surplus income nor claimed exemption u/s 12AA in this year.
• Contended AO wrongly computed figures, ignoring audited accounts showing a net deficit of ₹3.43 lakh, instead of income.
• Argued AO even noted contradictory figures in show cause notice vs. final order.
• Blamed earlier CA for lapses, filing condonation affidavit for 1256 days’ delay in appeal

Tribunal’s Findings

• Delay condoned, as mistake of earlier CA should not prejudice assessee.
• On scrutiny selection – Tribunal held it was a complete scrutiny, not limited scrutiny, hence valid.
• On exemption – Tribunal observed:
• Trust was not registered u/s 12AA in AY 2017-18, registration was only granted from AY 2022-23onwards.
• Trust catered to a specific community, which disqualified it from exemption under section 11.
• AO rightly treated receipts as taxable, not exempt.
• Assessee’s claim of net deficit was not accepted since exemption itself was not available.
• Relied on CBDT Circular No. 01/2015 & case laws confirming that unregistered trusts cannot claim s.11 exemption

Outcome

• Addition of ₹8,36,509 sustained.
• Appeal of assessee dismissed in full

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD