Charitable Trust as Pass-Through Entity: ITAT Deletes Interest Disallowance Rejects 8% Profit Estimation

Dnyaneshwar Trust Vs DCIT (ITAT Pune)

Charitable Trust as Pass-Through Entity: ITAT Deletes Interest Disallowance Rejects 8% Profit Estimation

The Income Tax Appellate Tribunal, Pune Bench, in the case of Shri Dnyaneshwar Trust vs DCIT, held that a charitable trust functioning as a pass-through entity cannot be taxed on notional profits or denied genuine expenditure, leading to deletion of major additions across multiple years.

The assessee trust, engaged in facilitating harvesting and transportation activities for labourers through a sugar factory, received supervision charges and routed bank loans to workers. The Assessing Officer treated the trust as a contractor, applied Section 44AD (8% profit) on gross receipts, and disallowed substantial interest expenses on the ground that loans were in the names of individual labourers.

The Tribunal noted that the trust operated on a “no profit, no loss” basis, merely facilitating funds and services for labour welfare, with all costs—including interest—being reimbursed by the sugar factory. Documentary evidence (including bank disbursements shown in records like those on pages 14–22) established that loans were effectively routed through the trust for its charitable objectives.

Rejecting the Revenue’s approach, the ITAT held that: disallowing interest while taxing reimbursements creates artificial income, contrary to real income principles; estimation of profit @ 8% is unsustainable where the entity is not carrying on business; and the trust’s role as a facilitator/pass-through entity must be respected.

Accordingly, the Tribunal deleted the entire interest disallowances across years, removed additions based on presumptive taxation, and in certain issues (like TDS-related disallowances) restored matters for fresh verification. The appeals were largely allowed in favour of the assessee

FULL TEXT OF THE ORDER OF ITAT PUNE0

The above batch of 6 appeals filed by the assessee are directed against the separate orders of the Ld. CIT(A) / NFAC, Delhi relating to the respective assessment years as mentioned above. Since identical grounds have been raised by the assessee in all these appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.

2. First we take up ITA No.1881/PUN/2025 for assessment year 2011-12 as the lead case. This is the second round of litigation before the Tribunal. Facts of the case, in brief, are that the assessee is a charitable trust registered under the Maharashtra Cooperative Societies Act, 1960. It is registered u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide CIT Nashik’s order No. Nasik/Tech/12A/64/81-82 dated 19.03.1982. Further, as per amended provisions, the trust got registration u/s 12A vide order dated 24.09.2021 having validity of registration from assessment year 2022-23 to 2026-27. It filed its return of income on 27.09.2012 declaring total income at Nil. The return of income was accompanied with computation of total income, audit report in Form 10B, audited statement of accounts, balance sheet, income & expenditure account, audit report under the BPT Act. The case was selected for scrutiny and the assessment was completed by passing an order u/s 143(3) of the Act on 16.01.2014 determining the assessed income at Nil in the status of AOP instead of trust as claimed by the assessee while filing the ITR. Against the treatment of status as AOP instead of trust, the assessee filed an appeal before the CIT(A) which was allowed and the status was restored to the trust vide order dated 23.01.2023. In the meantime, the case of the assessee was reopened by issue of notice u/s 148 of the Act on 23.03.2018 after recording reasons for reopening and after obtaining due approval. Accordingly, the assessment was completed by passing an order u/s 143(3) r.w.s. 147 of the Act on 24.12.2018 determining the total income at Rs.3,54,17,670/-after making the following remarks / additions/disallowances:

i) Observing that proviso to section 2(15) not applicable, the Assessing Officer initiated proposal for cancellation of 12AA registration

ii) Status changed from Trust to AOP (Association of Persons)

iii) Disallowance made of Rs.3,54,17,666/- u/s 44AD at 8% of Rs.44,27,20,834/- in line with

a) Rejecting application of proviso to section 2(15)

b) Rejecting status as Trust

c) Applying section 44AD

iv) Disallowed interest paid of Rs.2,83,27,925/- u/s 43B

3. Aggrieved by the order of the Assessing Officer the assessee preferred an appeal before the CIT(A) who vide order dated 04.10.2019 allowed all the grounds of appeal except change in the status. Against the above order of the CIT(A) the assessee as well as the Revenue filed appeals before the Tribunal with their respective grounds. In the meantime, on 14.02.2023 the assessee trust received an order u/s 12AA(3) of the Act from the CIT, Exemption, Pune dropping the proceedings initiated in 2018 for cancellation of registration.

4. The Tribunal vide order dated 08.03.2023 in ITA Nos.1647/PUN/2019 to 1650/PUN/2019 for assessment years 2011-12, 2012-13, 2013-14 and 2016-17 and ITA Nos.34 to 37/PUN/2020 for assessment years 2011-12, 2012-13, 2013-14 & 2016-17 restored the matter to the file of the Assessing Officer with a direction to examine the entire issue and pass the order as per fact and law by observing as under:

“12. We have given our thoughtful consideration to the foregoing rival submissions and find no merit to express our agreement with either of these two parties in entirety at this stage. We observe first of all that we have already decided the assessee’s foregoing legal ground of its assessment as an “AOP” or a charitable trust in its favour (supra). This is further coupled with the fact that the assessee prima facie appears to have filed all the relevant details [strongly contested by the Revenue side] before the Assessing Officer as per the assessment discussion. It transpires from the perusal of the assessment order that the learned Assessing Officer had not examined the ‘tripartite agreement’ executed amongst the assessee, the payer Shree Dnyaneshwar SSK Ltd., and the ultimate payee representing harvesting and transport labourers/unions. We however note as a matter of abundant caution that even our findings in preceding paragraphs about the total receipts coming to the assessee’s credit [including alleged advances] of Rs.4,42,72,834/- had not been properly routed in the corresponding revenue account maintained at the assessee’s behest. Faced with the situation, we are of the opinion that the learned Assessing Officer needs to examine this entire issue of the assessee’s status as a pass through entity only, afresh as per law to arrive at the correct computation of its taxable income. We order accordingly. It is made clear that it shall be the risk and responsibility only to file and prove all the necessary details in consequential proceedings before the Assessing Officer preferably within three effective opportunities of hearing as much water has flown downstream since the impugned assessment year 2011- 12. These Revenue’s grounds as well as it’s main appeal ITA.No.34/PUN./2020 stands accepted for statistical purposes in very terms. “

5. In view of the above direction of the Tribunal, the Assessing Officer issued notice u/s 142(1) of the Act asking for certain details. The assessee in response to the same filed the requisite details from time to time.

6. The Assessing Officer on perusal of the Income & Expenditure account, ledger accounts, agreements, trust deed and the reply furnished by the assessee trust noted that the assessee trust has shown supervision charges received from Shri Dyaneshwar SSK Ltd amounting to Rs.3,20,14,050/- against which the trust has claimed interest payment of Rs.2,83,27,925/- as expenditure on the object of the trust. From the submissions made by the assessee and the terms and conditions of the agreement between Dyaneshwar SSK Ltd and the assessee trust, he noted that all the expenses including advance payments incurred by the trust on harvesting and transportation contract are borne by Shri Dyaneshwar SSK Ltd. Further, if any of expenses incurred by the trust on account of harvesting and transporting on behalf of Dyaneshwar SSK Ltd are reimbursed to the assessee trust if the same are incurred by the trust. He observed that the bank has disbursed working capital loans to the individual contractor and not to the trust and therefore, the liability to pay interest on such loans is of the individual harvesting and transport contractor and not of the trust. He, therefore, issued a show cause notice asking the assessee to explain as to why the interest on loan should not be disallowed. The assessee made elaborate reply to the query raised by the Assessing Officer.

7. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and disallowed the interest on loan amounting to Rs.2,83,27,925/- by recording as under:

6.1. The above reply of the assessee trust has been considered. The primary object of the Trust is to provide employment to poor people, particularly in harvesting and transporting of sugarcane by appointing sugarcane harvesting and transport contractors. The assessee trust acts as a middle man between sugarcane harvesting and transport contractor and Dyaneshwar SSK Ltd. As per the terms and condition of agreement between Shree Dyaneshwar SSK Ltd., and the assessee Trust, Shree Dyaneshwar SSK Ltd., provides funds including advance and contractors payments to the assessee trust for carrying out the activity of harvesting and transportation of sugarcane. The funds so received by the trust from Shree Dyaneshwar SSK Ltd., is distributed by the Trust among the labour contractors. Further whatever expenditure was incurred by the Trust for carrying out these activities, is reimbursed by the sugar factory Shree Dyaneshwar SSK Ltd. Shree Dyaneshwar SSK Ltd. pays the supervision charges to the Dyaneshwar Trust for carrying various activities on behalf of Shree Dyaneshwar SSK Ltd. Thus the actual income of the assessee Trust is in the nature of supervision charges which is received at end of the year based on the tonnage of sugarcane crushed by Shree Dyaneshwar SSK Ltd., which is evident form the ledger account of supervision charges furnished by the assessee Trust. Thus the contention of the assessee Trust that supervision charges received by the trust include reimbursement of interest on loan is not acceptable.

6.2. It is an admitted fact that the bank had disbursed loan to individual harvesting and transporting contractors and not to the assessee Trust. Therefore the liability to pay the interest on such loan is of the harvesting and transporting contractors and not of the assessee trust. Further on perusal of the trust deed it is observed that no such object was mentioned in the trust deed regarding payment to bank with interest expenses on loan given to harvesting and transport contractor by the bank. Thus the interest expenses claimed by the assessee trust in income and expenditure account are not related to the object of the assessee trust. Further the assessee trust in his submission has admitted that whatever expenditure incurred by the assessee trust on behalf of Shree Dyaneshwar SSK Ltd., in carrying out the activity of harvesting and transporting are reimbursed to the assessee trust by Shree Dyaneshwar SSK Ltd. Thus the question of claiming interest on account of interest on loan does not arise particularly when such interest on loan is reimbursed by the Shree Dyaneshwar SSK Ltd.

In view of the above facts and circumstances of the case it is clear that the interest expenses incurred by the assessee trust are not related to the object of the trust. Therefore the interest expenses on loan claimed to be incurred on the object of the trust at Rs. 2,83,27,925/- is hereby disallowed and added to the income of the assessee trust. Penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars is separately initiated.

[Addition/Disallowance: Rs. 2,83,27,925]

8. Similarly the Assessing Officer has made disallowance for assessment year 2012-13 at Rs.3,86,39,767/-, for assessment year 2013-14 at Rs.4,11,48,160/- and for assessment year 2016-17 at Rs.10,23,29,756/-.

9. In appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under:

5.4.1. Vide the ground no. 3 of the original grounds of appeal, the appellant has assailed disallowance of interest on loan amounting to Rs.2,83,27,925/-.

5.4.2. It is pertinent to look at the background of the matter. It is inferred that in this case there is a triangle of persons/parties i.e. this appellant namely Shri Dyaneshwar Trust; M/s Dnyaneshwar Sahakari Sakar Karkhana Ltd. (DSSKL) and individual sugarcane harvesters & transport contractors. Main activity being undertaken was production & harvesting, transportation & procurement of sugarcane, and finally production of the white sugar as the end product of the entire set of activities. In such interplay, DSSKL was making payment to this appellant for the “supervision & administration” of sugarcane procurement and this appellant further sub-let it to harvestors and transport contractors. Contractors and transporters were paid harvesting charges on per-ton basis and transportation charges were paid on ‘per-ton, per-kilometer’ basis.

5.4.3. The Hon’ble ITAT while setting aside the assessment in its order dated 08.03.2023 had observed, inter alia, that:

“It transpires from the perusal of the assessment order that the learned Assessing Officer had not examined the tripartite agreement amongst the assessee, the sugar factory Dnyaneshwar SSK Ltd., and the ultimate payee representing harvesting and transport labourers/unions. We however note as a matter of abundant caution that even our findings in preceding paragraph, which do not represent conclusive adjudication on the issue, are only for the purpose of disposing of the appeals and the final decision on this issue rests with the situation, we are of the opinion that the learned Assessing Officer needs to examine this entire issue of the assessee’s status in pass-through entity, after due law to arrive at the correct computation of its taxable income.”

5.4.4. On the specific issue of interest on loan; the appellant’s reply furnished on 24.03.2025 is cited in the assessment order. It is explained that loans ranging from amount of Rs.2 lakhs to Rs.3 lakhs are sanctioned by different banks to individual sugarcane producers and disbursed in their saving bank accounts. This appellant has stood as guarantor of such loans and that “the Trust also undertakes to bear total interest cost which is finally reimbursed by the sugar factory”. Thus, this appellant bearing any cost of interest is baseless. The loan are sanctioned and advanced by different banks to individual farmers/sugarcane harvesters. With the objective of providing financial assistance and help to the farmers/harvesters, this appellant/DSSKL could have stood guarantor or facilitators but ultimately cost of interest of the loan advanced to farmers has always been reimbursable by the DSSKL and not this appellant, yet this appellant has claimed deduction of interest payment. This is a simple matter of the incidence of the interest burden and this appellant has certainly not borne any burden of any interest payment made on account of loans advanced to farmers.

5.4.5. The appellant has given unclear and evasive explanation as far as appellant’s submission quoted verbatim in the assessment order shows. The appellant has given contradictory explanation or resorted to citing its noble objective of helping poor and needy etc. Few extracts of the appellant’s submission cited in the impugned assessment order are as follows:

“The loan is initially sanctioned, disbursed and credited to the individual saving accounts of the concerned labour contractors and all such individual loans are directly transferred by the bank to the current account of the Trust in bulk lot. On receipt of such loan amounts, the Trust distributes it as an advance to needy labourers as per their requirements.”

…………

“The Bank of Baroda has sanctioned and disbursed loan of Rs.960/- lakhs to 480 individual labourers as agriculture advance % Rs.2 lakhs per person. For this loan, the bank has obtained the guarantee of the Trust and Shree Dnyaneshwar SSK Ltd. and also undertaking to repay bank loan from amounts of harvesting/labour charges payable to individual borrowers.”

…………

“Further the Indian Overseas Bank has sanctioned loan of Rs.1500 lakhs to 600 individual borrowers for which bank has taken guarantee as well as undertaking to deduct bank dues from individual borrowers payments and remit it to the bank from the Trust as well as sugar factory.”

…………

“The bank has initially credited this loan amount to the saving accounts of individual borrowers and then transferred it to the credit of bank account of the Trust as under:”

5.4.6. Leaving this at that, the substantial inference is that the amount of interest payable to banks against the loans disbursed to farmers was reimbursable to this appellant. The appellant has rather claimed the deduction of such amount. The AO has recorded that, “assessee trust in his submission has admitted that whatever expenditure incurred by the assessee trust on behalf of Shri Dnyaneshwar SSK Ltd. in carrying out the activity of harvesting and transporting are reimbursed to the assessee trust by Shri Dnyaneshwar SSK Ltd.”

5.4.7. This is equally important finding before allowing the deduction under discussion whether facilitating financial assistance to farmers by way of bearing the interest cost was part of the objectives of disburse or not. The AO has said that “Further on perusal of the trust deed it is observed that no such object was mentioned in the trust deed regarding payment to bank with interest expenses on loan given to harvesting and transport contractors by the bank. Thus, the interest expenses claimed by the assessee trust are not related to the object of the trust.”

10. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:

1. On the facts and in the circumstances of the case and in law, Ld. AO erred in initiating the reassessment proceedings u/s 147 by issuing notice u/s 148 dated 23/03/2018 for AY 2011-12, the period which is beyond four years especially in view of the fact that all the material facts were discussed in the original assessment proceedings for which order u/s 143(3) date 16/01/2014 was passed, therefore entire reassessment proceedings are bad in law and deserves to be struck down and consequential order needs to be annulled.

2. On the facts and in the circumstances of the case and in law, Ld. AO erred in making disallowance of Rs.2,83,27,925/- being expenditure claimed under the head ‘Interest Expenses, without appreciating the manner in which activities are carried out by trust and disregarding appellant’s contention and detailed submissions made in this regard. Your appellant prays for deletion of entire addition.

Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the inter of principle of natural justice.

11. The Ld. Counsel for the assessee did not make any submission regarding validity of reopening. We, therefore, dismiss this ground as ‘not pressed’ for assessment years 2011-12, 2012-13, 2013-14 and 2016-17.

12. So far as ground of appeal No.2 is concerned the Ld. Counsel for the assessee submitted that the common issue involved in the appeals for assessment years 2011-12, 2012-13, 2013-14 and 2016-17 is regarding the disallowance of interest debited to income and expenditure account by assuming that this interest is not a liability of trust and therefore it cannot be treated as allowable expenditure. He submitted that in the first round in all these cases the Assessing Officer has treated the society as a contractor of H&T workers and treated advances given to these H&T workers as turnover of trust and estimated the profit @ 8% of the turnover. Further, he also disallowed the interest expenses debited to Income and Expenditure account by invoking provision of section 43B(e) and disallowed such interest alternatively. The Ld. CIT(A) / NFAC deleted the addition on account of estimation of profit @ 8% of the turnover as well as interest addition made u/s 43B which was reversed by the Tribunal with a direction to the Assessing Officer for arriving at correct computation of income by treating assessee’s status as pass through entity only.

13. He submitted that in the second round of assessment the Assessing Officer although in principle has accepted the pass through entity status and did not estimate any income, however, treated the interest expenses as disallowed expenditure without appreciating the fact of the case. He submitted that the trust is registered u/s 12A of the Income Tax Act, 1961 since 1982 and since its inception there is no change in the object of the trust or activities of the trust. The trust is regularly filing its return of income in the status of “Trust” and claiming deductions u/s 11 to 13 of the Act available for the trusts registered u/s 12A of the Act. The income tax authorities had also assessed the income of the trust in the status of “Trust” by allowing deductions u/s 11 to 13 of the Act. He submitted that it was for the first time that the Assessing Officer raised question of applicability of section 2(15) of the Act and concluded that it is not a charitable trust and the trust is carrying the business as contractor. He submitted that the trust is supporting the Harvesting and Transport (H&T) labourers and is also helping the agriculturists at large by educating them regarding best seeds of sugarcane, fertilizers and pesticides to be used and also provides the facility of vaccination to the bulls of the farmers. He submitted that the trust is also running “Zunka Bhakri Kendra” for providing bread and butter to the needy labourers. It also provides harvesting demo facility to the farmers at large. Thus, the assessee trust is engaged in the charitable activities and not carrying on any business. He submitted that the Assessing Officer has misinterpreted the activities of the trust and has taken view that trust is engaged in business of contractorship and accordingly estimated the profit @ 8% by invoking the provisions of section 44AD of the Act and further disallowed the interest paid on bank loan without appreciating the exact nature of transaction.

14. The Ld. Counsel for the assessee reiterated that the supervision charges received from the Sugar Factory are not “income” in the commercial sense. He submitted that the Trust calculates the total cost of helping illiterate labourers such as salaries, admin, interest etc. Any small income earned is deducted and the net deficit is reimbursed by the Sugar Factory. Referring to the resolution of the sugar factory he submitted that the payment is calculated specifically to cover the Trust’s expenses which confirms a “No Profit, No Loss” mandate. He submitted that the disallowance of interest of Rs.2,83,27,925/- for assessment year 2011-12 by the Assessing Officer and such similar disallowances of later years creates an artificial profit where none exists. He submitted that the trust pays interest to banks (BOB, JOB, IDBI) on funds used to provide vital advances to rural labourers. This is a direct cost of its charitable objects. He submitted that the Sugar Factory reimburses this exact interest amount to the Trust. This is credited to the Income & Expenditure account as a recovery of cost. He submitted that by treating the reimbursement of interest as Revenue and further disallowing the interest as Expenditure the Assessing Officer is taxing a gross recovery without allowing the actual cost which is contrary to the principles of real income.

15. So far as the objection of the Assessing Officer that those banks issued loans to individuals and not to the trust is concerned, the Ld. Counsel for the assessee submitted that due to lack of collateral security, loans are sanctioned to labourers. He submitted that with the trust’s guarantee, banks transfer these funds directly into the trust’s account in lots. Referring to pages 4 to 12 of written submission the Ld. Counsel for the assessee drew the attention of the Bench to such transfers by Bank of Baroda to the account of the trust. Referring to pages 15 to 19 of written submission, he drew the attention of the Bench to the loans transferred to the trust’s account by Indian Overseas Bank. Similarly, referring to page 27, he drew the attention of the Bench to the loan transferred by IDBI bank to the account of the assessee trust. He submitted that the trust distributes these as advances and repays the bank and bears the interest. Referring to various pages of paper book, he drew the attention of the Bench to the sanction letters from Bank of Baroda, Indian Overseas Bank and IDBI Bank and submitted that the sanction letters also confirm this mechanism. He accordingly submitted that since these receipts are a mere reimbursement of expenses including interest and the trust operates as a pass through entity for the welfare of the rural labour class and there is no business profit to be taxed u/s 44AD and the modus operandi clearly demonstrates that it is deficit base funding, therefore, question of disallowing any interest does not arise.

16. So far as ITA Nos.1882/PUN/2025 and 1883/PUN/2025 for assessment years 2010-11 and 2018-19 are concerned, he submitted that here this is the first round of litigation before the Tribunal where the Assessing Officer treated the trust as a contractor and applied the provisions of presumptive tax and estimated the profit 8% on advances routed through the trust. Further, he has also made the disallowance of interest on loan and further added supervision charges and certain disallowances u/s 40(a)(i)(a) without appreciating the fact that for the relevant years no disallowance was prescribed in the statute for TDS default in case of trust.

He accordingly submitted that the arguments for the first four years may be considered while deciding the issue.

17. The Ld. DR heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

18. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case initially treated the society as contractor of H & T workers and treated the advances given to these H&T workers as turnover of the assessee trust and estimated the profit @ 8% of such turnover. He further disallowed the interest expenses debited to Income and Expenditure account by invoking provision of section 43B(e) and disallowed such interest.

19. In the first round of appeal the Ld. CIT(A) / NFAC deleted the addition made by the Assessing Officer both on account of estimation of profit @ 8% as well as interest addition made u/s 43B. We find on further appeal by the Revenue, the Tribunal set aside the matter to the file of the Assessing Officer for arriving at correct computation of income by treating assess ee’s status as pass through entity only. We find the Assessing Officer in the set aside proceedings disallowed the interest on loan of Rs.2,83,27,925/- which has been sustained by the Ld. CIT(A) / NFAC, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the receipts are a mere reimbursement of expenses (including interest) and the trust operates as a pass through entity for the welfare of the rural labour class and there is no business profit to be taxed. Further, the assessee has debited the interest expenditure which is routed through the income and expenditure account on account of loans being transferred to the assessee’s trust on behalf of the individual borrowers. Such interest has been reimbursed by Shri Dnyaneshwar Sahakari Sakhar Karkhana Ltd. It is also his submission that the allegation of the Revenue that the bank has disbursed the loans to H & T Contractor and not to the assessee’s trust is factually incorrect.

20. We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of some of the loans disbursed on account of H & T advances to the assessee trust by Bank of Baroda are as under:

23. We find clause (N) of the above terms and conditions shows that H & T arrangement will be managed by Dnyaneshwar Trust, a no profit, no gain trust promoted for the management as well as betterment of labourers involved in the activity. All these things clearly and categorically show that the banks have disbursed the loan to the assessee trust on behalf of H & T Contractors. Therefore, when the assessee trust pays interest to the banks which in turn has been reimbursed to the assessee by Shri Gnyaneshwar SSK Limited, such interest expenditure could not have been disallowed by the Assessing Officer and confirmed by the Ld. CIT(A) / NFAC. We, therefore, set aside the order of the Ld. CIT(A) / NFAC and direct the Assessing Officer to delete the disallowance of interest on loan amounting to Rs.2,83,27,925/-. Similarly, the Assessing Officer is also directed to delete the interest disallowance of Rs.3,86,39,767/- for assessment year 2012-13, Rs.4,11,48,160/- for assessment year 2013-14 and Rs.10,23,29,756/-for assessment year 2016-17.

ITA No.1882/PUN/2025 (A.Y. 2010-11)

24. So far as ITA No.1882/PUN/2025 is concerned, as mentioned earlier, this is the first round of litigation before the Tribunal. A perusal of the assessment order shows that the Assessing Officer has determined the total income of the assessee at Rs.3,55,05,459/- by making the following additions:

i. Addition @ 8% of gross receipts 2,06,90,138/-

ii. Disallowance of interest u/s 43B(e) 46,25,263/-

iii. Supervision charges 1,00,19,078/-

iv. Disallowance of legal expenses u/s 40(a)(ia) Rs.1,07,030/-

v. Disallowance of audit fee u/s 40(a)(ia) 63,950/-

25. We find in appeal, the Ld. CIT(A) / NFAC deleted the disallowance of audit fee of Rs.63,950/- made by the Assessing Officer u/s 40(a)(ia) of the Act. He, however, has sustained the other additions made by the Assessing Officer.

26. So far as the addition of Rs.2,06,90,138/- made by the Assessing Officer by estimating the profit @ 8% of gross receipts is concerned, the same is liable to be deleted in view of the decision of the Tribunal in assessee’s own case for assessment years 2011-12, 2012-13, 2013-14 and 2016-17. We find, following the order of the Tribunal, the Assessing Officer has not made any addition and restricted the addition only by disallowance on interest u/s 43B(e) of the Act. Therefore, the addition made by the Assessing Officer by estimating the profit @ 8% for assessment year 2010-11 is liable to be deleted. We, therefore, direct the Assessing Officer to delete the addition.

27. So far as the disallowance of interest u/s 43B(e) of Rs.46,25,263/- is concerned, we find the same is identical to the ground raised by the assessee in ITA Nos.1881/PUN/2025, 1880/PUN/2025, 1879/PUN/2025 and 1884/PUN/2025 for assessment years 2011-12, 2012-13, 2013-14 and 2016-17 respectively. We have already decided the issue and directed the Assessing Officer to delete the addition. Following similar reasonings, the ground raised by the assessee is allowed.

28. So far as the addition of Rs.1,00,19,078/- on account of supervision charges is concerned, we find the Assessing Officer made disallowance on the ground that the assessee has debited an amount of Rs.2,20,96,871/- on account of objectives of the trust which includes the expenditure of Rs.1,00,19,078/- on account of supervision charges. Since the assessee did not justify the said expenses particularly with respect to the disallowance u/s 40(a)(ia) of the Act, the Assessing Officer, in absence of any TDS details, disallowed the same and made addition of Rs.1,00,19,078/-.

29. We find in appeal the Ld. CIT(A) / NFAC upheld the same by observing as under:

5.5. Vide the ground no. 3 of the appeal, the appellant has assailed the addition of supervision charges to the tune of Rs.1,00,19,078/-. During the assessment proceedings, the AO had required the appellant to explain the bonafide of such payment since TDS of such payment was not deducted. The appellant claimed that such amount represented grants from Government and no TDS on the such payment was required and that the amount was treated as supervision charges ‘due to clerical mistake’. On further probing by the AO it emerged that the appellant had paid the amount to Sangamner Bhag Sahkari Sakar Karkhana Ltd. (SBSSKL) for SBSSKL was responsible for crushing all the excess sugarcane produced in area of operation of DSSKL. The AO has rightly held that if at all the Government subsidy/grant had to be shares with SBSSKL, it could have been done by DSSKL, the present appellant had no role there. During the appellate proceedings, the appellant has reproduced verbatim the same submission which has been already been rejected by the AO. Nothing new brought on record, moreover, the plea in the appellant’s submission does not address or controvert the basis on which the AO had disallowed the amount of Rs.1,00,19,078/-. The ground no. 3 of the appeal is accordingly dismissed.

30. It is the submission of the Ld. Counsel for the assessee that for the relevant assessment year no disallowance was prescribed in the statute for TDS default in case of trust. It is his submission that since the trust is registered u/s 12A of the Act since 1982 and there is no change in the object of the trust or activities of the trust and the trust is regularly filing its return of income in the status of “Trust” and claiming deductions u/s 11 to 13 of the Act, therefore, no disallowance is called for.

31. We find before the Ld. CIT(A) / NFAC the assessee has not addressed or controverted the basis on which the Assessing Officer had disallowed the amount of Rs.1,00,19,078/- for which he has dismissed the ground raised before him. It is the submission of the Ld. Counsel for the assessee that the assessee is not required to deduct TDS from the payments made. It is his submission that no disallowance was prescribed in the statute for TDS default in case of trust. Since it is his submission that given an opportunity the assessee is in a position to substantiate its case by filing the requisite details, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give one opportunity to the assessee to substantiate its case by filing the requisite details. Needless to say, the Assessing Officer shall decide the issue after providing due opportunity of being heard to the assessee as per fact and law. Ground No.3 raised by the assessee is accordingly allowed for statistical purposes.

32. In ground No.4 the assessee has challenged the order of the Ld. CIT(A) / NFAC in confirming the disallowance of Rs.1,07,030/- u/s 40(a)(ia) of the Act.

33. After hearing both the sides, we find it is the submission of the Ld. Counsel for the assessee that no disallowance was prescribed in the statute for TDS default in case of trust. In the preceding paragraphs while deciding the ground No.3, we have restored the issue to the file of the Assessing Officer for fresh adjudication. Following similar reasonings, this ground is also restored to the file of the Assessing Officer for adjudication of the issue afresh. This ground is accordingly allowed for statistical purposes.

34. In ground No.5 the assessee challenged the order of the Ld. CIT(A) / NFAC in confirming the addition of Rs.63,950/- u/s 40(a)(ia) of the Act on account of audit fees. However, a perusal of the order of the Ld. CIT(A) / NFAC shows that he has deleted the addition by observing as under:

5.7.2. The AO had made the addition due to failure of the appellant to specifically answer the query which was raised vide letter dated 05.05.2017 and 19.12.2017″ with regard to admissibility of audit fee. In this case, the appellant has made specific explanation as reproduced above and therefore, it seems that the appellant had complied with the TDS provisions and the expenditure becomes admissible when seen from the prism of section 40(a)(ia), therefore, the ground no. 5 of the present appeal is allowed.

35. Therefore, the ground raised by the assessee becomes infructuous and is dismissed.

ITA No.1883/PUN/2025 (A.Y. 2018-19)

36. The grounds raised by the assessee are as under:

1. On the facts and in the circumstances of the case and in law. Ld. AO erred in making an addition of Rs.4,49,93,157/- being estimated profit @ 8% on gross receipts without appreciating the detailed submissions and documentary evidences placed on record, while doing so Ld AO has not even rejected books of accounts therefore estimating the income without any basis is incorrect and therefore entire addition deserves to be deleted.

Your appellant prays for deletion of entire addition. Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of principle of natural justice.

37. After hearing both the sides, we find the Assessing Officer in the order passed u/s 143(3) r.w.s. 147 r.w.s. 254 of the Act for assessment years 2011-12, 2012-13, 2013-14 and 2016-17 has not made any addition by estimating the profit @ 8% of the gross receipts after the order of the Tribunal. Since this issue is raised before the Tribunal for the first time and since the Assessing Officer or the Ld. CIT(A) / NFAC had no benefit of the order of the Tribunal while deciding the issue during the first round of litigation, therefore, the addition made by the Assessing Officer by estimating the profit @ 8% which has been sustained by the Ld. CIT(A) / NFAC is directed to be deleted. Grounds raised by the assessee for assessment year 2018-19 are accordingly allowed.

38. In the result, ITA Nos.1881/PUN/2025, 1880/PUN/2025, 1879/PUN/2025 and 1884/PUN/2025 for assessment years 2011-12, 2012-13, 2013-14 and 2016-17 respectively filed by the assessee are partly allowed. ITA No.1882/PUN/2025 for assessment year 2010-11 is partly allowed for statistical purposes.     ITA No.1883/PUN/2025 for assessment year 2018-19 is allowed.

Order pronounced in the open Court on 20t^h April, 2026.