Sarvoday Pratishthan Vs ITO (Exemption) (ITAT Pune)
Section 12AA Registration Shields Trust – Gross Receipts of Charitable Trust Cannot be Taxed Merely Due to ITR Filing Errors – Charitable Activities Prevail Over Technical Lapses – Pune ITAT Remands Case for Fresh Verification
Assessee, a public charitable trust formed in 1993, engaged in education & health activities for the needy, filed its return for AY 2017-18 on 20.12.2017 declaring NIL income, showing gross receipts of ₹1,78,10,242/- & Application of Income (Expenses) of ₹1,89,76,471/-, resulting in deficit. However, the return was processed u/s 143(1)(a) by CPC, which denied exemption & treated the entire receipts as taxable income, assessing total income at ₹1,78,10,242/-.
CIT(A) dismissed the case, holding that though return was filed in ITR-7, it was wrongly filed under Section 139(4B) (meant for political parties) instead of 139(4A) (for trusts). There was no mention of registration u/s 12A/12AA, nor filing of Form 10 or 10B (Audit Report). In absence of proper compliance, CPC was justified in taxing gross receipts without considering application of income. Thus, the appeal was rejected.
Before ITAT, Assessee argued that it was granted registration u/s 12AA on 22.01.2018, effective from FY 2017-18 onwards, covering the impugned assessment year. Errors in return filing (selection of wrong section, omission of details) were inadvertent & technical. Genuine charitable activities were carried out, & expenses exceeded receipts, leaving no taxable surplus. CPC’s approach of taxing gross receipts instead of net income was contrary to the Act. In assessee’s own case for AY 2016-17, the Pune ITAT had already remanded the matter for verification of activities & expenses & requested similar relief for AY 2017-18.
