ITO Vs Manav Sanskar Shiksha Sanstha (ITAT Delhi)
Form 10B Non-Filing Denies Exemption but Does Not Justify Taxing Gross Receipts; ITAT Denies Section 11 Exemption Because Form 10B Was Not Filed, Allows Expense Deduction
Summary: The Income Tax Appellate Tribunal (ITAT), Delhi, partly allowed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) concerning a charitable society registered under Section 12AA. The Central Processing Centre (CPC) had denied exemption under Sections 11 and 12 because the assessee failed to file the mandatory audit report in Form 10B, resulting in taxation of the entire gross receipts. The CIT(A) deleted the addition, observing that the assessee had reported a deficit and had not claimed exemption under Section 11. The Tribunal held that non-filing of Form 10B disentitled the assessee from claiming exemption under Sections 11 and 12. However, it also held that the entire gross receipts could not be subjected to tax where there was no dispute that the expenditure had been incurred for achieving the charitable objects of the society. Relying on the jurisdictional High Court’s decision, the Tribunal upheld deduction of expenditure against gross receipts while denying the exemption, thereby partly allowing the Revenue’s appeal.
Core Issue: Whether, in the absence of Audit Report in Form 10B, a charitable institution registered under section 12A can be taxed on its gross receipts, or whether expenditure incurred for charitable objects must still be allowed while computing taxable income.
