Rana Educational Trust Vs ITO (ITAT Chennai)
Losing Section 11 Exemption Does Not Turn Every Receipt Into Income-Trust Taxable Only on Real Net Income After Allowable Expenses: Chennai ITAT
The Chennai ITAT has held that denial of exemption u/s 11 does not authorise the Department to mechanically treat the entire gross receipts of a trust as taxable income.
Denial of exemption & computation of taxable income are two distinct exercises. Even where the trust does not possess registration u/s 12A or fails to file the prescribed audit report within time, its taxable income must still be determined under the applicable provisions of the Act after examining legitimate & admissible expenditure.
The Tribunal therefore restored the matter to the jurisdictional AO to compute the trust’s real net income instead of taxing its gross receipts of ₹1,04,01,040.
Facts of the Case
Rana Educational Trust was running Kaveri College of Engineering and Technology in the Trichy District.
For AY 2024-25, the trust filed its return in ITR-7 on 13.11.2024 & claimed exemption u/s 11.
While processing the return u/s 143(1), CPC denied the exemption on the ground that the prescribed audit report had not been furnished within the statutory time. It then brought the trust’s entire gross receipts of ₹1,04,01,040 to tax without allowing any expenditure.
