Hegde Charitable Trust Vs ITO (ITAT Bangalore)
No Form 10B, but Can the Entire Receipts of a Charitable Trust Be Taxed? Bengaluru ITAT Says Expenses Must Be Examined
A charitable trust’s failure to file its audit report in Form 10B led the Centralised Processing Centre (CPC) to deny its section 11 exemption and tax its entire gross receipts of ₹9,13,841. The trust did not ask the Income Tax Appellate Tribunal to restore the exemption. Its narrower argument was that, even without exemption, tax could be charged only on income remaining after allowable expenses.
The Bengaluru ITAT accepted that distinction. It held that denial of section 11 exemption does not, by itself, justify taxing gross receipts without considering legitimate expenditure. The Tribunal sent the matter to the Assessing Officer (AO) to examine the expenses and determine what could be allowed. It did not calculate the trust’s taxable income.
How the dispute arose
Hegde Charitable Trust, Mangaluru, was registered under section 12AA for educational purposes and the advancement of an object of general public utility. For assessment year 2019–20, it filed a return declaring nil income after claiming exemption under section 11.
The CPC proposed an adjustment because the trust had not electronically filed Form 10B on or before filing its return. In an intimation dated 14 August 2020, it denied the exemption, brought the trust’s gross receipts of ₹9,13,841 to tax and raised a demand of ₹1,26,911.
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