Vir Savarkar Swimmers Club Vs ITO (ITAT Pune)
Gross Receipts Cannot Be Taxed – Net Income Only in Absence of 12A Registration- Technical lapses should not lead to unjust enrichment of Revenue.- Income-Tax on ‘Real Income’, Not Gross Turnover
Vir Savarkar Swimmers Club, a registered society, filed its return of income declaring Nil income after claiming exemption u/s 11. However, CPC denied the exemption & taxed the entire gross receipts of ₹47,77,268/- (AY 2019-20), citing two technical lapses- Non-furnishing of registration details u/s 12A & Failure to file audit report in Form 10B along with return.
Subsequently, Assessee obtained provisional registration u/s 12A w.e.f. AY 2021-22 (granted on 27.05.2021). The lower authorities refused to consider the exemption for AYs 2019-20 & 2020-21, leading to appeals before ITAT
Before the Tribunal. Assessee argued that exemption u/s 11 should not be denied merely on technical delay in filing Form 10B and also that Income is wrongly assessed at gross receipts instead of net income. Alternatively, the assessee had deficit/expenditure exceeding income, hence no taxable surplus arose. At minimum, only revenue expenses must be allowed against receipts, taxing only the surplus. Non-grant of credit for prepaid taxes was also challenged.
Tribunal held that since Assessee was not registered u/s 12A during the relevant assessment years, exemption u/s 11 was not available. Tribunal howver strongly disagreed with the approach of taxing gross receipts. Relying on precedents like Muslim Education Society vs. ITO & Dr. Sukumar J. Magdum Foundation, Tribunal reaffirmed that income-tax is levied on net commercial income after allowing expenditure, not on gross receipts. On Alternative Claim u/s 10(23C)(iiiad), Tribunal directed AO to verify eligibility of Assessee for exemption u/s 10(23C)(iiiad).
