The Chennai Income Tax Appellate Tribunal (ITAT) has held that a mere mistake in the filing of return of income would not result into enhancement of the assessee’s income.
Assessee is a trust who earned an income of Rs.517.39 L and incurred expenditure of Rs.555.57 L. The excess application of income, thus was Rs.38.17 L. However, the assessee disallowed an amount of Rs.48.69 Lacs u/s 40(a)(ia) and computed net income of Rs.10.51 Lacs which has been offered to tax and due taxes have been paid thereon. The CPC, vide communication dated 20.03.2020, proposed an adjustment of Rs.38.17 Lacs since the additions were on account on noncompliance of the provisions of the Act and therefore, the exemption as applicable to Trust on this income would not be available to the assessee.
After hearing the contentions of both the parties, the Tribunal held that “We find that assessee trust is registered u/s 12AA and eligible to claim exemption as applicable to a registered trust. As per the provisions of Sec.11(1)(a), the income derived by the trust from property held under trust for charitable or religious purposes would not be included in its total income to the extent to which such income has been applied for charitable purposes in India. This sub-section also provide that the income accumulated or set apart for the charitable purposes which is not in excess of 15% of income shall also not be included in its total income. The Explanation-3 to Sec.11(1) as inserted by Finance Act, 2018 w.e.f. 01.04.2019 provide as under: –
“For the purposes of determining the amount of application under clause (a) or clause (b), the provisions of sub-clause (ia) of clause (a) of section 40 and sub- sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.”Finance Act, 2018
Correctly applying the provisions of law, the assessee’s income is to be computed as Rs.10,51,705/-. Merely because there is mistake in filing the corresponding columns in the return of income, the same would not result into enhancement of the assessee’s income. Therefore, we direct CPC to rectify the intimation and compute the income as Rs.10,51,705/- as offered by the assessee to tax.
The appeal stands allowed in terms of our above order.
M/s. Chinna Ponnu Ammal Trust vs DCIT
Assessment Year: 2019-20
Decision in Favour of: AssesseeINCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, CHENNAI