Trust's income computation upheld in appeal, Revenue's challenge dismissed. Follow sections 11 & 12, not business income rules.

The appeal by Revenue challenging the deletion of an amount treated as income of the trust and the computation of income made by the assessee was dismissed. The CIT(A) held that the waived amount was not income as it was not claimed as expenditure for charitable purposes. The assessee, a registered trust, should follow provisions of sections 11 and 12, not 'profits and gains of business or profession'. The A.O.'s incorrect computation was rectified by the CIT(A), and the Tribunal upheld this decision, rejecting the Revenue's arguments based on case laws related to business income computation.

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Issues:
1. Deletion of amount treated as income of the trust
2. Computation of income made by the assessee in the return of income

Deletion of amount treated as income of the trust:
The appeal by Revenue challenged the deletion of an amount of Rs.12,72,180 treated as income of the trust and the computation of income made by the assessee. The Assessing Officer (A.O.) added the waived amount of a loan as income, considering the assessee as a company following the mercantile system of accounting. However, the CIT(A) held that the waived amount was not claimed as expenditure or application for charitable purposes, thus not constituting income. The A.O. failed to consider that the assessee, a registered trust, should follow provisions of sections 11 and 12, not 'profits and gains of business or profession'. The CIT(A) decision was upheld, rejecting the Revenue's argument based on case laws related to business income computation.

Computation of income made by the assessee in the return of income:
The A.O. ignored the computation by the assessee showing excess expenditure over income, starting the income computation at NIL and adding all amounts as income without granting any exemption under section 11. The A.O. relied on a Rajasthan High Court decision which the CIT(A) found inapplicable to the current case. The CIT(A) allowed the assessee's contention, stating that the A.O. wrongly applied the principles and directed correct computation. The Tribunal found no merit in the Revenue's contentions and dismissed the appeal, upholding the CIT(A)'s decision.

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