Tribunal directs Assessing Officer to allow disallowed expenditure for charitable activities in 2018-19.

The Tribunal allowed the assessee's appeal against the CIT(A) order for the assessment year 2018-19. The Tribunal directed the Assessing Officer to allow the expenditure disallowed by the CIT(A), treating the remaining income as surplus for taxation. The decision emphasized the proper treatment of expenditure for charitable activities and surplus income under relevant tax provisions, even without specific registrations.

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Issues:
Appeal against CIT(A) order for assessment year 2018-19 - Disallowance of expenses - Variance in data between ITR-7 and audit report - Exemption u/s. 10(23C) - Treatment of expenditure for charitable trust - Registration u/s. 12AA - Application of provisions of Income tax Act - Addition made by AO-CPC - Opportunity of hearing - Treatment of surplus income - Allowance of expenditure under section 57(iii).

Analysis:
The appeal was filed by the assessee against the CIT(A) order for the assessment year 2018-19. The assessee, a charitable trust running a school, claimed exemption u/s. 10(23C)(iiad) for the excess of gross receipts over expenditure. The Assessing Officer disallowed revenue expenditure of &8377; 73,10,521/-, resulting in total income assessment at &8377; 91,23,206/-. In the first appeal, the CIT(A) upheld the addition, assuming data from the audit report filed by the assessee. The AR argued that no audit report was filed, and the CPC made the addition without providing a hearing, citing inadvertent mistakes. The AR contended that as the trust lacked registration u/s. 12AA, it should be treated as an AOP, and all expenditure for AOP activities should be allowed before taxing the surplus income.

The Senior DR opposed the AR's submissions, stating that the CPC acted based on the information provided in the e-return, and the notice to the assessee was not adequately responded to. The AR reiterated that the expenditure was exclusively for the trust's activities and should be allowed as per accounting principles. The Tribunal noted the ITAT Indore Bench's decision and held that even without registration u/s. 12AA, all incidental expenditure for income generation must be allowed under section 57(iii). As the trust's income was below &8377; 1,00,00,000/-, no audit report was required. The Tribunal directed the AO to allow the expenditure of &8377; 73,10,521/-, treating the remaining income as surplus for taxation. The appeal of the assessee was allowed, emphasizing the proper treatment of expenditure and surplus income.

In conclusion, the Tribunal's decision favored the assessee, emphasizing the allowance of expenditure incurred for charitable activities and the treatment of surplus income under relevant tax provisions. The judgment highlighted the importance of accurate reporting and the application of legal provisions regarding expenditure and income taxation for charitable trusts, even in the absence of specific registrations.

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