Charitable trust income computation: gross receipts cannot be taxed in full; only net surplus after verified expenditure and depreciation.

Absence of renewed registration under section 12A/12AB meant exemption under section 11 was not available for the relevant year. However, gross receipts could not be taxed in full as income; only the net surplus, after allowing verified expenditure and depreciation, was the appropriate tax base. The record therefore required verification of the assessee's expenditure and depreciation claims, and the matter was remitted to the Assessing Officer for recomputation. The claim for full exemption failed, but the addition of entire gross receipts was set aside for fresh examination.

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Issues: (i) Whether exemption under section 11 could be denied for the year under consideration in the absence of renewed registration under section 12A/12AB; (ii) Whether the entire gross receipts could be brought to tax, or only the net surplus after allowing expenditure and depreciation.

Issue (i): Whether exemption under section 11 could be denied for the year under consideration in the absence of renewed registration under section 12A/12AB.

Analysis: The assessee did not have renewed registration for the relevant year and, on that basis, the claim of exemption under section 11 was not available. The dispute, therefore, did not turn on allowance of exemption, but on the correct measure of income to be brought to tax.

Conclusion: Exemption under section 11 was not available for the year under consideration.

Issue (ii): Whether the entire gross receipts could be brought to tax, or only the net surplus after allowing expenditure and depreciation.

Analysis: Gross collection could not be taxed as income in full. Commercial prudence required allowance of matching expenditure incurred in carrying out the charitable activities, and the record required verification of the assessee's claim regarding expenditure and depreciation.

Conclusion: Only the net surplus was to be brought to tax, and the matter was remitted to the jurisdictional Assessing Officer for verification and recomputation.

Final Conclusion: The appeal succeeded only to the extent that the addition of the entire gross receipts was set aside for fresh verification, while the claim for exemption under section 11 was not accepted for the relevant year.

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