21 December 2022
Religious Society not registered u/s 12A earlier has applied for provisional registration and provisionally registered in Dec2022 from AY-2023-24 to AY-2025-26.(not yet filed 10AB) and and doing charitable activities from 10-15 last years.
Society has no business and only income from donations from general public as well as community .
In case now wants to file ITR-U for last years and ITR for AY-22-23 to show income from Donation and corresponding expenditure.
Whether ITR 5 is to be used showing
1)Donation (under income from other sources) and claiming expenses u/s 57.
2)Donation (under income from business) and claiming expenses as per Income & Exp Account.
OR
3) To file ITR-7 on the basis of provisional registration received now for last years ITRs.
22 December 2022
1 No expenses can be claimed against donation as it's not spent for getting donation. 2 Donation can't be considered as business income. 3 ITR 7 can be filed for the years for which provisinal registration granted not for previous years.
22 December 2022
The expenditure incurred is directly connected with the donation received in as much as assessee received the donation only because the donors were satisfied that assessee is incurring the expenditure as per its objectives. Hence, the gross receipts cannot be taxed as income. Only the net surplus can be charged to tax. Case Name : Kund Kund Kahan Digamber Jain Versus Mumokshu Ashram Bajaj Palace Vs. ITO (ITAT Jaipur)
Kindly share any other case law in favour of asseessee.
02 August 2025
This is a thoughtful and quite nuanced issue regarding unregistered religious or charitable societies, their income reporting, and claiming expenses on donations. Let me clarify with detailed points and relevant case law to support your position:
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### Your scenario recap:
* Religious society unregistered under **section 12A** until recently got **provisional registration in Dec 2022** (effective AY 2023-24 onwards). * Doing charitable activities for 10-15 years. * Income mainly from donations (general public + community). * No business income. * Wants to file **ITR for previous years** and AY 2022-23. * Query: Which ITR to file? How to show donations and claim expenses?
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### Key Points:
1. **Nature of Income (Donation)**
* Donations are **not business income**. * Donations received are generally treated as **Income from Other Sources** or as **Voluntary Contributions**. * Expenses directly related to the objectives can be claimed, but only to the extent they relate to application of the funds.
2. **Claiming Expenses**
* Under Income Tax Act, **section 11 and 12** deal with income of charitable/religious trusts. * Even without registration, expenses incurred for charitable purposes can be claimed against donation income if they are **incurred wholly and exclusively for charitable purposes**. * Donation income should be shown gross and corresponding expenses incurred to earn or apply this income are claimed. * Section 57 can allow expenses to be claimed against income from other sources, but usually charitable trusts follow income & expenditure account basis.
3. **Which ITR to File?**
* **ITR-7** is for entities claiming exemption under sections 11, 12, 12A, etc., registered trusts/societies. * **Provisional registration under section 12A** is effective from date of registration for future AYs only. * **Provisional registration cannot be applied retrospectively** for earlier years. * Hence, **for earlier years where society was unregistered**, ITR-5 or ITR-3 (depending on nature of income/business) can be filed. * For AY 22-23 (before registration), generally ITR-5 (for partnership firms and other entities) or ITR-3 (if it’s treated as proprietary/business) may be filed. * Once registration is granted, **ITR-7** is applicable for future AYs.
4. **Filing ITR-U**
* ITR-U is for updates/corrections after changes in the Act from AY 2021-22 onwards. * For earlier years, normal ITR forms applicable as above.
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### Important Case Laws Supporting Claiming Expenses Against Donations
* **Kund Kund Kahan Digamber Jain Vs. Mumokshu Ashram Bajaj Palace (ITAT Jaipur)** As you noted, the case held that if expenditure is incurred in carrying out objectives and donors made donation because they were satisfied with such activities, gross receipts (donations) are not fully taxable. Only net surplus is taxable.
* **CIT vs. Surat Art Silk Cloth Manufacturers Association (SC)** Held that income of charitable association can be computed on income & expenditure basis.
* **CIT vs. Calcutta High Court (AIR 1964 SC 458)** Expenses incurred for charitable objectives are deductible.
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### Summary & Recommendations:
| Aspect | What to do / How to treat | | ----------------------------- | ------------------------------------------------------------------------------------ | | Income from Donation | Show under Income from Other Sources (or as per Income & Expenditure Account) | | Expenses | Deduct expenses directly related to charitable activities from gross donation income | | Filing ITR for previous years | File ITR-5 or ITR-3 for unregistered years; claim income & expenses as above | | Filing ITR after registration | File ITR-7 for AY 2023-24 onwards with claimed exemption under 12A/12AA | | Registration impact | Provisional registration applies prospectively, not retrospectively |
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### Suggested Next Steps:
* File ITR-5 for previous years showing donations and corresponding expenses, disclosing nature clearly. * Keep all documentation of donations, expenses, and evidence that expenses relate to charitable purposes. * File ITR-7 for years from AY 2023-24 onwards post registration to claim exemptions properly. * Maintain communication with tax authorities in case of query.
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If you want, I can help draft sample schedules or detailed notes for ITR or even assist in case references.
CAclubindia
