Revenue erred in taxing gross receipts of Trust without considering expenditure; grants full stay of demand.

The Writ Petition was filed challenging the order dated 11.07.2025 passed by Respondent No. 1. By the impugned order, Respondent No. 1 directed the Petitioner to deposit 15% of the demand as a condition precedent for granting a stay pending disposal of the appeal filed by the Petitioner before Respondent No. 3.

The Bombay High Court allowed the assessee’s writ petition and stayed the entire demand against the assessee till the disposal of the assessee’s appeal before the CIT(A). The High Court also set aside the order passed by the CIT(Exemption) directing the assessee to deposit 15% of the demand as a condition precedent for granting a stay.

The High Court noted that the assessee is an Educational Trust which is fully funded by the State Government and is not a trust registered under Section 12A of the Income-tax Act. In the present case, the CIT(Exemption) held that although the assessee claimed that it was eligible for exemption under Section 10(23C)(iiiab), the income and expenditure statement, as applicable to assessees claiming exemption under Section 10(23C)(iiiab) or Section 10(23C)(iiiac), was not filled in by the assessee. On this basis, the CIT(Exemption) held that the claim for exemption was not validly made in the return of income for AY 2020-21 and, accordingly, refused to grant a stay of the entire demand and directed the assessee to deposit 15% of the demand.

Having considered the fact that the assessee was neither registered under Section 12A nor had it filed the requisite income and expenditure statement in Schedule IE-3, the High Court emphasised that the CIT(Exemption) failed to notice that the Assessing Officer had brought the gross receipts to tax and not the income of the assessee.

The High Court noted that in the return of income, the assessee had declared income of Rs. 1.83 crore and had also disclosed expenditure of Rs. 1.84 crore. The High Court held that before bringing any amount to tax, the Assessing Officer was required to consider the expenditure incurred by the assessee. This aspect was completely overlooked by the authorities.

The High Court observed that once this fundamental issue was ignored, the assessee had clearly made out a case for stay of the entire demand. This was further strengthened by the fact that the assessee is an Educational Trust fully funded by the State Government. Accordingly, the entire demand was stayed till disposal of the appeal before the CIT(A).

Decision: In favour of the assessee

Case: Godavari Shikshan Prasarak Mandal Sindhi v. CIT (Exemption), Pune and Others
Citation: TS-1646-HC-2025 (BOM)
Date of Judgment: 09.12.2025
Court: Bombay High Court