Appellate Tribunal Allows Deduction to 120-Year-Old Jain Religious Society; Ad-Hoc Disallowance Quashed

Intazamiya Kameti Shri Hastinapur Teerth, a religious society managing Jain temples at Hastinapur, derived income mainly from voluntary contributions and interest. For AY 2022–23 and AY 2023–24, it claimed expenditure under Section 57(iii) against such income. The Assessing Officer disallowed 30% of expenditure in AY 2022–23 and 100% in AY 2023-24 on an ad-hoc basis.

The CIT(A)/NFAC upheld the disallowances, citing absence of registration under Sections 12A/80G. The society appealed.

Issue Before Tribunal: Whether voluntary contributions taxable under Section 2(24) can be assessed under “Income from Other Sources” with deduction of related expenditure under Section 57(iii), and whether ad-hoc disallowance without rejecting books is valid.

ITAT’s Ruling: The Tribunal observed that no defects in books or genuineness of expenditure were pointed out, yet disallowances were made mechanically. Relying on CIT v. Rajendra Prasad Moody, it held that Section 57(iii) allows deduction if expenditure is incurred wholly and exclusively for earning income, irrespective of actual results.

Following Petroleum Sports Promotion Board v. DCIT and Shri Sanatan Dharam Mandir Sabha v. ITO, the Tribunal held that absence of registration under Sections 12A/80G does not bar deduction once voluntary contributions are taxed as income. Ad-hoc disallowance without rejecting books was held arbitrary.

The disallowances for both years were deleted. The additional ground on Section 143(2) notice was dismissed as not pressed. Both appeals were partly allowed.

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