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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER
PER KUL BHARAT, JM :
The present appeal filed by the assessee for the assessment year 2012-13 is directed against the order of Ld. CIT(A), Ghaziabad dated 10.05.2016.
The assessee has raised following grounds of appeal:- 1. “Disallowance by the Commissioner of Income tax Appeal, the Assessing Officer setting off carry forward business loss/depreciation is unjustified. The assessee has claimed this carry forward business loss/depreciation as a application of fund during this year. The disallowance is contrary to facts and law and therefore is liable to be deleted.
2. The appellant craves leave to add or amend any of the grounds of appeal.”
3. Facts giving rise to the present appeal are that in this case, the assessee is a society, duly registered with Registrar of Society, Uttar Pradesh and has been granted registration u/s 12A of the of the Income Tax Act, 1961 (“the Act”). The case of the assessee was taken up for scrutiny assessment and the assessment was framed vide order dated 25.03.2016 u/s 143(3) of the Act. The Assessing Officer (“AO”) while framing the assessment, made addition in respect of disallowance of depreciation amounting to Rs. 4,12,981/- and non-application of income for the specified purpose amounting to Rs.9,57,567/-.
4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, partly allowed the appeal of the assessee. Thereby, Ld.CIT(A) sustained addition to the extent of Rs.5,44,586/-.
5. Aggrieved against the order of Ld.CIT(A), the assessee is in appeal before this Tribunal.
Apropos to Grounds of appeal, Ld. Counsel for the assessee reiterated the submissions as made in the brief synopsis. The relevant contents of the brief synopsis are reproduced as under:-
“Respectfully submitted that Appeal in this case was filed by the Appellant on 13.7.2016 in against order passed dated 10.05.2016 by Ld. CIT(A), Ghaziabad, which was dismissed in-limine and now has been restored for fresh adjudication vide order passed dated 08.12.2022 in M.A. No. 349/Del/2018. Copy of Form-36 together with order passed by Ld. CIT(A) and the assessment order are attached as Annexure-1 (Page 1- 19). Brief facts of the case are that assessee is an Educational Trust registered with the Registrar of Society, Uttar Pradesh and is also granted registration u/s 12A of I.T. Act, 1961. For the assessment year under consideration, assessee trust filed its return of income declaring 'Nil' income, however, Ld. AO determined that assessee trust has applied an amount of Rs. 32,11,524/- against available application (85%) i.e. Rs.41,69,091/-, and thus disallowed an amount of Rs.9,57,567/- (Rs.41,69,091/- - Rs. 32,11,524/-) and passed assessment order determining an income of Rs. 9,57,567/-. Hon'ble CIT(A) allowed relief for an amount of Rs. 4,12,981/- vide order dated 10.05.2016 and sustained the disallowance of Rs. 5,44,586/- (Rs. 9,57,567/- - 4,12,981/-), alleging as under: - "The appellant has not furnished any plausible reason why this addition is unjustified. The only plea of the appellant is that it had unabsorbed b/f losses. Firstly this plea is unsubstantiated. Secondly there is no provision under law to allow such claim. Therefore, the addition of unutilized amount of Rs. 5,44,586/- in excess of 15% is confirmed." However, the fact is that for the Assessment year under consideration total surplus was worked out at Rs. 12,89,605/- as per Income & Expenditure A/c and the deficit of the preceding years was Rs. 15,14,917/- as per Balance sheet as on 31.3.2012, which was required to be adjusted against surplus of the assessment year under consideration. Therefore, the remaining surplus worked out Rs.5,44,586/- needs to be adjusted preceding years' deficit brought forward, for which the appellant is before the Hon'ble Tribunal. Ld. CIT(A) without examining the facts of the case decided the issue against the assessee. Copy of the Computation of Income, Balance Sheet, Income and Expenditure A/c are attached as Annexure-2 (Page 20-22). It is respectfully submitted that the case of the appellant assessee is squarely covered with the following judgments: - • Commissioner of Income-tax (Exemption) v. Subros Educational Society* [2022] 136 taxmann.com 236 (SC) JANUARY 11, 2022 Section 11 of the Income-tax Act, 1961 - Charitable or religious trusts - Exemption of income from property held under - Supreme Court by impugned order held that any excess expenditure incurred by trust/charitable institution in earlier assessment year could be allowed to be set-off against Income of subsequent years by invoking section 11 -[In favour of assessee] - (Annexure - 3) (Page 23-24).
• Commissioner of Income-tax (Exemption) v. Subros Educational Society* [2018] 96 taxmann.com 652 (SC) APRIL 16,2018 Section 11 of the Income-tax Act, 1961 - Charitable or religious trusts - Exemption of income from property held under - Appellant revenue raised question as to whether any excess expenditure incurred by trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking section 11 - Whether, there being no merit in aforesaid question of law, miscellaneous application against above question was to be dismissed - Held, yes [Para 2] [In favour of assessee] (Annexure -4) (Page 25) • Commissioner of Income-tax (Exemptions) v. Dawat Properties Trust* [2022] 142 taxmann.com 548 (Gujarat) JULY 7, 2022 Section 11 of the Income-tax Act, 1961 - Charitable or religious trusts - Exemption of income from property held under (Expenditure in earlier year) Assessment year 2014-15 - Whether expenditure incurred in earlier year can be set-off from income of subsequent years and utilization of such income for meeting expenditure of earlier year would amount to such income being applied for charitable or religious purpose - Held, yes [Paras 8 and 10] [In favour of assessee] (Annexure -5) (Page 26-32). • Income-tax Officer, Ward-L, Mysore v. Namma Sangha* [2018] 98 taxmann.com 307 (Bangalore - Trib.) [ASSESSMENT YEAR 2012- 13] SEPTEMBER 24, 2018 Section 11 of the Income-tax Act, 1961 - Charitable or religious trust- Exemption of income from property held under (Application of income) - Assessment year 2012 -13 - Whether expenditure incurred for religious and charitable purposes by assessee-trust in an earlier year could be adjusted against income of succeeding year while computing taxable income of succeeding year - Held, yes [Para 7] [In favour of assessee] (Annexure -6) (Page 30-34). In view of the above judgments, it is humbly prayed that the addition sustained by Ld. CIT(A) may kindly be deleted.”
On the other hand, Ld. Sr. DR relied upon the orders of the authorities below and strongly supported the assessment order.
I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The only grievance of the assessee is that the authorities below failed to give set off of excess application of money of preceding years. Therefore, he submitted that the set off ought to have been granted in respect of the brought forward deficit. The Revenue has not disputed the fact that the assessee had applied more than 85% in earlier years. Looking to the facts and circumstances of the present case, I hereby, set aside the orders of the authorities below and restore the issue to the file of AO and the AO is hereby, directed to verify the claim of the assessee regarding excess application of money and grant set off of the excessive application of money for the preceding years in the year under consideration as per law. Thus, grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.