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Income Tax Appellate Tribunal, SMC “A” BENCH : BANGALORE
Date of hearing : 24.07.2023 Date of Pronouncement : .07.2023 O R D E R This appeal is filed by the assessee against the DIN & Order No.ITBA/NFAC/S/250/2022-23/1051546883(1) dated 29.3.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18 on the following grounds:-
“1. General Ground 1.1. The order passed by the learned Commissioner of Income Tax (Appeals) ("CIT(A) for short hereinafter"] is bad in law and liable to be quashed. 2. Order passed without considering the submissions made by the appellant and without providing an opportunity of hearing 2.1 The learned CIT(A) has erred in passing the order dated 29-03-2023 without considering the submissions made by the appellant on 20-01-2022 and 10-11-2022. The order so passed without considering the submissions of the appellant and without providing any opportunity of hearing is bad in law and liable to be quashed. 2.2 The learned CIT(A) erred in dismissing the appeal without considering the submissions of the appellant that the provisions of Section 80 r.w.s. 139(3) of the Income-tax Act, 1961, ("the Act") does not apply while computing the income of a Society/ Trust registered under section 12A of the Act.
3. Set-off of brought forward excess of expenditure over income claimed to be allowed 3.1. The learned Income-tax Officer ["the ITO" or "the AO" for short hereinafter] has erred in disallowing the set-off of brought forward excess of expenditure over income for the AY 2015-16 claimed by the appellant on the grounds that the return of income for AY 2015¬16 was filed after due date and the learned CIT(A) has erred in confirming the said denial of set-off. 3.2 The learned CIT(A) erred in not appreciating that (a) The Appellant is registered under Section 12A of the Act and consequently, computes income in accordance with the provisions of sections 11, 12, 12A and 13; (b) The Appellant has rightly claimed the set-off of brought forward excess of expenditure over income for the AY 2015-16 against the income of the subject AY; and (c) The provisions of Section 80 r.w.s. 139(3), does not apply to the excess of expenditure over income as determined by the Appellant. 3.3. On facts and circumstances of the case and law applicable, the set-off of brought forward excess of expenditure over income claimed by the appellant while computing the income for, the subject AY is to be allowed.
Prayer:- In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the order passed by the learned CIT (A) be quashed.”
The brief facts of the case are that the assessee filed return of income on 13.3.2018 declaring NIL income after claiming exemption u/s. 11 of the Act. The case was selected for scrutiny and statutory notices were issued to the assessee. The AO noted that the assessee has been granted registration u/s. 12A by the DIT(Exemptions) on 11.12.1974. The assessee has claimed brought forward loss of Rs.29,93,299 for AY 2015-16 and Rs.71,11,561 for AY 2016-17. The assessee has filed return of income for AY 2015-16 beyond the due date and hence the brought forward loss was restricted to Rs.72,86,070. The CIT(Appeals) confirmed the order of the AO. Aggrieved, the assessee has filed the appeal before the Tribunal.
The ld. AR for the assessee reiterated the submissions made before the lower authorities and submitted that section 80 is not applicable to the trust registered u/s. 12A since the trust is disclosing income u/s. 11 to 13 of the Act. Further the unabsorbed capital expenditure does not fall within the purview of provisions of section 70 to 74 of the Act and therefore the condition of filing return of income within the due date as specified u/s. 80 will not apply to the carry forward and set off of excess expenditure over the income or unabsorbed capital expenditure. He submitted that the no opportunity was given to the assessee regarding disallowance of carry forward of excess expenditure for AYs 2015-16 & 2016-17. He relied on the following judgments:-
(i) Smt. Angoori Devi, dated 5.8.2019. (ii) CIT(E) v. Subros Educational Society [2018] 96 taxmann.com 652 (SC) 4. The ld. AR further submitted that the decision cited supra of the ITAT Delhi is squarely applicable to the present facts and the judgment of the Hon’ble Supreme Court in the case of Subros Educational Society (supra) was considered by the Tribunal.
The ld. DR relied on the orders of lower authorities and submitted that the assessee did not file its return for the AY 2015-16 within the due date and section 80- is squarely applicable, therefore assessee is not eligible for carry forward of loss. He further submitted that section 11(1) Explanation 5 inserted by Finance Act, 2021 is clarificatory in nature and has retrospective effect, hence the assessee is not entitled to carry forward of losses. He further submitted that the matter should be sent back to the AO for the purpose of verification of loss for AY 2015-16 since the assessee has not produced the relevant assessment order and it is also not clear whether the revenue has accepted the loss claimed by the assessee for that year.
After hearing both the sides, perusing the entire material on record and the orders of the lower authorities, I note that the assessee is registered u/s. 12A of the Act. The AO disallowed the unabsorbed capital expenditure for AY 2015-16 of Rs.29,93,299 since the assessee had filed the return of income beyond the due date. It is noticed that this issue is squarely covered by the decision relied by ld. AR in the case of Smt. Angoori Devi, dated 5.8.2019 wherein the judgment of the Hon’ble Supreme Court in the case of Subros Educational Society (supra) has been considered. In that case of Smt. Angoori Devi (supra) for AY 2012-13, the assessee, a public charitable trust, filed its return on 28.12.2012 and declared NIL income after claiming application of income u/s. 11 & 12 and carry forward of excess application of Rs.40,02,356. The AO applying the provisions of section 80 disallowed such carry forward stating that the assessee had filed return on 28.12.2012 which was beyond due date i.e. 30.9.2012. The CIT(Appeals) allowed the appeal of the assessee on this issue. On further appeal by the revenue, the Tribunal upheld the order of the CIT(Appeals) by observing as under:-
“9. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first issue regarding the claim of excess application in earlier year whether allowable to a charitable trust for set off is covered in favour of the assessee by the decision of Honourable supreme court in case of COMMISSIONER OF INCOME TAX (EXEMPTION) vs. SUBROS EDUCATIONAL SOCIETY 303 CTR 1. Provisions of section 70-74 applies to aggregation of losses and set off and carry forward of the same. Income of the trust is computed u/s 11 -13 of the act and is not hit by those provisions. Hence, we dismiss this ground of appeal holding that excess application in earlier year should be allowed for set off to the charitable trust in subsequent year against the income of the trust as application of such income.”
The ld. DR referred to the amendment in section 11(1) Explanation 5 inserted by the Finance Act, 2021 w.e.f. 1.4.2022. Since the assessee’s case is for AY 2017-18, therefore the amendment will not apply in the present case.
I am in agreement with the submission of the ld. DR that the quantum of loss for AY 2015-16 has to be verified by the revenue and therefore I remit this issue to the Assessing Officer for verification and determination of loss of Rs.29,93,299 claimed by the assessee as unabsorbed capital expenditure and after verification, the AO is directed to allow the same in the light of the decision of the Delhi Tribunal in the case of Smt. Angoori Devi (supra). Needless to say that the assessee may be given reasonable opportunity of being heard and the assessee is directed to produce all the relevant documents to substantiate its claim and avoid seeking unnecessary adjournment for early disposal of the case.
In the result, the appeal of the assessee is allowed for statistical purposes.
Pronounced in the open court on this 27th day of July, 2023.