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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED&
The instant appeal filed by the Revenue is directed against the order dated 11.10.2017 passed by the Commissioner of Income Tax (Appeals) - 9, Ahmedabad arising out of the order dated 11.11.2016 passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) for the Assessment Year 2014-15 whereby and whereunder the carry forward of deficit of earlier years of the assessee was allowed.
The assessee, a registered religious trust under the Bombay Public Trusts Act, 1950 vide Registration No. B/23/Surat with the concerned Assistant Charity - 2 - DCIT vs. Ashara Mubaraka Dai Al Husain Trust, Asst.Year – 2014-15 Commissioner, Surat working for the Dawoodi Bohra Community, filed its return of income on 27.09.2014 declaring income at Nil after claiming the exemption of Rs.27,31,32,753/-, which was processed u/s 143(3) of the Act. During scrutiny proceeding, it was found that the assessee has claimed deficit for A.Y. 2012-13 adjusted to the extent of Rs.3,21,370/- against the surplus of current year income of Rs.3,21,370/- which according to the Learned AO was not in terms of law. Assessee’s income, is therefore, determined at Rs.3,21,370/- by the Learned AO. He was of the opinion that no carry forward of deficit is allowed as there is no such provision u/s 11 under which the assessee can claim set off excess expenditure incurred in earlier years against the income of the relevant assessment year. Ultimately, the said claim of set off of deficit of earlier years for Rs.5,40,90,439/- has been disallowed by the Learned AO which, in turn, was allowed in appeal preferred by the assessee following the judgment passed by the Jurisdictional High Court in the matter of CIT-vs-Shri Plot Swetamber Murtipujak Jain Mandai reported in 211 ITR 293 (Guj.). While doing so the Leanred CIT(A) observed as follows: “5.2 I have carefully considered the facts of the case as well as the observations of the A.O. The A.O has not allowed deficits of earlier A.Yrs. for Rs.5,40,90,439/- in the order. The appellant has relied upon the order of jurisdictional High Court in the case of CIT vs Shri Plot Shwetambar Murtipujak Jain Mandal 211 ITR 293(Guj.), CIT vs Maharana of Mewar Charitable Foundation 29 Taxman 476 (Raj) and Govindu Naicker Estate v. Asstt.DIT [2001] 248 ITR 368 (Mad). Hon'ble Gujarat High Court in the case of Shri Plot Shwetambar Murtipujak Jain Mandal has held as follows:-
"A bare perusal of section 11 of the Income-tax Act, 1961, shows that the income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India is to be excluded for the purposes of computing the income of the trust for the purpose of assessment. There are no words of limitation in this section providing that the income should have been applied for charitable or religious purposes only in the year in which the income had arisen. The word "apply" means "to put to use" or "to turn to - 3 - DCIT vs. Ashara Mubaraka Dai Al Husain Trust, Asst.Year – 2014-15 use" or "to make use" or "to put to practical use". Having regard the provisions of section 11 of the Act, it is clear that when the income of a trust is used or put to use to meet the expenses incurred for religious or charitable purposes, it is applied for charitable or religious purposes. The application of the income for charitable or religious purposes takes place in the year in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. In other words, even if expenses for charitable and religious purposes have been incurred for the earlier year and the said expenses are adjusted against the income of a subsequent year, the income of that year can be said to have been applied for charitable and religious purposes in the year in which the expenses incurred for Charitable and religious purposes had been adjusted. There is nothing in the language of section 11(1)(a) of the Act to indicate that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year, would not amount to such income being applied for charitable or religious purposes. Income derived from trust property has to be determined on commercial principles and if commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and will have to be excluded from the income of the trust under section 11(1)(a)."
5.3 I agree with the contention of the appellant as well as the reliance placed on the decision of Jurisdictional Gujarat High Court and hereby direct the A.O to allow the benefit of the deficit of earlier A.Y. 2010-11 for Rs.2,55,52,566 and A.Y. 2012-13 for Rs.2,85,37,873/- aggregating to Rs.5,40,90,439/- against the future incomes, after due verification. Subject to this remark, grounds of appeal No.2 to 7 are allowed.”
In view of the ratio laid down by the Hon’ble Jurisdictional High Court in the matter of Shri Plot Shwetambar Murtipujak jain Mandal, the claim of set off of deficit of earlier years has rightly been allowed by the Learned CIT(A), which does not call for any - 4 - DCIT vs. Ashara Mubaraka Dai Al Husain Trust, Asst.Year – 2014-15 interference. Hence, the same is upheld. The Revenue’s appeal thus found to be devoid of any merit and hence dismissed.