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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SHRI PRAMOD KUMAR&
PER Ms. MADHUMITA ROY - JM:
The instant appeal filed by the revenue is against the order dated 03.01.2017 passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad arising out of the order dated 19.01.2016 passed under section 154 of the Income Tax Act, 1961 (hereinafter referred as to “The Act”) for the Assessment Year 2012-13.
The revenue has challenged the order passed by the Learned CIT(A) in allowing deficit of Rs.6,49,06,986/- to be carried forward for future set off.
The brief facts leading to the case is this that the assessee, a Trust carrying on activities on education research, training etc. for social economic development is covered u/s 10(23C)(vi) of the Act, 1961 vide approval letter dated 22.03.2012. Further that, the assessee is also registered u/s 12A with CIT on 09.12.1974.
- 2 - ITA Nos.731/Ahd/2017 DCIT vs. Charutar Arogya Mandal Asst.Year – 2013-14 In the year under consideration, the assessee filed its return along with audited accounts and Form No.10B on 28.09.2013 showing deficit of Rs.6,49,06,986/- with total refund of Rs.33,55,038/- as its total income. An intimation order u/s 143(1) dated 27.03.2015 was passed assessing the total income at Rs.91,43,76,970/- without granting deduction of total expenditure of Rs.97,92,83,956/- and raising demand of Rs.35,66,99,472/- including interest u/s 234A, 234B and 234C after credit of TDS of Rs.32,16,342/-. An application for rectification u/s 154 dated 29.04.2015 and 25.09.2015 has been filed by the assessee with a request to grant the total expenditure of Rs.97,92,83,956/- since the same is applied for the object of the trust and refund of Rs.33,55,038/- along with interest u/s 244A of the Act. However, on 19.01.2016, the Learned Assessing Officer passed an order u/s 154 of the Act allowing deduction of Rs.91,43,76,970/- as against expenses of Rs.97,92,83,956/-. But while doing so, the Learned Assessing Officer failed to record the direction to grant deficit of Rs.6,49,09,986/-. The Learned Assessing Officer, ultimately, computed the total loss of the appellant at Nil against the returned loss of Rs.6,49,09,986/-.
The case of the assessee is this that the Assessing Officer ought to have allowed the total expenditure of Rs.97,92,83,956/- instead of restricting it to total income. Therefore, the resultant deficit of Rs.6,49,06,986/- ought to have been allowed to be carried forward to succeeding years. In appeal, such relief was granted to the assessee by the Learned CIT(A). Hence, revenue’s appeal is before us.
At the time of hearing of the appeal, the Learned Advocate appearing for the assessee submitted before us that charitable or religious trust as like assessee is under obligation to apply income derived from the property held under trust for such purposes. Upto 100% of the income can be applied. In the event, the application exceeds 100% of income, such income applied should be treated in par with any losses as would be
- 3 - ITA Nos.731/Ahd/2017 DCIT vs. Charutar Arogya Mandal Asst.Year – 2013-14 applicable to any business or profession. In that event, the excess of applicable has to be treated as deficit and allowed to be set off as applicable of income for the subsequent years. It was further submitted by the Learned AR that in the earlier years, in assessee’s own case, the Assessing Officer has treated the excess of application as deficit and allowed to be carried forward. The order passed by the Learned CIT(A) dated 09.09.2014 for A.Y. 2010-11 whereof the Learned AO has calculated the total loss of Rs.10,54,36,100/- was also brought to our notice which is part of the record at Page 91 of the Paper Book before us. In support of his submission, the Learned Advocate for the assessee relied upon the judgment passed by the Jurisdictional High Court in the matter of CIT-vs-Shri Plot Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 0293 (Guj). On the other hand, Learned DR relied upon the order passed by the Learned Assessing Officer.
We have heard the respective parties, we have also perused the relevant materials available on record. It appears from the records that the Learned CIT(A) while allowing the carry forward deficit of Rs.6,49,06,986/- relied upon the judgment passed by the Jurisdictional High Court as mentioned hereinabove. The relevant portion whereof is as follows: “4.2 I have carefully considered rival contentions, case law relied upon and the order passed by the A.O. u/s.154 of the Act. The main issue is allowability of excess expenditure of Rs.6,49,06,986/- to be allowed to be set off against further income of the appellant. 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.) and CIT vs Institute of Banking Personnel Section (IBPS) (2003) 264 ITR 110 (Bom.). Hon'ble Gujarat High Court in the case of Shri Plot Shwetambar Murtipujak 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 purpose in India is to be excluded for the purposes of computing the income
- 4 - ITA Nos.731/Ahd/2017 DCIT vs. Charutar Arogya Mandal Asst.Year – 2013-14 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 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).”
4.3 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 AO to allow carry forward deficit of Rs.6,49,06,986/- against its future income. Accordingly, ground of appeal no.2 is allowed. The AO would recheck the quantum of deficit before giving the appeal effect.”
- 5 - ITA Nos.731/Ahd/2017 DCIT vs. Charutar Arogya Mandal Asst.Year – 2013-14 7. This is the well settled position that 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). Such ratio has been laid by the Jurisdictional High Court in the matter of Shri Plot Swetamber Murti Pujak Jain Mandal (supra). The order passed by the Learned CIT(A) applying such ratio while allowing carry forward deficit of Rs.6,49,06,986/- does not call for any interference. Hence, revenue’s appeal is dismissed.
In the result, revenue’s appeal is dismissed.
This Order pronounced in Open Court on 30/01/2019
Sd/- Sd/- ( PRAMOD KUMAR ) ( Ms. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 30/01/2019 Priti Yadav, Sr.PS
- 6 - ITA Nos.731/Ahd/2017 DCIT vs. Charutar Arogya Mandal Asst.Year – 2013-14
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-9, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 08/01/2019 (Dictation Page 11) 2. Date on which the typed draft is placed before the Dictating Member …09/01/2019 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S ……………………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement… 6. Date on which the fair order comes back to the Sr.P.S./P.S……. 7. Date on which the file goes to the Bench Clerk………………… 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………