COMMISSIONER OF INCOME TAX (EXEMPTIONS) vs. RAMANBHAI FOUNDATION

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TAXAP/430/2018HC GujaratGJHC24024384201802 May 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Tax Appeal filed by the Revenue. The Tribunal had relied on the Gujarat High Court's judgment in the case of Commissioner of Income-Tax v. Shri Plot Swetamber Murti Pujak Jain Mandal. In that precedent, the Court had held that the income derived from property held under trust for charitable or religious purposes is excluded to the extent it is applied to such purposes. The Court clarified that there are no words of limitation in Section 11 of the Act restricting the application of income to the year in which it arises. The word 'applied' means 'to put to use' or 'to turn to use'. Therefore, even if expenses for charitable and religious purposes were incurred in an earlier year and are adjusted against the income of a subsequent year, the income of that subsequent year can be considered as applied for charitable and religious purposes in the year the expenses were adjusted. The High Court found no reason to differ from this established legal position.

What were the facts?

The Revenue, Commissioner of Income Tax (Exemptions), has filed an appeal against a judgment of the Income Tax Appellate Tribunal (ITAT). The appeal concerns the assessment year(s) not explicitly stated in the provided text. The core issue is whether the Tribunal was correct in allowing the set-off of brought-forward excess expenditure (deficit) from an earlier year against the income of a subsequent year for a trust claiming exemption under Sections 11 & 12 of the Income Tax Act. The ITAT had relied on a previous judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal.

What were the issues?

1. Whether the Tribunal was right in allowing for set-off of brought forward excess expenditure incurred over and above the income, i.e., deficit in an earlier year against the income of the subsequent year, though there is no such provision to claim such deficit in the case of a trust claiming exemption u/s.11 & 12 of the Act? (Question of law). Assessee's Contention: The judgment does not record any specific contentions made by the assessee (Ramanbhai Foundation) before the High Court. However, the Tribunal's reliance on the Gujarat High Court's judgment in CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal implies that the assessee likely argued that excess expenditure incurred for charitable/religious purposes in an earlier year, even if resulting in a deficit, could be adjusted against the income of a subsequent year, as the 'application' of income for such purposes is not restricted to the year of accrual. Revenue's Contention: The Revenue's appeal challenges the Tribunal's decision, arguing that there is no specific provision in the Income Tax Act that allows for the set-off of such brought-forward deficits for trusts claiming exemption under Sections 11 and 12.

Which sections of the Income-tax Act were involved?

Section 11,Section 12

AI-generated summary — verify with the full judgment below

C/TAXAP/430/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 430 of 2018 ========================================================== COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus RAMANBHAI FOUNDATION ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 02/05/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue   has   filed   this   appeal   against   the judgment of the Income Tax Appellate Tribunal dated 18.12.2017 raising following substantial question for our consideration. “Whether the Tribunal was right in allowing for set­off   of   brought   forward   excess   expenditure incurred over and above the income i. e. deficit in   earlier   year   against   the   income   of   the subsequent   year   though   there   is   no   such provision to claim such deficit in the case of trust   claiming   exemption   u/s.11   &   12   of   the Act?” 2. The   question   itself   is   elaborate   and   brings about controversy between the parties.  The Tribunal relied   on   the   judgment   of   this   Court   in   case   of Commissioner   of   Income­Tax   v.  Shri   Plot   Swetamber Murti Pujak Jain Mandal  reported in  [1995] 211 ITR 293 (Guj), in which, such a question was considered Page 1 of 2

C/TAXAP/430/2018 ORDER in following manner. “A   bare   perusal   of   the   above­referred provisions of the Act 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   "applied" means "to put to use" or "to turn to use" or "to make use" or "to put to practical use". Having   regard  to  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   said 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.” 3. In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 2 of 2

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