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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: SH. N. K. BILLAIYA & SHRI K.NARASIMHA CHARY
This appeal by the revenue is preferred against the order of the CIT(A)-40, Delhi dated 22.12.2017 pertaining to A.Y. 2014-15.
The grievance of the revenue read as under :-
“i) Whether on the facts and in circumstances of the case and in law, Ld. CIT (A) was correct in allowing the carry forward of deficit of Rs.6,40,70,201/- and ignoring the fact that in case of an assessee registered u/s 12A of the Act, its total income is required to be computed in accordance with section 11,12 & 13 of the Act and provision of these sections do not envisage set-off of deficit/loss/excess expenditure of earlier assessment year? ii) The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”
Briefly stated the facts of the case are that the assessee society is registered u/s 12A of the Income-tax Act vide order F.N.DIT(E)/2009-10/Del-IR20110-10072009/453 dated 10.07.2009. It is also registered u/s- 80G(5)(vi) vide order No. DIT(E) 2011-12/Del-IE22568-08042011/35 dated 08.04.2011. The main object and activities of the institution are as:- (a) To establish and incorporate a non-affiliating teaching institute for imparting IT education in Delhi. (b) To facilitate and promote studies, research and consultancy work in Information Technology and its application domains. (c) To achieve excellence in IT and matters connected therewith or incidental thereto (d) To create a paradigm shift in the way IT can be sued for improving the delivery of service in selected domains.
During the course of the scrutiny assessment proceeding the AO noticed that the assessee has claimed carry forward of excess application of income to the tune of Rs.64070201/- for next years’ set off. The assessee was asked to justify and substantiate as to why not the claim of excess application of income be disallowed to be carry forward. The assessee filed a detailed reply in support of its claim which did not find any favour with the AO who proceeded to disallow the carry forward of the excess application of income.
Assessee agitated the matter before the CIT(A) and reiterated its contention.
After considering the facts and the submissions the CIT(A) drawing support from the decision of the Hon’ble High Court of Delhi in the case of Raghuvanshi Charitable Trust 197 Taxman 170 directed the AO to allow the set off of carry forward deficit.
Before us the DR strongly supported the findings of the AO. It is the say of the DR that there is no provision in the Act with regard to trust which allows for determination of loss u/s.11, carry forward of the same the subsequent years to be set off against incomes of the subsequent years. The Counsel strongly supported the findings of the CIT(A).
8. We have given a thoughtful consideration to the orders of the authorities below. The Hon’ble Delhi High Court in the case of Raghuvanshi Charitable Trust 971 taxman 170 held as under :-
It would be fruitful to refer to the discussions contained in Institute of Banking Personnel Selection (IBPS)'s case (supra), Per Hon'ble Mr. justice S.H. Kapadia, which is advanced before us by the learned counsel for the revenue to repel the same in the following words : "Now coming to question No.3, the point which arises for consideration is : whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in the subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that in the case of a charitable trust, their income was assessable under self-contained code mentioned in section 11 to section 13 of the Income-tax Act and that the income of the charitable trust urns not assessable under the head "Profits and gains of business" under section 28 in which the provision for carry forward of losses was relevant. That, in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the 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 adjustment has been made having regard to the benevolent provisions contained in the section 11 of the Act and that such adjustment will have to be excluded from the income of the trust under section 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot SwetamberMurtiPujak Jain Mandal [1995] 211 ITR 293. Accordingly, we answer question No. 3 in the affirmative, i.e., in favour of the assessee and against the Department."
It is clear from the above that as many as five High Courts have interpreted the provision in an identical and similar manner. Learned counsel for the revenue could not show any judgment where any other High Court has taken contrary view. Since we are in agreement with the view taken by the aforesaid High Court, we answer these questions in favour of the assessee and against the revenue.
Before we part with, we may point out that learned counsel for the assessee in IT A No. 589/2008 and submitted that the questions involves in these two appeals are purely academic. In these cases even in the current year, more than 75 per cent/85 per cent (as the case may be) of the income was applied for charitable purpose and therefore, no set off was required to be claimed. Further, it is not necessary to go into this issue once we have decided the question of law in favour of the assessee."
9. The Hon’ble Supreme Court in the case of CIT (E) Vs. Subros Educational Society in M.A. 941/2018 in C. A. No. 5171/2016 was seized with the following question :-
“(a) Whether any excess expenditure incurred by the trust/ charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking Section 11 of the Income Tax Act, 1961 ?”
10. And the order of the Hon’ble Supreme Court held as under :-
ORDER “In this application filed by the Income Tax Department it is stated that Civil Appeal No. 5171 of 2016 arises out of Special Leave Petition (C) . . . CC No. 8 982/2016 was tagged with other appeals and the batch matters were decided by this Court on 13.12.2017. However, the following question was also raised in the instant appeal which was not the subject matter of those appeals: “(a)Whether any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking Section 11 of the Income Tax Act, 1961?" To this extent, Mr. K. Radhakrishnan, learned senior counsel appearing on behalf of the applicant/appellant is correct. Therefore, we have heard him on the aforesaid question of law as well but did not find any merit therein. The miscellaneous application is dismissed.”
As no distinguishing decision have been brought to our notice and as the CIT(A) has followed the decision of the Hon’ble jurisdictional High Court (supra) we do not find error or infirmity in the findings of the CIT(A).
In the result, the appeal filed by the revenue is according dismissed.
Decision announced in the open court in the presence of both the representatives on 28.07.2021.