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Income Tax Appellate Tribunal, G BENCH, MUMBAI
M/s Gharda Foundation, Vs 48 Gharda House, Hill Road, Bandra (West), Mumbai - 400050 [PAN: AAATG0260C] ……………… Respondent Appearances For the Appellant/Department : Shri Avinash Tiwari For the Respondent/Assessee : Shri Deepak Shah Date of conclusion of hearing : 10.05.2022 Date of pronouncement of order : 29.07.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Revenue has challenged the order, dated 01.10.2021 passed by the Ld. Commissioner of Income Tax (Appeals), [hereinafter referred to as „the CIT(A)‟] National Faceless Appeals Centre (NFAC)], Delhi under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟] in appeal [CIT(A)1, Mumbai/10691/2019-20] for the Assessment Year 2017-18, whereby the CIT(A) had partly allowed the appeal filed by the Assessee against the against Assessment Year: 2017-18 the Assessment Order, dated 15.12.2019, passed under Section 143(3) of the Act.
The Revenue has raised the following grounds of appeal read as under:
1. Whether, on the facts and in the circumstances of the case and in law the Ld CIT(A) was right in allowing the claim of depreciation of Rs. 5,00,71,925/- relying on the decision of the Hon'ble Bombay High Court in the case of CIT Vs Institute of Banking Personnel Services reported in 264 ITR 110(Bom) Ignoring the ratio of Hon'ble Supreme Court Judgments in the case of Escorts Ltd Vs Union of India (199 ITR 43)(SC)(1992) Wherein Hon'ble Supreme Court has held that double deduction is not permissible if the same is not specifically provided by law, in addition to normal deduction
2. Whether on the facts of the case and in law the Id.CIT(A) erred in allowing the carry forward of deficit of Rs. 5,00,71,925/- and allowing set off against the income of the subsequent years, allowing the deficit will tantamount to double deduction on account of expenditure out of exempt income.
3. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing to carry forward of deficit on account of excess expenditure and directing the Assessing Officer to allow carry forward of deficit on account of excess expenditure without appreciating the fact that this would have the effect of granting double benefit to the assessee, first as 'application of income u/s 11(1)(a) in earlier years/current year and then as application of income u/s 11(1)(a) in the subsequent years which was legally not permissible?"
4. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in ignoring the provisions of sub-section (6) of section 11 of the Act applicable from the assessment year 2015-16 onwards that the income shall 2 Assessment Year: 2017-18 be determined without any deduction or allowance by way of depreciation or otherwise in respect of nay asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year."
3. Ground No. 1 to 4 above raised by the Revenue in the present appeal are directed against the order of CIT(A) accepting the claim of the Assessee of carrying forward of deficit of INR 5,00,71,925/- to the subsequent assessment years.
The relevant facts, in brief, are that Assessee is a trust registered under Section 12A of the Act. The return filed by the Assessee for the Assessment Year 2017-18 was selected for scrutiny. During the relevant previous year the expenditure by the Assessee towards the charitable objects exceeded its receipts/income during the relevant previous year by INR 5,00,71,925/-. The Assessee claimed carry forward of the aforesaid amount to the succeeding assessment years for setting off against the receipt/income of the succeeding years and thereby, claiming application of income for charitable purposes to the extent of such set off. The Assessing Officer denied the aforesaid claim of the Assessee and passed order under Section 143(3) of the Act on 15.12.2019 restricting the amount of application of income to INR 13,12,46,543/-, being the amount of receipts/income for the relevant previous year, as against the actual expenditure of INR 18,13,18,468/-.
In appeal filed by the Assessee against the assessment order on this issue, the CIT(A) accepted the claim of the Assessee holding as under:
3 Assessment Year: 2017-18 “8. Decision: The appellant is a trust registered u/s. 12A of the Act and having recognition uls.80G of the Act. For the impugned assessment year, the case of the appellant was I selected for scrutiny assessment and completed u/s.143(3). During the year under consideration the appellant had earned income of Rs.13,12,46,543/- and spent Rs.18.13.18,468/- for its objects. In completing the impugned assessment, the AO had restricted the expenditure applied by the appellant to the extent of income earned and thereby ignoring the excess application of Rs.5,00,71,925/-. From the perusal of assessment order, it is noticed that there is no discussion on excess application of Rs.5.00.71,925/-.e. the AO has not brought on record any finding regarding the carry forward or disallowance of excess application of Rs.5,00,71,925/- During the course of appellate proceedings, except relying on judicial precedents on the issue of carry forward of excess application, the appellant did not furnish any details. The details like brought forward accumulated surplus, depreciation claim of the current year, computation of total income of the year under consideration. loan repayments of the current year, return of income, audit report, details of TDS on the expenditure etc., are not available on record Without these details, actual amount of application by the appellant cannot be determined. Relying on the judicial precedents relied upon by the appellant, I am of the considered view that the deficit in the case of a trust is allowed to be carried forward to be set off in subsequent assessment years. Therefore, the AO is hereby directed to verify the claim of the appellant regarding excess application of income and accordingly allow the deficit for carry forward and set off in the subsequent assessment years. In the result, the appeal is partly allowed.”
Being aggrieved, the Revenue has preferred the present appeal.
While the Learned Departmental Representative reiterated the grounds raised
in the present appeal, in response, the Learned Authorised Representative of the Assessee placed reliance upon the judgment of the Hon‟ble Bombay High Court in the 4. Assessment Year: 2017-18 case of CIT Vs. Institute of Banking Personnel Services: 264 ITR 110 (Bom) to support the order passed by the CIT(A).
We have considered the rival submission and perused the orders passed by the Assessing Officer and CIT(A). We note that the issue before us stands decided in favour of the Assessee by the Hon‟ble Bombay High Court in the case of CIT Vs. Institute of Banking Personnel Services: 264 ITR 110 (Bom) wherein it has been held as under:
“5. 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 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 was 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 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 5 Assessment Year: 2017-18 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 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 Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 293. Accordingly, we answer question No. 3 in the affirma-tive i.e., in favour of the assessee and against the Department.” (Emphasis Supplied)
The above judgment was cited by the Assessee before the CIT(A) and the CIT(A) has, after considering the same, accepted the contention of Assessee as regards the carry forward of the deficit pertaining to the current year is concerned. However, as regards the quantification of the amount of deficit be carried forward is concerned, the CIT(A) has directed the Assessing Officer to verify the claim made by the Assessee. We do not see any infirmity in the order passed by the CIT(A). The order passed by the CIT(A) does not call for interference. Accordingly, Ground No.1 to 4 raised by the Revenue are dismissed.
In result, the present appeal is dismissed.