Loading judgment…
No AI summary yet for this case.
PER RAJPAL YADAV, JUDICIAL MEMBER:
The Revenue is in appeal before the Tribunal against the order of the learned Commissioner of Income-tax (Appeals)-9, Ahmedabad dated 28.06.2016 passed for Assessment Year 2012-13.
The issue agitated by revenue is, whether CIT(A) is justified for permitting the assessee to carry forward of unabsorbed deficit amounting to Rs.1,00,97,909/- against future income.
ITA No.2205/Ahd/2016 ITO vs. National Innovation Foundation India A.Y. 2012-13
- 2 –
The assessee trust has filed its return of income on 26.09.2012 declaring nil income. The assessee has claimed carry forward of loss of Rs.1,00,97,909/- this loss pertains to A.Y. 2010-11. The Ld. AO without making any discussion disallowed the claim of the assessee. The brief finding recorded by the Assessing Officer read as under: “The Trust is engaged in various projects involving strengthening grass-root technological innovations by documenting, screening and providing support at grassroots level etc. The trust has received grant income, project income and other incomes which have been applied to the activities of the trust. The assessee trust has been registered with the Charity Commissioner and has claimed registration u/s 12AA of IT Act, 1961.
During the course of assessment proceedings, it is noted that the trust has claimed c/f loss of Rs.1,00,97,909/- for A.Y. 2010-11 in terms of unabsorbed deficit in computation of inccme. Since the deficit is met out of accumulations of the trust fund, the claim of deficit c/f is not acceptable and accordingly not allowed. The stand is in line with order passed in case of the assessee for A.Y. 2011-12.”
Dissatisfied with the order of the Assessing Officer, assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) has accepted the claim of the assessee after putting reliance upon the decision of jurisdictional High Court rendered in the case of CIT vs Shri Plot Swetambar Murti Pujak Jain Mandal 211 ITR 293, findings recorded by the Ld. CIT(A) read as under: “4.2 I have carefully considered the rival contention, observation of the A.O as well as the case law relied upon by the appellant. It is observed that the A.O has denied the carry forward of loss of Rs. 1,00,97,909/-. The A.O has mentioned in the order of assessment that the said deficit pertains to A.Y.2011- 12 and as per the stand taken for A.Y.2011-12 the claim of carry forward of deficit is not acceptable and accordingly not allowed. During the appellate proceedings the appellant has submitted the order passed u/s. 143(3) for A.Y.2010-11 and further submitted that the appellant's case was not selected
ITA No.2205/Ahd/2016 ITO vs. National Innovation Foundation India A.Y. 2012-13
- 3 –
for scrutiny for A.Y.2011-12. It has not received any intimation u/s.143(1) of the Act for A.Y.2011-12 as well. The appellant informed that on 24/3/2015 it had filed a rectification application u/s. 154 of the Act on the issue of the observation of A.O that the carry forward of deficit is not acceptable and not allowed as per the order passed in the case of appellant for A.Y.2011-12. For the said rectification application the appellant has informed the A.O that the appellant's case was not selected for scrutiny for A.Y.2011-12. The appellant has also submitted the computation of income for A.Y.2010-11 i.e. F.Y 2009- 10. In the statement of income it is observed that the appellant has carried forward loss/deficit amounting to Rs.1,00,97,909/- and in the said statement of income itself it has relied upon the judgments of CIT vs Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj), CIT vs Shri Plot Swetambar Murti Pujak Jam Mandal 211 ITR 293 (Guj), CIT vs Matriseva Trust 242 ITR 20 (Mad) and Govindu Naicker Estate vs ADI 248 ITR 368 (Mad). The appellant also submitted the order passed u/s.143(3) of the Act for A.Y 2010-11. It is apparent from this order that the then A.O has accepted the total income as per return at Rs. Nil. However, the A.O is silent or has not referred to the carry forward of deficit of Rs.1,00,97,909/- for the A.Y.2010-11. As mentioned earlier the appellant has informed that no scrutiny assessment was undertaken for AY 2011-12 and it is not in receipt of any intimation u/s.143(1) of the Act. Based on these facts and circumstances, I am of the considered opinion that the A.O was not justified in mentioning of assessment that non acceptance of carry forward of deficit of A.Y. 2010-11 is in line with the order passed in case of the appellant with A.Y.2011-12. So far as the claim of the appellant for carry forward of deficit of A.Y. 2010-11 is concerned, the order for A.Y.2010-11 u/s.143(3) of the Act is silent on not allowing the carry forward of the said deficit. The appellant has also relied on the case law of jurisdictional High Court in the case of Shri Plot Swetamber Murti Pujak Jain Mandal(supra). Hon'ble Gujarat High Court in the case of Shri Plot Shwetambar Murtipujak Jain Mandal wherein it was 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 use" or "to make use" or "to put t practical use". Having regard to the provisions of section 11 of the Act. it is clear that when the income
ITA No.2205/Ahd/2016 ITO vs. National Innovation Foundation India A.Y. 2012-13
- 4 –
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 take 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 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 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 sect/on 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 as above and hereby direct the A.O to allow the to carry forward of unabsorbed deficit amounting to Rs.1,00,97,909/- against future income, if any. Accordingly, ground of appeal No.1 is allowed.”
With the assistance of learned Representatives, we have gone through the record carefully. A perusal of the Ld. CIT(A)’s order would indicate that learned first appellate authority has based its findings on the decision of Hon’ble Jurisdictional High Court. The Hon’ble High Court has held that the adjustment of the expenses incurred by the trust
ITA No.2205/Ahd/2016 ITO vs. National Innovation Foundation India A.Y. 2012-13
- 5 –
for charitable and religious purpose in the earlier years against income earned by the trust in the subsequent years will have to be regarded as application of income of the trust for charitable and religious purpose in subsequent years, in which adjustment has been made. This finding would indicate that assessee would be entitled to carry forward of the deficit for making adjustment against the income of the trust in subsequent years. Therefore, we do not find any error in the order of the Ld. CIT(A). This ground of appeal is rejected and appeal of the revenue is dismissed.
In the result, appeal of the revenue is dismissed. Order pronounced in the Court on 16th May 2018 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated, 16/05/2018 Priti Yadav, Sr.PS 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) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, / DR, ITAT, Ahmedabad. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, / ITAT, Ahmedabad TRUE COPY