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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
आदेश / O R D E R
PER V. DURGA RAO, J.M:
This appeal filed by the Revenue is directed against the order of
Learned Commissioner of Income Tax (Appeals)-14, Chennai in ITA
No.45/2015-16 dated 21.11.2017 relevant to the Assessment Year
2009-10.
ITA No.294/Chny/2018 :: 2 ::
The Revenue has raised the following grounds of appeal:
“1. The order of the learned CIT(A) is contrary to the law and facts of the case. 2.1 The Id. CIT (A) erred in holding that the assessee is eligible to set-offof brought forward excess application of funds to subsequent years. 2.2 The Id. CIT (A) failed to observe that there is no provision in the Income Tax Act which allows for determination of loss u/s 11 and carry forward of the same to subsequent year to be set-offagainst income of the subsequent year. 2.3. The CIT(A) failed to observe that the income of the trust is not computed on the principles of business income which contains the provisions of carry forward of losses of earlier year and set-offsuch losses against the income of the current year. 2.4 The Id. CIT(A) failed to consider the decision of ITAT, Delhi in the case of PushpawatiSinghania Research Institute for Liver, Renal & Digestive Diseases vs Dy.DIT (2009)29 SOT 316, ITAT, Chennai decisions in the case of Anjuman-E-Himayath- lslamvs.ADIT(Exemption) - IV, Chennai for the A.Y. 2009-10 reported in [2015] 59 taxmann.com 379 and M/s Inter Church Service Association in ITA NO.1253/Mds/2014 dated 05/02/2016. 2.7 The Id.CIT(A) failed to observe that carry forward of excess application of funds would result in notional application of income in subsequent year which is not permissible in law. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored.” 3. The brief facts of the case are that the assessee is a registered
trust filed its return of income on 30.09.2008 by declaring ‘Nil’ income for
the assessment year 2009-10 and the assessment was completed u/s.
143(3) of the Income Tax Act, 1961 (hereinafter “the Act”) on 26.12.2011
by determining the taxable income at ‘Nil’. Subsequently, the Assessing
Officer (AO) reopened the assessment and passed the assessment
ITA No.294/Chny/2018 :: 3 :: order u/s. 143(3) r/w s. 147 of the Act on 19.03.2015 by determining
taxable income at Rs. 2,08,18,595/- by disallowing the set-off against
excess application of previous year as against the current year shortfall.
The assessee carried the matter before the Ld. CIT(A), the Ld.
CIT(A) by following the decision of Hon’ble Jurisdictional High Court in
the case of CIT vs. Matriseva Trust [2000] 242 ITR 20 (Mad.), directed
the A.O to allow set-off of excess application of previous year at Rs.
2,08,18,595/- against the shortfall for the assessment year under
consideration.
On being aggrieved, the Department carried the matter before the
Tribunal.
The ld. Counsel for the assessee has submitted that this issue is
squarely covered by the decision of Hon’ble Jurisdictional High Court in
the case of CIT vs. Matriseva Trust [2000] 242 ITR 20 (Mad.), and the
same was followed by the Ld. CIT(A) and submitted that the order of Ld.
CIT(A) may be upheld. He further submitted that the Hon’ble
Jurisdictional High Court has considered the same issue in the case of
Anjuman-E-Himayat-E-Islam v. Assistant Director of Income-tax,
Exemptions-IV, Chennai [2021] 436 ITR 139 (Mad) by following the
ITA No.294/Chny/2018 :: 4 :: earlier decision in the case of CIT vs. Matriseva Trust(supra), and
submitted that the same may be followed.
On the other hand, the ld. Departmental Representative has
strongly supported the order of the A.O.
We have heard both the parties, perused the material available on
record and gone through orders of the authorities below. The only issue
involved in this appeal is set-off against the excess application of
previous year as against the current year shortfall is allowable or not?
The Hon’ble Jurisdictional High Court in the case of CIT vs. Matriseva
Trust (supra), has considered the issue and held that the excess
application of previous year, which can be allowed as against the current
year shortfall and the Ld. CIT(A) by considering the judgment of the
Hon’ble Jurisdictional High Court directed the A.O to allow the claim of
the assessee. The relevant portion of the order of the Ld. CIT(A) is
extracted as under: “4.1.2. It is relevant here to refer to the decision of the High Court of Madras in the case of CIT vs Matriseva Trust (242 ITR 20) (Mad) wherein the jurisdictional High Court observed as follows: 5. With regard to the second question, the Tribunal has held that the trust is entitled to set off the amount of excess application of the last year against the deficiency of Rs. 82,516 of the present assessment year. When similar questions came up before the Rajasthan High Court and the Gujarat High Court in the cases of CIT v. MaharanaofMewar Charitable Foundation [1987] 164 ITR 439 and CIT v. Shri Plot
ITA No.294/Chny/2018 :: 5 ::
SwetamberMurtiPujak Jain Mandal [1995] 211 ITR 239, respectively, boththe Rajasthan High Court and the Gujarat High Court have answered the questions in favour of the assessee and against the revenue.
Following the aforesaid decisions of the Rajasthan and the Gujarat High Courts, we answer the second question referred to us in favour of the assessee and against the revenue. This view was further reinforced in the case of DIT vs Medical Trust of the Seventh day Adventist (supra) wherein the rationale of the decision in Matriseva Trust (supra) was approved. The Hon'ble High Court of Rajasthan in the case of CIT Vs. Maharana of Mewar Charitable Foundation (supra) observed that there is nothing in the language of Sec. 1 1(1)(a) to indicate that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year, and utilisation of such income for meeting the expenditure of the earlier year would not amount to such income being applied for charitable purposes. Further elaborating on this, the Hon'ble High Court of Madhya Pradesh in the case of CIT Vs. GujratiSamaj (213 Taxman 182) (MP) declared that where expenses for charitable and religious purposes incurred in earlier year are adjusted against income of subsequent year, then the income of the subsequent year can be said to have been applied for charitable and religious purposes. In view of the above I have no hesitation in holding that the Assessing Officer erred in denying the benefit of sec. 11 85 12 for the adjustment of excess application made in the earlier assessment years. The Assessing Officer is directed to allow set-off of excess application of previous years of Rs.2,08,18,595/- against the short fall for the assessment year under consideration. The appellant succeeds on this ground.” 9. In the case of Anjuman-E-Himayat-E-Islam v. Assistant Director of
Income-tax, Exemptions-IV, Chennai (supra), has held that an amount of
excess application of money by assessee-trust towards its objectduring
the earlier year could be set-off by assessee-trust against deficiency of
subsequent assessment years. We, therefore respectfully following the
judgment of the Hon’ble Jurisdictional High Court (supra), we find no
ITA No.294/Chny/2018 :: 6 :: infirmity in the order passed by the Ld. CIT(A). Thus, the appeal filed by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on the 27th day of October, 2021, in Chennai.
Sd/- Sd/- (जी. मंजूनाथा) (वी. दुगा�राव) (G. MANJUNATHA) (V. DURGA RAO) लेखासद�/ACCOUNTANT MEMBER �ाियकसद�/JUDICIAL MEMBER
चे�ई/Chennai, �दनांक/Dated: 27th October, 2021. EDN/- आदेशक��ितिलिपअ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 4. आयकरआयु�/CIT 2. ��यथ�/Respondent 5. िवभागीय�ितिनिध/DR 3. आयकरआयु� (अपील)/CIT(A) 6. गाड�फाईल/GF