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Income Tax Appellate Tribunal, DELHI BENCH “A”: NEW DELHI
Before: SMT BEENA A PILLAI & SHRI PRASHANT MAHARISHISmt. Angoori Devi
PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the Id Deputy Commissioner of Income tax ( exemption) , Circle 2 (1), New Delhi ( The Ld AO ) against the order of the ld CIT(A)-40, (Exemption), New Delhi ( the ld CIT (A) ) dated 07/06/2016 for the Assessment Year 2012-13. The ld AO has raised the following grounds of appeal:- “1. On the facts and circumstances of the case and in law, the ld CIT(A) has erred in allowing the claim of carry forward of losses disregarding the fact that set-off and carry forward of losses are dealt with by the provisions of section 70 to 74 of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law, the ld CIT(A) has erred in ignoring the fact that where the capital expenditure has been claimed as an application for the object of
the trust, allowance of application on account of depreciation will tantamount of double deduction.” 2. The brief facts of the case show that the assessee, public charitable trust, engaged in charitable educational activities, is a running two schools and one college at Greater Noida and Mayur Vihar, New Delhi. It has received income from activity fee, admission fee, annual charges, development fee, bank interest, transport charges, tuition fee, examination fee etc. It is also registered u/s 12A of the Act vide registration dated 21.12.1995. The assessee filed return of income on 28.12.2012 declaring Nil income after claiming application of income as per provisions of section 11 and 12 of the Act. During the course of assessment proceedings, it was found that assessee has incurred expenditure on purchase of fixed assets, which was shown as application of income, and the assessee has claimed depreciation on it. On questioned, assessee relied upon the decision of Hon'ble Delhi High Court in case of Vishva Jagriti Mission and CIT Vs. Institute of Banking (2003-(264)-ITR-0110-BOM. The Id AO rejected the contention of the assessee relying upon the decision of the Hon'ble Supreme Court in case of Escorts Ltd Vs. Union of India (1993) 199 ITR 43 and decision of the Hon'ble Delhi High Court in case of Charanjiv Charitable Trust (March 2014). He also relied upon the decision of the Kerala High Court in case of Lissie Medical Institutions Vs. Commission of Income Tax (feb 2012) [2012] 348 ITR 344 (Ker). Accordingly, he disallowed depreciation on such assets of Rs. 49342529/-. The Id AO further found that during the year, assessee has claimed carry forward of excess application of Rs. 4002356/-. The Id AR when questioned, furnished the details of carry forward of excess of income and supported it with decision of Gujarat High Court in case CIT Vs. Shri Plot Swetamber Murty Pujak Jain Mandal[1995] 211 ITR 293 (Guj). The Id AO rejected the explanation of the assessee and applied the provision of section 80 of the Act stating that „due date‟ of filing of return of income for Assessment Page | 2
Year was 30.09.2012 and the assessee has filed the return of income on 28.12.2012, therefore, such carry forward of loss is not admissible to the assessee. Consequently, he determined the total taxable income of the assessee at Rs. Nil as even after above adjustments, application of income was exceeding 85% of the income. 3. The assessee being aggrieved with the order of the Id AO preferred an appeal before the Id CIT (A). On the issue of claim of depreciation, he held as under as para 5.1 of his order “5.1 On account of depreciation, various judgments support the claim of the appellant that depreciation on assets used for charitable activities is to be allowed as an expense. However, neither the depreciation should be allowed where the cost of the subject asset has already been claimed, as application of income, is a point where no clear position has emerged in absence of a decision of the Supreme Court. With effect from 1.4.15, sub section (6) has been inserted to disallow the depreciation claim in such cases. It is a fact that the amendment is prospective and it the order pronounced on 14,8.15 by the Hon‟ble IT AT Bangalore in the case of Jyothy Charitable Trust vs. DCIT (Exemptions) in ITA no. 662/Bangalore/ 2015, in order to maintain judicial discipline, the appellant is allowed the claim of depreciation for the year in question. 4. On the issue of carry forward of excess expenditure he held as under:- “5.2 Carry forward of excess expenditure is not disputed by the Assessing Officer per se while taking note of response of the appellant filed vide letter 3/3/2015 to the SCN dated 27/02/2015. Also, the appellant's contention on this matter has been upheld by the CIT(A)-36, in the appellate proceedings in the preceding assessment year. The disallowance of carry forward of excess application by invoking section 80 is not correct since the assessee has not been given an opportunity of hearing on this point in the SCN and also provisions of „sub section (1) of section 72 or sub section (2) of section 73 or sub section (1) or sub section (3) of section 74 or sub section (3) of section 74.AA are not applicable in the instant case. Thus, based on the arguments by the appellate, the carry forward is allowable.” 5. Thus on both the counts he allowed the appeal of the assessee. Therefore, the Id AO has preferred this appeal.
The first ground of appeal is relating to allowing the claim of carry forward of excess expenditure incurred of the assessee. The Id DR vehemently stated that as the assessee has not filed its return of income within „due date” therefore, the Id AO has correctly disallowed the claim of carry forward of excess of application over income of the trust. 7. The Id AR vehemently submitted that the above issue is squarely covered by the decision of the Hon'ble Supreme Court in COMMISSIONER OF INCOME TAX (EXEMPTION) vs. SUBROS EDUCATIONAL SOCIETY 303 CTR 1 wherein it has held that excess expenditure incurred by the trust in earlier assessment year could be allowed to be set off against the income of the subsequent year. He further submitted the provision of section 80 does not apply to the facts of the case as it is related to the carry forward of the loss. With respect to second ground of appeal, he submitted that issue is squarely covered in favour of the assessee by the decision of Honourable supreme court in COMMISSIONER OF INCOME TAX vs. Rajasthan and Guajarati Charitable Foundation Poona (2018) 300 CTR 0001 (SC). He also raised several other legal arguments. 8. On both the grounds, the Id DR could not controvert the arguments of the dl AR that they are covered in favour of the assessee by the decision of the honourable supreme court. He did not also support his arguments by any contrary decisions. 9. We have carefully considered the rival contentions and perused the orders of the lower authorities. The first issue regarding the claim of excess application in earlier year whether allowable to a charitable trust for set off is covered in favour of the assessee by the decision of Honourable supreme court in case of COMMISSIONER OF INCOME TAX (EXEMPTION) vs. SUBROS EDUCATIONAL SOCIETY 303 CTR 1. Provisions of section 70-74 applies to aggregation of losses and set off and carry forward of the same. Income of the trust is computed u/s 11 -13 of the act and is not hit by those provisions. Hence, we Page | 4
dismiss this ground of appeal holding that excess application in earlier year should be allowed for set off to the charitable trust in subsequent year against the income of the trust as application of such income. 10. With respect to ground no 2 of the appeal of the allowability of depreciation on the assets, cost of which have been already claimed by the assessee as application of income is also covered in favour of the assessee by the decision of Honourable supreme court in case of COMMISSIONER OF INCOME TAX vs. Rajasthan and Guajarati Charitable Foundation Poona (2018) 161 DTR 0033 (SC), (2018) 300 CTR 0001 (SC), (2018) 402 ITR 0441 (SC), (2018) 253 TAXMAN 0165 (SC). Thus ground no 2 of the appeal is also dismissed. 11. Accordingly, appeal filed by the ld AO is dismissed. Order pronounced in the open court on 05/08/2019. -Sd/- -Sd/- (BEENA A PILLAI) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 05/08/2019 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi