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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: Shri P.M. Jagtap & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the Department against the order of the ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad in Appeal no. CIT(A)-9/10478/DCIT CPC/2019-20 vide order dated 19/08/2020 passed for the assessment year 2018-09.
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The revenue has taken the following grounds of appeal:-
“1. "Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in allowing the claim of the assessee for carry forward of deficit, ignoring the fact that there is no express provision in the Income Tax Act, 1961 allowing such claim, and without appreciating the fact that this would have the effect of granting double benefits to the assessee, first as accumulation of income u/s. 11(1)(a) or / Corpus donation u/s. 11(1)(d) in earlier/current year, or exempt income u/s. 10(34), and then as application of income u/s. 11(1)(a) in subsequent ' years which is legally not permissible?"
The brief facts of the case are that the assessee is a Trust registered under section 12AA of the Act. For the impugned assessment year, return of income was processed wherein amount applied during the previous year was allowed to the extent of income earned during the year and thereby the excess of expenditure of � 236,76,40,436/-, being the deficit, was not allowed to be carried forward.
In appeal, before Ld. CIT(A), the assessee gave a breakup of how the deficit was arrived at in the return of income. Before the Ld. CIT(A), the assessee submitted that having regard to the provisions of Section 11 of the Act, when the income of the assessee trust is used to meet the expenses incurred for the objects of the trust, it is application of income. The said application of the income for charitable purposes takes place in the year in
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which the income is adjusted to meet the expenses incurred for charitable purposes. In other words, even if expenses for charitable 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 religious purposes in the year in which the said expenses incurred for earlier years had been adjusted. The assessee placed reliance on the case of Shri Plot Swetamber Multi Pujak Jain Mandal (1995) 211 ITR 293 (Guj), wherein the Gujarat High Court held that the expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made and will have to be excluded from the income of the trust u/s 11(1)(a) of the Act. The assessee also placed reliance on the case of CIT vs. Institute of Banking (2003)264 ITR 110 (Bom), wherein a similar view was taken by the Bombay High Court as well. In view of the above rulings, the assessee submitted before CIT that deficit claimed during the year be allowed to be carried forward. The Ld. CIT(A) granted relief to the assessee with the following observations:
4.1. I have carefully considered the contention of the appellant and observation of the A.O. as well as the case laws relied on by the appellant. The only contention of the appellant is that it should be granted benefit of carry forward of excess expenditure during this financial year to the next financial year. This is covered in favour of the appellant by the order of the Hon'ble Gujarat High Court in the
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case CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) (211 ITR 0293)[supra]. Hence the AO is directed to allow the carry forward of excess expense over gross receipts amounting to Rs 236,76,40,436/- to the next financial year as held by the jurisdictional High Court. The ground of appeal is allowed.
The Department is in appeal before us against the aforesaid relief granted by Ld. CIT(A). The DR argued before us that under the income tax law there is no provision for carry-forward of expenses and accordingly, Ld. CIT(A) erred in facts and in law in allowing the assessee’s appeal. In response, the counsel for the assessee submitted that the case of the assessee is directly covered by the jurisdictional Gujarat High Court decision the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) (211 ITR 0293). Further, counsel for the assessee submitted that in the instant facts, the expenditure as pointed out at page 2 of the Ld. CIT(A) order is the actual expenditure incurred by the assessee, and no part of the same relates to any depreciation on assets claimed by the assessee. Accordingly, the counsel for the assessee submitted that there is no double deduction of expenditure claimed by the assessee i.e. the assessee has not claim both capital expenditure as well as depreciation in the instant facts.
We have heard the rival contentions and perused the material on record. We observe that in the case of CIT v. Kantilal Jaikishandas Choksi Charitable Trust [2021] 133 taxmann.com 218 (SC), the Supreme Court dismissed the SLP filed by the Department against High Court's ruling that where expenses for charitable and religious purposes had been incurred
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in earlier year and said expenses were adjusted against income of a subsequent year, income of that year can be said to have been applied for charitable and religious purposes in year in which expenses had been adjusted. Again, the Honourable Gujarat High Court in the case of CIT v Dawat Properties Trust [2022] 142 taxmann.com 548 (Gujarat) held that expenditure incurred by trust in earlier year can be set-off from income of subsequent years and utilization of such income for meeting expenditure of earlier year would amount to such income being applied for charitable or religious purpose. The jurisdictional Gujarat High Court decision the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) (211 ITR 0293) held that where expenses for charitable and religious purposes have been incurred in earlier year and said expenses are adjusted against income of a subsequent year, income of that year can be said to have been applied for charitable and religious purposes in year in which expenses has been adjusted. The Honourable Madras High Court in the case of Anjuman-E- Himayat-E-Islam [2021] 127 taxmann.com 78 (Madras) has held that amount of excess application of income by assessee-trust towards its object during earlier year could be set off by assessee-trust against deficiency of subsequent assessment years. The ITAT Ahmedabad in the case of Gnyan Dham Vapi Charitable Trust [2020] 120 taxmann.com 281 (Ahmedabad - Trib.) has held that where a trust has incurred shortfall due to its excess spending on objects of trust in a particular year, such deficit or shortfall could be allowed to be carried forward in full for set off against incomes generated in subsequent years. In view of the consistent position of the law on the subject, we are of the considered view that Ld. CIT(A) has not erred in facts and in law in allowing the assessee’s claim of carry-forward of
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excess losses and adjustment thereof against income of the assessee trust in the subsequent years.
In the result, the appeal of the Department is dismissed. 7.
Order pronounced in the open court on 31-10-2022
Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 31/10/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद