Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: Shri G. MANJUNATHA & Shri RAVISH SOOD,
सुनवाई क� तार�ख / Date of Hearing : 13/06/2019 28/06/2019 आदेश क� तार�ख /Date of Order: आदेश / O R D E R
Per G. Manjunatha, Accountant Member
This appeal filed by the Revenue and cross objection by the assessee are directed against order of the Ld. CIT(A)-1, Mumbai, dated 19/02/2018, and they pertains to AY 2012-13. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are disposed of by this consolidated order.
The Revenue has raised following grounds of appeal;-
1. Whether on the facts of the case and in law the Id. CIT(A) was erred to allowing the carry forward of deficit of Rs. 1,42,16,863/- 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 assesses, first as 'accumulation' of income u/s.11(1)(a) or as corpus donation u/s. 11(1)(d) 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. ? 2. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A)\ was erred in allowing the claim of the assessee for carry forward of the said deficit by relying upon the judgement of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case, but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. However, on this issue the department has filed SLP before the Apex Court in the case of MIDC (SLP (Civil) 9891 of 2014) in which leave has been granted by the Hon'ble Apex Court and the case has not reached finality.
3 M/s Harvard Business School (India) Research Centre, 3. 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 the assessee for carry forward of the said deficit, ignoring the fact that there was no express provision in the I T Act, 1961 permitting allowance of such claim .
The appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored.
The brief, facts of the case are that the assessee is non-profit making society incorporated under the Society Registration Act, 1860 and is also registered with Charity Commissioner of Mumbai under the Bombay Public Trust Act, 1950. The objects of the assessee are to mainly promote education. It has obtained registration u/s 12AA of the Income Tax Act, 1961(hereinafter the Act) and claimed exemption in respect of income u/s 11 of the Act. The assessee has filed its return of income for the AY 2012-13 on 28/09/2012, declaring total deficit of Rs.1,42,16,863/- and carried forward the same to be set off against income earned in subsequent years. The case was selected for scrutiny and during the course of assessment proceedings, vide letter dated 05/12/2015, the assessee filed revised computation of income to restrict the 15% accumulation u/s 11(1)(a) of the Act to the extent of income available after deduction of expenditure incurred for the charitable purpose. As per the revised computation, the deficit reduced to Rs.5,13,709/- as against Rs.1,42,16,863/- claimed in the return of income. The assessment has been completed u/s 143(3) of the Act, on 26/02/2015, where the AO had rejected deficit/excess application of income for charitable purpose claimed by the assessee in statement of total income to be carried forward to the subsequent years and set off against income on the ground that there
4 M/s Harvard Business School (India) Research Centre, is no provision which allows determination of loss/deficit while computing taxable income u/s 11 of the Act.
4. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that excess application of income for charitable purpose can be carried forward to subsequent years and can be set off against income of the trust because the income of the trust claiming exemption u/s 11 shall be computed in accordance with commercial principles, therefore, like any other business activity, deficit of income shall be allowed to carry forward to subsequent years and to set off against income of the trust. In this regard, it has relied upon the decision of the Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel (264 ITR 110)(Bom.).
The Ld. CIT(A) after considering the submissions of the assessee and also relied upon by the decision of the Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel(supra) held that excess application of income for charitable purpose can be carried forward to subsequent year and set off against income derived from property held under trust. However, for working out the deficit for the year, the benefit for accumulation of 15% of the income shall not be allowed to the assessee, accordingly, directed the AO to allow deficit without allowing the benefit of accumulation of 15% of the income. The relevant findings of the Ld. CIT(A) are as under:-
5 M/s Harvard Business School (India) Research Centre, “5.4.1 In view of the aforesaid reasons, and in view of the decision of the Hon’ble ITAT in the case of ‘Lakshmi and Usha Mittal Foundation’ and in the case of ‘Dawat Institute of Dawoodi Bhora Community’, through his holiness Dr. Syedna Mohammed Burhanuddin Saheb, dated 30.04.2013, and the decision of the Hon’ble ITAT Mumbai Bench in 116 TTJ Mum 673, I am of the view that the accumulation of 15%, if claimed by the assessee for working out the deficit is not allowable to it. The AO shall compute the deficit for the year without giving benefit of 15% accumulation.”
In so far ground no.3 taken by the assessee challenging disallowance of other items of written off Rs.1,21,837/-, the Ld. CIT(A) rejected the arguments of the assessee on the ground that the claim of the assessee is not supported by any credible evidence.
Aggrieved by the Ld. CIT(A)’s order, the Revenue is in appeal before us and the assessee has filed cross objection.
The Ld. AR for the assessee, at the time of hearing, submitted that the issue involved in the present appeal is squarely covered in favour of the assessee by the decision of ITAT, Mumbai Bench in assessee’s own case for AY 2010-11 in where under identical set of facts, the Tribunal by following the decision of the Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel (supra) held that excess application of income for object of the trust can be carried forward to subsequent year to be set off against income of the trust. The Ld. AR further submitted that even otherwise the appeal filed by the Revenue is not maintainable because, the tax effect involved in the appeal is below prescribed limit fixed by CBDT for filing appeal before the Tribunal, which is evident from the fact that the Ld. CIT(A) has allowed relief of Rs.5,13,709/- as against Rs.1,42,16,836/- claimed
6 M/s Harvard Business School (India) Research Centre, by the assessee, therefore, the appeal filed by the Revenue may be dismissed as not maintainable in view of Circular of CBDT vide Circular No.03 of 2018 dated 11/07/2018.
The Ld. DR on the other hand, fairly accepted that the tax effect involved in this appeal is less than the prescribed limit for filing appeal before the Tribunal. However, facts are not clear whether the issue involved is comes within the exception as provided in the Circular or not therefore, liberty may be given to the Revenue to file miscellaneous application, in case, the issue comes in any of exception provided in the said circular.
We have heard both parties, perused the material available on record and gone through the orders of authorities below. We find that the Tribunal has considered identical issue in assessee’s own case for Assessment Year 2010-11 and by following the decision of the Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel Selection (supra) held that deficit/excess application of income for the objects of the trust can be carried forward to be set off against income of subsequent years. The relevant findings of the Tribunal are as under:-
“5. Before us, the plea of the Department is that the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) has not been accepted by the Department on merits and on a similar issue, SLP (Civil) no. 9891 of 2014 has been filed before the Hon'ble Supreme Court in the case of Maharashtra Industrial Development Corporation (MIDC). So, however there is no controversion by the Revenue to the fact that the decision of the CIT(A) is in line with the judgment of the Hon'ble 7 M/s Harvard Business School (India) Research Centre, Bombay High Court in the case of Institute of Banking Personnel Selection (supra).
6. We find that the Hon'ble Bombay High Court subsequent to the decision in the case of Institute of Banking Personnel Selection (supra) considered a similar argument of the Revenue in the case of M/s. Mumbai Education Trust, dated 3.5.2016 and allowed the claim of the assessee. In fact, the Grounds of appeal urged by the Revenue before the Hon'ble High Court, which read as under :- “(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in confirming the order of the CIT(A) to allow the claim of depreciation relying on the decision of this Court in the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR 110 (Bom) ignoring the ratio of Hon'ble Supreme Court judgment in the case of Escorts Ltd. V/s. Union of India (199 ITR 43) wherein Hon'ble Supreme Court has held that double deduction cannot be presumed if the same is not specifically provided by law, in addition to normal deduction? (b) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in confirming the order of the CIT(A) to allow to carry forward of deficit of earlier years relying on the decision of this Court in the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR 110 (Bom) while the revenue did not file SLP against the case of CIT v/s. Institute of Banking Personnel Services reported in 264 ITR110 (Bom) due to low tax effect?”.
stand on the same footing as are being canvassed before us in the instant case. Thus, there is no error on the part of the CIT(A) in following the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) and allowing the stand of the assessee. The other argument taken by the Revenue that its SLP filed before the Hon'ble Supreme Court is pending on a similar issue is of no consequence inasmuch as the binding judgments of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) as well as in the case of M/s. Mumbai Education Trust (supra) continue to subsist. Therefore, in this background, we find no merit in the Ground raised by the Revenue and the same is accordingly dismissed.
8 M/s Harvard Business School (India) Research Centre, 11. We further noted that even otherwise, tax effect involved in the present appeal is less than prescribed limit fixed for filing appeal before the Tribunal by the Revenue as per latest Circular No.03 of 2018 dated 11/07/2018 issued by the CBDT, therefore, considering the CBDT Circular No.03 of 2018 dated 11/07/2018 and also fact that the additions sustained by the Ld. CIT(A) is only at Rs. 5,13,709/- and tax effect on said addition is less than the prescribed limit of Rs.20 lakhs, we are of the considered view that appeal filed by the Revenue is not maintainable on this count also. Hence, the same is dismissed as not maintainable. However, we keep open option to the Revenue to file miscellaneous application if necessary in case, the issue involved in the present appeal comes within the three exception as provided in para-10 of said circular and clause (e) of subsequent circular issued by the CBDT.
In the result, appeal filed by the Revenue is dismissed.
Cross Objection No.135/Mum/2018
The first issue that came for our consideration from cross objection of the assessee is accumulation of 15% of income under section 11(1)(a) of the Act. We find that the issue challenged by the assessee is with regard to accumulation of 15% income of the trust u/s 11(1)(a) of the Act, before arriving at deficit/excess income for the year. The Ld. CIT(A) has given categorical finding in the light of ITAT decision in the case of Dr. Syedna Mohammed Burhanuddin Saheb, dated 30/04/2013, and held that accumulation of 15% income claimed by the assessee for working out deficit is not allowable. We find that the this issue has been 9 M/s Harvard Business School (India) Research Centre, settled by the Hon’ble Supreme Court in the case of ACIT vs A.L.N. Charitable Trust (1995) 216 ITR 697, where the legal position of computation of income and accumulation income u/s 11 has been explained, as per which the question of accumulation of income arises only when the trust had surplus income in the year under consideration. In case, the trust has deficit income for the year under consideration, then only deficit can be allowed to carry forward to subsequent year to be set off against income, but when the assessee is already having deficit, further accumulation of 15% of income u/s 11(1)(a) of the Act cannot be allowed. Therefore, we are of the considered view that there is no merit in the ground no.1 of cross objection filed by the assessee and hence, the same is dismissed.
The next issue that came up for our consideration from ground no.2 of cross objection is disallowance of Rs.1,21,837/- being other items written off claimed as application of income. The CIT(A) after considering material available on record and also on the basis of submissions of the assessee came to the conclusion that the assessee has failed to file necessary evidence to prove that advanced written off, in fact is application of income for charitable purpose. Facts remained unchanged. The assessee except stated that income of trust claiming exemption u/s 11 of the Act shall be computed under commercial principles, fail to furnish any evidence to controvert the findings of the fact recorded by the AO/ld. CIT(A), hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the assessee.
In the result, cross objection filed by the assessee is dismissed.
10 M/s Harvard Business School (India) Research Centre, 16. As a result, appeal filed by the Revenue as well as cross objection filed by the assessee is dismissed.
Order pronounced in the open court on 28/06/2019/2019.
Sd/- Sd/- (Ravish Sood) (G. Manjunatha) �या�यक सद�य /JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER मुंबई Mumbai; �दनांक Dated :.28/06/2019 f{x~{tÜ? fÜA P.S आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant (Respective assessee) 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai, 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,