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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI AMIT SHUKLA
impugned order dated 27.4.2015, passed by Ld. CIT (Appeals)-40 (Exemption), New Delhi for the quantum of assessment passed u/s 143 (3) for the asstt. year 2011-12. In the grounds of appeal revenue has raised following grounds:-
1.”On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of carry forward of losses disregarding the facts that the set off and carry forward of losses are dealt with by the provisions of section 70,71,72,73 and 74 of the Income-Tax Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) had erred in allowing the claim of carry forward of losses disregarding the facts that the provisions of the Act are not applicable in the cases who are claiming exemption u/s 11 &12 of the Income Tax Act, 1961.”
The facts in brief are that assessee is charitable trust registered u/s 12A (a) vide order dated 4.12.74. The main object of the trust was to promote Ayurvedic system of medicine treatment and running of Ayurvedic hospital. AO noted that the assessee was enjoying the benefit of exemption u/s 11(1) up to A.Y. 2002-03 and also exemption u/s 10(23C)(via) from A.Y. 2003-04 to A.Y. 2005-06. The assessee’s application for renewal of the exemption was still pending with DGIT (Exemption), Delhi. In the scrutiny proceedings u/s 143(3) for the A.Y. 2006-07, the assessee was denied the exemption on the ground that the activities of the assessee were not carried out as per the objects of the trust as the assessee was also doing the allopathic treatment. In the first appeal against the said assessment order, Ld. CIT (A) has allowed the exemption u/s 11 vide order dated 15.10.2010. However, in the appeal preferred by the department before the Tribunal, the order of the Ld. CIT (A) was set-aside and the matter restored back to the file of AO. In the meantime DGIT (Exemption) had cancelled the registration of the assessee u/s 12AA vide order dated 30.6.2009.
However, the said order of DGIT (Exemption) has been set aside by the Tribunal and registration u/s 12AA has been restored. This order of the Tribunal has also been upheld by the Hon’ble Delhi High Court vide order dated 4.4.2011. AO after referring to the past history of the various assessments, again held that activities carried out by the assessee trust is not in accordance with the aims and objects of the trust, because assessee is also running Allopathic hospital which is a primary source of activities of the assessee. Accordingly, he denied the benefit of exemption u/s 11 and computed the income of the assessee as normal business income.
Before the Ld. CIT (A) one of the alternative submissions of the assessee was that, if claim of exemption of the income of the Ayurvedic division is disallowed, then assessee should be given benefit of adjustment of losses as per the law. Ld. CIT (A) had accepted such plea after observing and holding as under:-
“4.13 After considering all the facts and circumstances of the case I am of the view that since the Hon’ble Tribunal has restored the order of the AO for the A.Y. 2006-07 denying the exemption u/s 11(1) to the assessee and no exemption u/s 10(23C)(via) is available as on date the assessee cannot be allowed the exemption for the time being in full but the assessee is eligible for exemption of the income of the trust division and the ayurvedic division as per the decision of the Hon’ble Tribunal of the A.Y. 2006-07 as referred above and as followed by the AO in the assessment u/s 143(3) for the A.Y. 2012-13 and it is only the income of the allopathic division where exemption u/s 11(1) which is to be denied to the assessee and at the same time the assessee should be allowed the consequential benefit of adjustment of loss as per law and the AO is directed accordingly.”
4. After hearing both the parties and on perusal of the impugned order, we find that the only grievance of the revenue is that the Ld. CIT (A) has erred in allowing the claim of carry forward of losses despite the fact that AO himself has denied the exemption u/s 11 and 12 to the assessee and has computed the income as normal business income. Once the income has been computed by the AO as per the normal business income, then consequently benefit of adjustment of losses has to be allowed as per law. The aforesaid observation and direction of the Ld. CIT (A) is completely in accordance with facts and law of the case, because if exemption u/s 11(1) is denied to the assessee on the income of Allopathic division and is computed as business income then adjustment of losses in the computation of such business income is consequential effect which has to be given.
Accordingly, the order the Ld. CIT(A) is confirmed and grounds raised by the revenue are dismissed.
In the result the appeal of the revenue is dismissed.
Order pronounced in the Open Court on 25th June, 2018.