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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI A. K. GARODIA & SHRI LALIET KUMAR
Per Laliet Kumar, Judicial Member
These appeals are filed by the Revenue on the following common grounds: I. Whether on the facts and in the circumstances of the case and in law, the CIT(A) is right in not appreciating the fact that the normal computation of income under respective heads as envisaged u/s 15 to 59 are not applicable to the computation of income in respect of charitable trust/institution for the purpose of claiming exemption under section 11, 12 and 13 and, therefore, the provisions relating to set-off of loss from one source against the income from another source, set-off of loss from one head against income from another head and carry forward and setoff of loss against the income of subsequent years as envisaged u/s70 to 79 are also not applicable to the charitable trusts/institutions.
757/Bang/2018 Page 2 of 3 II. Whether on the facts and in the circumstances of the case and in law, the CIT(A) is right in not appreciating the fact that the issue of application of income more than the income computed does not arise except in a case where the assessee has incurred huge amount of capital expenditure sourced out of borrowed or corpus donations or 15% of income set apart over a period of time? (Expenditure incurred out of the above sources however cannot be termed ass application of funds out of the income earned in a particular assessment year inasmuch as loan borrowed does not fall under the category of income earned by the assessee, corpus fund donation does not come under income by virtue of section 11(1)(d) and 15% of income set apart in earlier assessment year .cannot be construed as income of the current year and 15% set apart out of the current year income is also excluded from income available for application. As such, the concept of application is only to show that the income is fully utilized rather than claiming excess expenditure either revenue or capital over and above the income so as to claim excess application or deficit/loss to be carried forward to subsequent assessment years. Even in the case of excess application by virtue of borrowed funds/corpus fund donations/ 15% set apart of earlier years, the income of the assessee cannot be converted to loss but at best it can be made Nil. Hence, the carry forward of excess application of income as claimed by the assessee cannot be allowed)?
The first ground raised by the Department in both the appeals are identical. The respondent is a religious cum charitable Trust registered under the Income Tax Act and filed its return of income for the assessment year under consideration after claiming Nil depreciation. The respondent has also carried forward the excess expenditure applied over income for subsequent assessment years from A.Y. 1999- 2000 upto 2009-10. The AO had disallowed carry forward of the surplus fund and set off against the other income as losses.
Aggrieved by the order of the assessment, the assessee preferred the appeal before the CIT. The CIT vide impugned order dated 28.12.2017 had allowed the appeal of the assessee on both the grounds viz., on depreciation as well as the carrying forward of the excess application relying upon the catena judgments mentioned in the impugned order in paragraph 5.3 and 5.11. Now the Revenue is in appeal before us on both the grounds. At the outset, the learned AR has submitted that the Hon’ble Supreme Court in the matter of Rajasthan and Gujarati Charitable Foundation, Poona in Civil Appeal No. 596/2017 and in the CIT Vs. Subros Educational Society had the occasion to examine these two issues and after 757/Bang/2018 Page 3 of 3 examining the issues, the Hon’ble Supreme Court had decided the issue in favour of the assessee. For ready reference, he has drawn our attention to paragraphs 3, 4 and 5 of the order of the Hon’ble Supreme Court in Rajasthan and Gujarati Charitable Foundation. Further, the learned AR has drawn our attention to the order passed by this Tribunal in the case of ACIT Vs. Diocesan of Mangalore wherein in paragraph 6 and 7, the Co-ordinate Bench, after relying upon the decision of the Hon’ble Supreme Court had decided the issue in favour of the assessee.
The learned DR, relied upon the order passed by the CIT(A).
We have heard the rival contentions and perused the record. In view of the categorical finding with respect to both the issues recorded by the Hon’ble Supreme Court and the subsequent decision of the Co-ordinate Bench in the matter of ACIT Vs. Diocesan (supra), we do not find any merit in the appeals of the Revenue.
In the result, the appeals of the Revenue are dismissed.