THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS) CIRCLE-1, MANGALURU vs. M/S SAINT FRANCIS XAVIER'S CHURCH, MANGALORE

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.

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.