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Before: Shri Abraham P. George & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) 17, Chennai dated 14.09.2017 relevant to the assessment year 2011-12. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in holding that the assessee is eligible to set off of brought forward excess application of funds to subsequent years.
Brief facts of the case are that the assessee is a registered public charitable trust registered under section 12AA of the Income Tax Act, 1961 [“Act” in short]. The assessee filed its return of income for the assessment year 2011-12 on 07.12.2011 admitting NIL income. The return filed by the assessee was selected for scrutiny and notice under section 143(2) of the Act was issued on 13.09.2013. A notice under section 142(1) of the Act was issued on 12.09.2013 calling for specific details. In response to the above notices, the assessee filed the details as called for. The Assessing Officer completed the assessment under section 143(3) of the Act determining the taxable income at NIL. The Assessing Officer further held that the assessee would not be eligible to carry forward the deficit of income over expenditure of the current year since the deficit had been funded out of loans and the loans can be claimed as application as and when repaid as per Circular No. 100 dated 24.01.1973 and the provisions of the Act allowing set off and carry forward of losses does not permit determination of loss under section 11 of the Act and its carry forward.
On appeal, by following the decision of the Hon’ble Madras High Court in the case of CIT v. Matriseva Trust 242 ITR 20, the ld. CIT(A) allowed the appeal of the assessee.
Aggrieved, the Revenue is in appeal before the Tribunal. By relying on the grounds of appeal
, the ld. DR has submitted that there is no provision in the Income Tax Act which allows for determination of loss under section 11 of the Act and carry forward of the same to subsequent year to be set off against income of the subsequent year. By relying upon the decision of the Tribunal in the case of Pushpawati Singhania Research Institute for Liver, Renal & Digestive Diseases v. DDIT (2009)
29. SOT 316, in the case of Anjuman-E-Himayhath-Islam v. ADIT(E) [2015] 59 taxmann.com 379 (Chennai - Trib) as well as in the case of Inter Church Service Association in dated 05.02.2016, the ld. DR pleaded that the order of the ld. CIT(A) should be reversed.
Despite service of notice through DR, none appeared on behalf of the assessee. Hence, we proceed to decide the appeal on merits after hearing the ld. DR.
We have heard the ld. DR, perused the materials available on record and gone through the orders of authorities below. The only dispute is with regard to the denial of benefit of section 11 & 12 of the Act for the excess amount brought forward from earlier assessment years. By following the decision of the Hon’ble Madras High Court in the case of CIT v. Matriseva Trust (supra), the ld. CIT(A) decided the issue in favour of the assessee. The ld. DR relied on the decision in the case of Medical Trust of Seventh Day Adventist v. ITO in & 3077/Mds/2014 dated 11.08.2016, wherein, the decision of the Tribunal in the case of Anjuman-E-Himayhath- Islam v. ADIT(E) (supra) has been followed. Prima facie, the decision of the Hon’ble Jurisdictional High Court in the case of CIT v. Matriseva Trust (supra) was neither brought on record nor distinguished this judgement while arriving at the conclusion by the Tribunal that there would be no scope arithmetically to set off excess application of fund during the earlier assessment years in the relevant assessment years. When, similar issue was subject matter in appeal before the Hon’ble Delhi High Court in the case of DIT v. Raghuvanshi Charitable Trust & Ors. (2011) 197 Taxman 170, by reproducing the observations of the Hon‟ble Mr. Justice S.H. Kapadia in the case of CIT vs. Institute of Banking Personnel [264 ITR 110 (Bom.), the Hon’ble Delhi High Court decided the issue in favour of the assessee after analysing five different judgements of different High Courts viz., (i)CIT vs. Maharana of Mewar Charitable Foundation [164 ITR 439 (Raj.)], (ii) CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 293 (Guj), (iii) CIT vs. Institute of Banking Personnel [264 ITR 110 (Bom.)]; (iv) CIT vs. Siddaramanna Charities Trust [96 ITR 275 (Mys); and (v) CIT vs. Matriseva Trust [242 ITR 20 (Mad.)]. The relevant observations of the Hon‟ble Mr. Justice S.H. Kapadia in the case of CIT vs. Institute of Banking Personnel (supra) reads as under: “Now coming to question No.3, the point which arises for consideration is: whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in the subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would
not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that tin the case of a charitable trust, their income was assessable under self-contained code mentioned in section 11 to section 13 of the Income-tax Act and that the income of the charitable trust was not assessable under the head "Profits and gains of business" under section 28 in which the provision for carry forward of losses was relevant. That, in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in the section 11 of the Act and that such adjustment will have to be excluded from the income of the trust under section 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 293 (Guj). Accordingly, we answer question No.3 in the affirmative, i.e., in favour of the assessee and against the Department.” The Hon’ble Delhi High Court has concluded as under: “9. It is clear from the above that as many as five High Courts have interpreted the provision in an identical and similar manner. Learned counsel for the Revenue could not show any judgment where any other High Court has taken contrary view. Since we are in agreement with the view taken by the aforesaid High Court, we answer these questions in favour of the assessee and against the Revenue.” The Hon’ble Jurisdictional High Court’s decision is one of the decisions analysed by the Hon’ble Delhi High Court while deciding similar issue in favour of the assessee, which was followed by the ld. CIT(A). Moreover, the ld. DR could not brought on record any higher Court decision having modified and reversed the decisions of the various High Court’s decision including the decision of the Hon’ble Madras High Court. Accordingly, we find no reason to interfere with the order passed by the ld. CIT(A) on this issue and thus, the ground raised by the Revenue stands dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 29th October, 2018 at Chennai.