ITO (EXEMPTION)-2(3) MUMBAI, MUMBAI vs. SAYAJI-U-BA KHIN MEMORIAL TRUST, MUMBAI

1 ITA 5883/Mum/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI

Before Shri Mahavir Singh (JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER)

I.T.A No.5883/Mum/2016 (Assessment year: 2010-11)

ITO-(E) 2(3), Mumbai vs Sayaji-U-Ba Khin Memorial Trust 2nd Floor, Green House, Green Street, Fort, Mumbai 400 023 PAN : AAATT0114E

Appellant by Shri Rajat Mittal Revenue by Shri Rajnikant Chemiyari

Date of hearing 13-03-2018 Date of pronouncement 21-03-2018 O R D E R Per G Manjunatha, AM : This appeal filed by the revenue is directed against the order of the

CIT(A)-1, Mumbai dated 14-07-2016 and it pertains to AY 2010-11. The

revenue has raised the following grounds of appeal:-

“1. "Whether on the facts of the case and in law the Id.CIT(A) erred in allowing the appeal of the assesses on account of disallowing depreciation on fixed assets of Rs. 84,81,13,61- in contravention of the decision of Escorts Ltd. Vs. UOI 199 1TR 43 wherein it was held that since section 11 of the Income Tax Act provides for deduction capital expenditure incurred on assets acquired for the objects of the trust as application and does not specifically & expressly provide for double deduction on account of depreciation on the same very assets acquired from such capital expenditure, no deduction shall be allowed u/s.32 for the same or any other previous year in respect of that asset as it amounts to claiming a double deduction. 2. Whether, on the facts and in the circumstances of the case and in law the IdCIT(A) erred in allowing the appeal , when the Delhi High Court in the case of Charanjiv Charitable Trust and Kerala High Court in the case of Lissie Medical Institutions vs CIT 76 DTR (Ker) 372 has decided the issue in the favour of the department after considering the decision of Hon'ble Supreme Court in the case of Escorts Ltd (199 ITR 43). 3. Whether, on the facts and in the circumstances of the case and in law the Id CIT(A) erred in relying upon the judgment of Hon'ble high Court in the case of CIT vs. Institute of Banking personnel selection without appreciating the fact that Department has not accepted the decision on merit, but due to smallness of tax effect appeal was not filed before Hon'ble

2 ITA 5883/Mum/2016 Supreme Court. However, the issue is pending for adjudication before Hon'ble Supreme Court in other cases. 4. Whether on the facts of the case and in law the Ld.CIT(A) erred in allowing the accumulation or setting apart of 15% of income of Rs. 56,37,4627- as the assessee has expended the entire income toward object of the trust as Application of income and there is no surplus left to be accumulated. However, in assessee's own case the Question of law on this issue has been admitted by Hon'ble Bombay High court vide order, ITA No. 2422 of 2013 dated 26th April 2026, for A. Y. 2007-08. 5. Whether on the facts of the case and in law the Id.CIT(A) erred in allowing the carry forward of deficit of Rs. 1,52,81,656/- and allowing set off against the income of the subsequent years, -—— 6. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred 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." 7. Whether, on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing the claim of the assessee for carry forward of the said deficit by relying upon the judgment 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 MIDQSPL (Civil) 9891 of 2024) and the matter is pending before the Hon'ble Supreme Court.” 2. The brief facts of the case are that the assessee is a trust registered

u/s 12A of the Income-tax Act, 1961. The assessee has filed its return

of income on 19-08-2011 declaring deficit of Rs.1,52,81,656. The

assessment has been completed u/s 143(3) on 28-02-2013, determining

total income at Nil, wherein the AO has denied the benefit of

depreciation claimed on fixed assets on the ground that when entire

amount of capital asset has been claimed as application of income u/s

11(1), claiming further depreciation on such fixed assets amounts to

double deduction by relying upon the decision of Hon’ble Supreme Court

in the case of Escorts Ltd vs UOI 199 ITR 43 (SC). The AO also

rejected the claim of assessee towards claim of carry forward of excess

application of income of Rs.1,52,81,656 by holding that there is no

provision for carry forward of excess application as loss or deficit u/s 11

3 ITA 5883/Mum/2016 to the subsequent years. The AO also rejected the claim of the

assessee’s accumulation of income to the extent of 15% of gross

receipts u/s 11(1) (a) of the Income-tax Act, 1961.

before the CIT(A). Before the CIT(A), assessee has filed elaborate

written submissions. The assessee also relied upon the decision of

ITAT, in its own case for the assessment year 2007-08, wherein the

ITAT has allowed the claim of depreciation, carried forward of excess

application of income u/s 11(1) and accumulation of income to the extent

of 15% u/s 11(1)(a) of the Act. The CIT(A), by following ITATs decision

in assessee’s own case allowed appeal filed by the assessee.

Aggrieved by the order of CIT(A), revenue is in appeal before us.

claimed on fixed assets. The Ld.AR for the assessee submitted that the

issue is squarely covered in favour of the assessee by the decision of

ITAT in assessee’s own case for AY 2007-08 in ITA No.5646/Mum/2011,

wherein the ITAT has allowed depreciation. On the other hand, the

Ld.DR strongly relied upon the order of the AO.

record. We find that the co-ordinate bench of ITAT, Mumbai Bench “E”

in ITA No.5646/Mum/2011 for AY 2007-08 has considered a similar

issue in the light of decision of Hon’ble Supreme Court in the case of

4 ITA 5883/Mum/2016 Escorts Ltd vs UOI and by following the decision of Hon’ble Bombay

High Court in the case of CIT vs Institute of Banking Personnel Selection

264 ITR 110 (Bom) allowed depreciation claimed on fixed assets. The

relevant portion of the order is extracted below:-

“4. We have considered submissions of ld.representatives of parties and orders of authorities below. We observe that there is no reason to interfere with the order of ld.CIT(A) on this issue as the income of the trust is required to be computed u/s 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. Ld CIT(A) has rightly observed that the reliance placed by the department in the case of Escorts Ltd (supra) is not applicable to the facts of the assessee’s case. It is also observed that a Coordinate Bench of this Tribunal in assessee’s own case for assessment year 2004-05 by following the decision of Hon’ble Jurisdictional High Court in the case of Institute of Banking Personnel Selection (supra) allowed the claim of depreciation, which is followed by ld CIT(A) in the impugned order. Hence, we uphold his order and reject Ground No.1 of appeal taken by department.”

co-ordinate bench, we are of the considered view that the assessee is

eligible for depreciation on fixed assets even though entire cost of such

fixed assets has been claimed as application of income u/s 11 of the

Income-tax Act, 1961. The Ld.CIT(A), after considering relevant facts

has rightly deleted addition made by the AO. We do not find any error or

infirmity in the order of the CIT(A). Hence, we are inclined to uphold the

findings of the CIT(A) and reject ground raised by the revenue.

5 ITA 5883/Mum/2016

of income u/s 11(1)(a) of the Income-tax Act, 1961. The AO rejected

accumulation of income u/s 11(1)(a) on the ground that when there is no

surplus available for accumulation of income, there is no provision under

the Act to accumulate 15% of gross receipts for future years. The Ld.AR

for the assessee submitted that the issue is squarely covered in favour

of the assessee by the decision of ITAT, Mumbai Bench in its own case

for AY 2007-08. We find that the co-ordinate bench of ITAT in

assessee’s own case for AY 2007-08 in ITA No.5646/Mum/2011 has

allowed the claim of the assessee towards accumulation of 15% income

u/s 11(1)(a) of the Act. The relevant portion of the order is extracted

below:-

6 ITA 5883/Mum/2016 6.4 Considering all the above factual position as well as the case laws referred as above, I consider it proper and appropriate to hold that the A.O. was rot justified in denying the claim of the appellant for the accumulation of income. Accordingly, this ground of appeal is allowed.” 8 We observe that ld CIT(A) has relied on the decision of Hon’ble Supreme Court in the case of A.I.N. Rao Charitable Trust (supra), wherein , it is held that exemption available u/s.11(1)(a) i.e. 15% of income is unfettered and not subject to any conditions. In the case before us, assessee has claimed 15% accumulation u/s.11(1)(a) of the Act. Hence, we do not see any reason to interfere with the order of ld CIT(A) and reject ground of appeal taken by department. “ 8. In this view of the matter and consistent with the view taken by the

co-ordinate bench, we are of the view that the assessee is eligible for

accumulation of income to the extent of 15% of gross receipts u/s

11(1)(a) of the Act. The CIT(A) after considering relevant facts has

rightly allowed the claim. We do not find any error in the order of the

CIT(A). Hence, we are inclined to uphold the findings of CIT(A) and

reject ground raised by the revenue.

excess application of income. The Ld.AR for the assessee submitted

that the issue is covered in favour of the assessee by the decision of

ITAT, in its own case for AY 2007-08, wherein the ITAT has held that the

assessee can claim carry forward of excess application of income to

subsequent years. We find that the co-ordinate bench of ITAT, in

assessee’s own case in ITA No.5646/Mum/2011 for AY 2007-08 has

allowed the claim of carry forward of excess application of income to

subsequent years. The relevant portion of the order is extracted below:-

“9. In regard to Ground No.3 of appeal, we heard ld.

7 ITA 5883/Mum/2016 Representatives of parties and perused orders of authorities below. We observe that ld CIT(A) by allowing the claim of the assessee has relied on the decision of Hon’ble Bombay High Court in the case of CIT vs Institute of Banking Personnel Selection (supra), wherein it has been stated that income derived from the trust property has to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable 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 purposes in subsequent year in which such adjustment has been made. Hence, there is no reason to interfere with the order of the ld.CIT(A). Accordingly, we uphold the same by rejecting ground No.3 of appeal taken by revenue.” 10. In this view of the matter and consistent with the view taken by the co-ordinate bench, we direct the AO to allow carry forward of excess

application of income u/s 11 of the Income-tax Act, 1961. 11. In the result, appeal filed by the revenue is dismissed. Pronounced in the open court on 21st March, 2018.

Sd/- sd/- (Mahavir Singh) (G Manjunatha) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 21st March, 2018 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order Sr.PS, ITAT, Mumbai