M/S. N.T.THOMAS MEMORIAL EDUCATIONAL AND DEVELOPMENT SOCIETY,INDORE vs. THE ACIT 1(2), INDORE

आदेश /O R D E R

PER O.P. MEENA, ACCOUTANT MEMEBR. These are cross appeals filed by the assessee as well as Revenue are directed against the order of the CIT(A)-1, Indore, dated 9.10.2014 for the assessment year 2011-12 which in turn

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 2 of11 has been arisen out of the order u/s 14(3) dated 7.2.2014 passed

by the ACIT-1(2) (hereinafter referred to as the AO). The Grounds

of appeal as taken by the assessee in I.T.A. No. 139/Ind/2015.

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 3 of11 3. Ground No. 1 relates to not allowing the benefit of carry forward of losses.

furnished its return of income on 27.09.2011 declaring the total

loss of Rs. 1,17,97,731/- which was assessed u/s 143(3) at total

loss of Rs. 54,25,934/-. The assessee is an registered educational

trust. The CIT(A) observed that the entire income is held to be

exempt , there is no provision for any carry forward of loss,

because if income of any kind in such cases is held as exempt in

these cases, no purpose could be served by carry forward of

losses from one year to another year, because they could not be

set off against any income as, entire income has been made

exempt under this Section, without any limitation or restriction .

Therefore, carry forward of losses, which are not provided under

the provision of Section 10(23C)(vi) of the I.T. Act, for the reasons

mentioned above, would be an exercise in futility. The case law

referred to by appellant in cases of Gujrati Samaj 204 Taxman

151 [MP] and judgment of Bombay High Court reported in 264

ITR 110 [Bomb.], are with reference to Section 11 of the Act and

are not applicable to the provision of Section 10(23C)(vi) of I.T.

Act. Accordingly, the action of the AO was upheld.

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 4 of11 5. Being aggrieved, the assessee has filed an appeal before us.

The Ld. Counsel for the assessee submitted that the lower

authorities has disallowed the carry forward of loss by holding

that the assessee’s income is exempt u/s 10(23C)(vi) and there is

no provision in the Act for any carry forward of loss from one year

to another year because they could not be set off against any

income at the income in succeeding year is also exempt. The Ld.

CIT(A) as also distinguished the case laws relied by the assessee

in the case of Gujrati Samaj of Hon'ble MP High Court 204

Taxman 151 by observing that these cases were decided with

reference to Section 11 of the Act, hence not applicable to the

provision of Section 10(23C)(vi) of the Act. However, the

provisions of Section 11 are also applicable to charitable trust,

where the income of the assessee is held to be exempt. Similarly

the provisions of Section 10(23C)(vi) is also akin to the Section 11

of the I.T. Act. Therefore, the ratio of decision of Hon'ble

Jurisdictional High Court in the case of Gujrati Samaj (Supra) is

duly applicable to the present case of the assessee.

lower authorities.

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 5 of11 7. We have considered the facts, rival submissions and

perused the material available on record. We find that the Ld.

Counsel for the assessee has relied on the decision of the Hon'ble

Jurisdictional High Court in the case of CIT v. Gujrati Samaj

[2012] 349 ITR 559 (MP) wherein para 8 of the said decision the

Hon'ble High Court has observed as under:

“Coming to the next question as to whether the order of the Tribunal holding that the assessee is entitled for carry forward and set off excess of expenditure incurred during the year over its income. We find that in view of Section 11(1)(a) of the Act, it cannot be said that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year would not amount to such income being applied for charitable or religious purposes. Having regard to Section 11(1)(a) of the Act, in our view, when the income of the trust is used or put to use to meet the charitable or religious purposes, it is applied for charitable purpose and the said application of the income for charitable or religious purposes takes place in the year in which the income for charitable and religious purposes have been incurred in the earlier year and the said expenses are adjusted against the income of a subsequent year, the income of that year can be said to have been applied for charitable and religious purposes in the year in which expenses incurred for charitable and religious purposes had been adjusted. There are no words of limitation in Section 11(1)(a) of the Act explaining that the income should have been applied for charitable or religious purposes only in the year in which the income had arisen [see CIT v. Maharana of Mewar Charitable Foundation, [1987] 164 ITR 439 (Raj.)]. In our considered view, the Tribunal has rightly applied the ratio of the judgment and order passed by the Division Bench of the Rajasthan High Court in CIT v. Maharana

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 6 of11 of Mewar Charitable Foundation, [1987] 164 ITR 439 (Raj.) and committed no error in holding this issue in favour of the assessee.”

charitable purposes in the year is liable to be adjusted against

the income of the succeeding year which computing taxable

income of the succeeding year. Since, the provision of Section

10(23C)(vi) and Section 11 are appearing on the chapter 3 under

the head “exempt income” similarly the provision of Section

10(23C)(vi) falls under that Chapter 3 and both Section allow

exemption of income, and deals with charitable trusts, hence,

provision has the similarity. Further, the Hon'ble High Court in

above case has held that the expenditure of the earlier year can

be set off against the income of subsequent year. Therefore,

respectfully following decision of the Hon'ble Jurisdictional High

Court in the case of Gujrati Samaj (Supra), the claim of excess

expenditure of the assessee is directed to be allowed in

subsequent year subject to actual expenditure/deficit against the

receipts of succeeding year, if remained available after

determining the final assessed income and giving appeal effect.

This grounds of appeal, is accordingly allowed.

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 7 of11 9. Ground No. 2 relates to not accepting the claim of

assessee u/s 11 of the Act. 10. The Ld. Counsel for the assessee has not pressed this

ground, therefore, the same is treated as dismissed as not

pressed. 11. In the result, the appeal of the assessee is partly allowed.

I.T.A. No. 150/IND/2015 revenue’s appeal.:

40,00,000/- made u/s 68 of the Act. 13. Briefly stated the facts are that, the AO made an addition of

Rs. 40,00,000/- on the ground that the assessee has shown M/s

Nitin & Company as its sundry creditor for Rs. 40,00,000/-, but

M/s Nitin & Company has denied of any such credit balance.

However, during the course of appellate proceedings it was

explained that M/s Nitin & Company has carried out the

construction of school as a contractor for Rs. 84,00,000/- for the

assessee. A part of this bill is paid in the year under

consideration as advance on which TDS was also deducted in

the year 2011. For that reason alone a part of this amount of Rs.

40,00,000/- was shown by the assessee as outstanding credit

balance in the name of Nitin & Company in assessment year

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 8 of11 2011 itself. The CIT(A) after examining the facts, deleted the

addition of Rs. 40,00,000/- made u/s 68 of the Act.

carried out the construction work for the assessee for the total

amount of Rs. 84,00,000/-. The bill received on 4.4.2011. It was

submitted that a journal entry by debiting to the building

account and crediting the contractor’s account was passed. The

bill has been received on 4.4.2011 which clearly shows that the

building was completed up to 31.03.2011 to the tune of Rs.

85,00,000/-. The assessee has made the payment for this bill by

DD issued directly by the bank from the loan account on

11.04.2011 and the T.D.S. payment is made on 15.4.2011.

Therefore, the credit to the contractor was correctly given as per

his bill and there is no question of making any addition as a cash

credit. Even otherwise, this was merely a journal entry and there

is no question of making such addition.

perused the material available on record. We find that the

assessee had paid a sum of Rs. 44,00,000/- as advance for the

contract work done for Rs.84,00,000/- and has provided an

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 9 of11 amount of Rs. 40,00,000/- by debiting the building account and

crediting the contractor’s account. The bill of Rs. 84,00,000/-

was received on 4.4.2011. We find that this is a journal entry of

payment of Rs. 40,00,000/- which was made through banking

channel. Therefore, we do not find any infirmity in the order of

the CIT(A). Accordingly, this grounds of appeal of the Revenue is

rejected.

3,98,892/- made on account of excess depreciation holding

that the assessee is entitled for allowing the depreciation of

higher rate of 30% as against 15% allowable.

that the AO found that the assessee has claimed depreciation of

Rs. 7,97,786/- being @ 30% on buses owned and used by the

assessee as convenience to and from the students of the

institution, whereas higher rate of depreciation is allowed to

buses which are used for transport business, hence, depreciation

so claim was restricted to 15% rate as applicable for machinery.

This resulted in disallowance of Rs. 3,98,892/-.

Ld. CIT(A). The Ld. CIT(A) deleted the disallowance so made by

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 10 of11 holding the buses were used as profession line for safety and

security of children, on which higher rate of depreciation is

eligible.

Tribunal. The Ld. Senior DR relied on the order of the AO, and

submitted that buses are used as conveyance of students of

institution, hence, the AO was correct in making such

disallowance.

and submitted that buses were used in a profession, hence, Ld.

CIT(A) was right in deleting the disallowance.

the orders of the lower authorities, and perused the material

available on record. We find that the assessee is owner of the

buses. These buses are being used for transport of the students

of institution to and fro residence of children to the classroom

only which cannot be said as being used for business transport

business or running them on higher. We find that higher

depreciation will also be admissible on motor Lorries used in the

assessee’s business of transportation of goods on hire. The higher

rate of depreciation however will not apply if the motor buses,

N.T. Thomas Memorial Educational & Society I.T.A. No.139 & 150 /Ind/2015/A.Y.: 11-12 Page 11 of11 motor lorries etc. are used in some other non-hiring business of

the assessee. Therefore, the assessee is not entitled to claim of

higher rate of depreciation. Accordingly, this grounds of appeal is

allowed in favour of revenue and order of Ld. CIT(A) on this issue

is set aside.

is partly allowed.

Sd/- Sd/-

(सी.एम.गग�)/(C.M. GARG) (ओ.पी.मीना) /(O.P.MEENA) �या�यक सद�य /JUDICIAL MEMBER लेखा सद�य /ACCOUNTANT MEMBER

Dated: 29th March,2017.

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