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Income Tax Appellate Tribunal, INDORE
Before: SHRI C.M.GARG & SHRI O.P.MEENA
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.
The Ld. CIT(A) has erred in not allowing the benefit of carry forward of loss. 2. The Ld. CIT(A) has erred in not accepting the claim of the assessee u/s 11 since the application registration was made and all the necessary compliances were also made. On this account it should be presumed that the Institution be deemed to be treated as a registered institution u/s 12A/12AA and the loss be carry forward. The Revenue has taken following grounds of appeal in ITA No. 150/IND/2015 as under: 1. On the facts and circumstances of the case, the Ld. CIT(A)-1, erred in deleting the addition of Rs. 40,00,000/- made u/s 68 of the I.T. Act, 1961 being unexplained credit especially when at the time of completing the assessment the assessee failed to explain the nature and source up-to the satisfaction of the Assessing Officer? 2.On the facts and circumstances of the case, whether the Ld. CIT(A) has erred in deleting the addition of Rs. 3,98,892/- made by the AO on account of excess depreciation holding that the assessee is entitled for allowing depreciation on the higher rate 30% as against 15% allowable as per Rule 5 of Income-tax Rules. Now we will take up 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.
Briefly stated the facts of the case are that the assessee has
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.
On the other hand the Ld. DR relied on the orders of the
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.”
We are of the view that excess expenditure incurred for
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.:
Ground no. 1 relates to deletion of addition of Rs.
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.
The ld. DR relied on the order of the AO.
The Ld. Counsel submitted that M/s Nitin & Company has
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.
We have considered the facts, rival submissions and
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.
Ground no. 2 of Revenue relates to deletion of Rs.
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.
Facts from the assessment order and appellate order reveals
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/-.
Being, not satisfied, the assessee filed an appeal before the
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.
Being aggrieved the Revenue filed this appeal before the
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.
Per contra, the Ld. AR supported the order of the Ld. CIT(A)
and submitted that buses were used in a profession, hence, Ld.
CIT(A) was right in deleting the disallowance.
We have heard the rival submissions and have gone through
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.
In the result the appeal of the Revenue is partly allowed.
In the result, the appeal of the Assessee as well as Revenue
is partly allowed.
The order pronounced in the open court on 29 .03. 2017.
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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