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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
These two appeals by the Revenue are arising out of the different order of Commissioner of Income Tax (Appeals)-I, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-I/IT/E-II(37 & 138)/2014-15 even dated 06- 01-2016. The Assessment were framed by the Assistant Director of Income Tax (Exemption) II (1), Mumbai [in short ADIT (E)] for the assessment years 2004-05 & 2005-06 vide order even dated 21.10.2014 under section 143(3) read with section 260 of the Income Tax Act, 1961(hereinafter ‘the Act’).
The only common issue in these two appeals of Revenue is against the order of CIT(A) allowing carry forward of deficit and allowing set off the same against income of the subsequent years and according to Revenue, this will amount to double deduction on account of expenditure out of exempt income. For this Revenue has raised identical worded grounds in both the years and the facts are exactly identical, hence, we will take up the facts from AY 2005-06 and decide the issue. The grounds raised
reads as under: -
1. Whether, on the facts of the case and in law, the Ld. CIT(A) erred in allowing the carry forward of deficit and allowing set off against the income of the subsequent years. allowing the deficit will tantamount to double deduction on account of expenditure out of exempt income.
2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing to carry forward of deficit on account of excess expenditure and directing the Assessing Officer to al/ow carry forward of deficit on account of excess expenditure without appreciating the fact that this would have the effect of granting double benefit to the assessee, first as 'accumulation' of income u/s. I l(1)(a) or as corpus donation u/s. 11 (1)(d) in earlier years/current year and then as 'application' of income u/s 11 (1)(a) in the subsequent years which was legally not permissible'
3. 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 catty forward of the said deficit, ignoring the fact that there was no express provision in the IT Act. 1961 permitting allowance of such claim."
4. That the decision of Hon'ble Bombay High Court in the case of Indian Institute of Banking and Personnel Selection (2003) 264 ITR 110 was not accepted by Revenue. but the appeal was not filed due to the smallness of tax effect. On the issues decided in said order are challenged in Apex Cowl in other cases hence the issue of double deduction on account of allowing claim of carry forward of deficit to adjust as application of income in subsequent years have not reached finality.
5. The Appellant prays that, to the extent of above grounds. the order of the Commissioner of Income Tax (Appeal)-I, Mumbai be set aside and that of the Assessing Officer be restored.”
Briefly stated facts are that during the course of assessment proceedings the AO noted that the assessee has shown a surplus of an amount of ₹ 33,85,363/- and claim the same as set off against unabsorbed expenditure of previous years. The assessee was asked to justify its claim and was also required to show cause as to why this claim for set off of carry forward deficit should not be disallowed. The assessee relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Institute of Baking Personal Selection (‘IBPS’) (203) 131 Taxman 386 (Bom.), wherein the Hon’ble Bombay High Court has answered that the assessee could carry forward deficit of earlier years and set it off against surplus of subsequent years. Similar view was taken by the Hon’ble Delhi High Court in the case of Director of Income Tax (‘DIT’) v. Raghuvanshi Charitable Trust (2011) 197 Taxman 170 (Delhi), wherein Hon’ble Delhi High Court also held that the adjustment of deficit of current year against income of subsequent years would amount to application of income of trust for charitable purposes in subsequent years within the meaning of section 11(1)(a) of the act. However, the AO despite these judgements noted that the SLP is pending before Supreme Court, hence, set off was not allowed by observing in Para 4.3(10) & 4.4 as under: - “4.3(10) The assessee in support of its claim has placed reliance upon the judgment in the case of CIT v/s Institute of Banking Personnel Selection 264 ITR 110 (Bom.) wherein the issue of allowability of set off of 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 has been decided in favour of the assessee. The Department has not filed SLP against this order due to tax effect being below the prescribed limit.
In this regard, it is submitted that the Hon'ble High Court of Bombay, in the ease of The Director of Income Tax (Exem.) V/s. Maharashtra Industrial Development Corporation (MDC) (ITA No. 2652 of 2011) after relying on the decision of CIT v/s. Institute of banking (264 ITR 110) (Bombay High Court) had dismissed the appeal filed by the department on the issue of carry forward deficit. However, the department has filed SLP before the Apex Court (SPL (Civil) 9891 of 2014) and the matter is pending before the Hon'ble Supreme Court. It is further humbly submitted that the other decisions are not from the jurisdictional bench.
4.4 In view of the above reasons and discussion, neither loss of earlier years is allowed to be set off in this year nor loss of current year is allowed to be carried forward for adjustment in subsequent years.”
Aggrieved, assessee preferred the appeal before CIT(A), who allowed the claim of the assessee. Aggrieved, now Revenue is in appeal before us.
Before us, the learned Counsel for the assessee stated that this issue is settled in favour of assessee by Tribunal decisions in assessee’s own case in for AY 2010-11 vide order dated 23/09/2015. We find that this issue is squarely covered with regard to carry forward of deficit to be set off against the future income by the decision of Hon’ble Bombay High Court in the case of Institute of Banking Personnel Selection (Supra) and respectfully following the same, we confirm the order of CIT(A) and the appeal of the Revenue is dismissed. Similarly, the appeal for AY 2004-05 is also dismissed.
In the result, both the appeals of Revenue are dismissed.