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

In its appeal, Revenue has raised the following Grounds of appeal:-

Whether, on the facts and in the circumstances of the case and in law the ld CIT(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 DTK (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).

Whether, on the facts and in the circumstances of the case and in law the ld 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 Supreme Court. However, the issue is pending for adjudication before Hon'ble Supreme Court in other cases.

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.63,71,846/- 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 2016, for A.Y. 2007-08.

Whether on the facts of the case and in law the ld. CIT(A) erred in allowing the carry forward of deficit of Rs.1,58,37,846/- and allowing set off against the income of the subsequent years.

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.

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 MIDC (SPL (Civil) 9891 of 2014) and the matter is pending before the Hon'ble Supreme Court.

The appellant prays that the order of the Commissioner of Income Tax (Appeals)-I, Mumbai be set aside and that of the Assessing Officer be restored."

Although the Revenue has raised multiple Grounds of appeal, but the dispute involved in this appeal is on three issues. Firstly, the Revenue is aggrieved by the decision of the CIT(A) in directing the Assessing Officer to allow the benefit of depreciation. Secondly, the grievance of the Revenue is against the action of the CIT(A) in allowing the assessee the benefit of carry forward of the deficit for future set- off. Lastly, the Revenue is aggrieved by the decision of CIT(A) in allowing the accumulation or setting apart of 15% of income as application of income.

At the time of hearing, it was pointed out to the ld. DR that on all the three issues, the CIT(A) has followed the decision of his predecessor

In this background, now we may refer to the relevant facts. The respondent-assessee is a charitable organisation registered u/s 12A of the Act and is engaged in charitable activities to perpetuate the memory of late Shri Sayaji U Ba Khin and for that purpose to establish school, library, ashrams or any other institution and to publish books, pamphlets and other literature about his view, life and the technique of ‘Vipsashyana’. The Assessing Officer noticed that assessee had claimed depreciation allowance of Rs.80,55,519/- on the cost of fixed assets, whereas such cost of fixed assets has also been taken as an application of income while computing the total income. According to the Assessing Officer, this amounted to a double deduction and he, therefore, disallowed the assessee’s claim for depreciation. The CIT(A) has since allowed the claim of the assessee following the judgment of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, 264 ITR 110 (Bom) as well as the decision of the Tribunal in assessee’s own case (supra).

Before us, the plea of the Department is that the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra) has not been accepted by the Department on merits and on a similar issue, SLP (Civil) no. 9891 of 2014 has been filed before the Hon'ble Supreme Court in the case of Maharashtra Industrial

We find that the decision in the case of Escorts Ltd. (supra) being relied upon by the Revenue before us has been considered by the Hon'ble Delhi High Court in the case of Indraprastha Cancer Society, (2014) 112 DTR 345 dated 18.11.2014, wherein it has been opined that the allowance of depreciation in similar situation would not amount to a double deduction. Further, the Hon'ble Delhi High Court in the case of Vishwa Jagriti Mission, ITA No. 140/2012 dated 29.3.2012 also allowed a similar claim after analysing the judgment of the Hon'ble Supreme Court in the case of Escorts Ltd. (supra), which is being relied upon by the Revenue. It is also noticed that the Hon'ble Supreme Court has also dismissed the SLP filed by the Department against the said decision of the Hon'ble Delhi High Court vide SLP No. 19321 of 2013. We find that the Hon'ble Bombay High Court subsequent to the decision in the case of Institute of Banking Personnel Selection (supra) considered a similar argument of the Revenue in the case of M/s. Mumbai Education Trust, ITA No. 11/2014 dated 3.5.2016 and allowed the claim of the assessee. In fact, the Grounds of appeal urged by the Revenue before the Hon'ble High Court, which read as under :-

Similarly, the second issue raised by the Revenue in Grounds of appeal nos. 5 to 7 are with regard to carry forward of the deficit of Rs.1,58,37,846/- to be set-off against the future income. On this aspect also, CIT(A) has allowed the claim following the decision of the Tribunal in the assessee’s own case (supra) wherein the Tribunal has followed the judgment of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (supra); in fact, similar situation has been further affirmed by the Hon'ble Bombay High Court in the case of M/s. Mumbai Education Trust (supra) as well as in the case of the assessee for Assessment Year 2007-08 (supra) as noted earlier by us. Therefore, on this aspect also, we find no error on the part of the CIT(A) in allowing the claim of the assessee, which we hereby affirm.

The third issue raised by the Revenue by way of Ground of appeal no. 4 is with regard to allowance of accumulation of 15% of income allowed by the CIT(A) in terms of Sec. 11(1)(a) of the Act. The stand of the Assessing Officer was that accumulation u/s 11(1)(a) of the Act could not be allowed as the entire income was already expended towards objects of the trust and there was no surplus left to be accumulated, and rather there was a deficit. The CIT(A) has allowed the claim of the assessee noticing that the Tribunal in assessee’s own case for Assessment Years 2007-08 (supra) and 2008-09 (supra) had upheld the claim of the assessee.

At the time of hearing before us, it is not disputed by the Revenue that the decisions of the Tribunal relied upon by the CIT(A) continue to hold the field, though the Hon'ble High Court has admitted

In the result, appeal of the Revenue is dismissed.