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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
ORDER ORDER ORDER ORDER
PER H.S. SIDHU : JM PER H.S. SIDHU : JM PER PER H.S. SIDHU : JM H.S. SIDHU : JM
This Appeal filed by the Revenue is directed against the impugned order passed by the Ld. Commissioner of Income Tax (Appeals), Meerut for the assessment year 2010-11.
The grounds raised in the Revenue’s read as under:-
“1. The. Ld. CIT(A) has erred in allowing the brought forwards loss of Rs. 48,00,215/- of AY 2009-10 to be carried forward to AY 2011-12 ignoring the fact that the Section-11 stipulates that income derived from property held under trust shall not be included in the total income. Thus they benefit given by Section 11 is not a deduction about exclusion of income from taxation. Therefore, there is no scope for computation of loss due to this exemption. 2. The Ld. CIT(A) be cancelled and the order of the AO be restored. 3. Appellant craves leave to modify/ amend or add any one or more grounds of appeal.
The brief facts of the case are that assessee has filed the return of income for AY 2010-11 on 8.10.2010 declaring a total income of Rs. NIL including brought forwards losses of Rs. 48,00,215/- income in the status of AOP(T). The return was processed u/s. 143(1) of the I.T. Act, 1961 on 7.4.2011. Thereafter the case was selected for scrutiny and statutory notice u/s. 143(2) of the I.T. Act, was issued on 21.9.2011, fixing the date of hearing for 29.9.2011, which was duly served upon the assessee.
Subsequently u/s. 142(1) of the I.T. Act, was issued on 23.1.2012 alongwith preliminary questionnaire fixing the case for hearing on 31.1.2012 which were also duly served upon the assessee. In response to the aforesaid notices issued, assessee’s AR attended the proceedings from time to time and submitted the details / replies as called. The books of accounts were also produced during the course of assessment proceedings which were examined on test check basis. The assessee is running education institutes at Meerut and Noida, which are engaged in the profession of imparting higher professional and technical education.
Assessee society has been granted registration u/s. 12A by the Ld. CIT, Meerut vide Certificate dated 19.5.2008, hence, assessee was eligible for exemption u/s. 11 of the Act. However, the AO while passing the assessment order dated 21.3.2013 u/s. 143(3) of the I.T. Act, 1961, has not allowed the carry forward of brought forward losses.
Aggrieved with the aforesaid order of the AO, the assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 21.08.2015 allowed the appeal of the assessee.
Against the order of the learned CIT(A) the Revenue is in appeal before the Tribunal.
Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
In this case, Notice of hearing to the assessee was sent by the Registered AD post, in spite of the same, assessee, nor his authorized representative appeared to prosecute the matter in dispute, nor filed any application for adjournment. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, we are of the view that no useful purpose would be served to issue notice again and again to the assessee, therefore, we are deciding the present appeal exparte qua assessee, after hearing the Ld. DR and perusing the records.
We have heard the Ld. DR and perused the records. We find that the Ld. CIT(A) has elaborately discussed the issue in dispute and gave his finding at page no. 4 to 6 of his impugned order. For the sake of convenience, the relevant finding of the Ld. CIT(A) is reproduced below:- 3
“I have gone through the assessment order as well as the submissions of the assessee. It is true that sections 11 to 13 are a self contained code in itself and are, in fact, special provisions dealing with taxation of trusts and societies etc that are registered in section 12AA of the Income Tax Act.
I have noticed that the Hon'ble Bombay High Court in the case of CIT Vs Institute of Banking 264 ITR 110 had held that the Hon’ble Tribunal was right in directing the AO to allow depreciation of the asset, the cost of which had been fully allowed as application of income u/s. 11 of the Income Tax
Act in the past years. I also notice that before the Hon'ble
High Court the revenue had pleaded that allowing of depreciation would tantamount to a double deduction because the cost of the asset had earlier been allowed as application of income already.
The Hon'ble High Court, while negating the revenue's plea, went on to hold in favour of the assessee on the principle that income of any trust had to be computed commercially and in so doing since there is no saving clause U/S 11- to 13 which could serve as a rider to allowance of depreciation U/s 32, the same must be allowed.
In CIT Vs Trustees of Seth Merwanjee Framji Panday Charitable Fund Trust, Bombay the Hon'ble Judges have held as under: "whether the tribunal was justified in holding that in working of the trust for application of section 11, the assessee was entitled to carry forward the deficit of the earlier years and settle it off against the surplus of the subsequent years?" In view of the judgment in the case of CIT Vs Institute of Banking decided on 9th July 2003 vide ITR 197 of 1997 the question is answered in the affirmative i.e in favour of the assessee and against the department I have further noticed that set off of future income aqalnst - application of past years surplus expenditure has been held possible in CIT Vs Matri SewaTrust 242 ITR 20 (Madras) and CIT Vs Shri Plot Swetambar Murti Poojak Jain Mandal 211 ITR 293 {Gujarat). I have not been able to lay hands on any judgment of the jurisdictional High Court either way. I feel that the judicial opinion is that income of a trust must be computed commercially and if while doing so, a loss due to surplus expenditure results, the same has to be appreciated and taken care of and cannot just be brushed aside especially when income is computed U/s 11-13 and since a loss cannot go beyond the provisions of section 80AB, in a given case, the net income may at best, work out to be nil, but in such a case, the remaining loss stares in the face for recognition. A reference to the provisions of section 11-13 and section 72,if made collectively, if makes it clear that there is no bar in either of the sections against computing, carry forward and set off of loss or surplus of expenditure over income. I, therefore, find that the contention of the assessee is correct 5 and the loss of Rs 48,OO,215/- deserves to be brought forward, set off from the current income and if any excess spills over; it be carried forward to the subsequent years. I am further fortified in my above finding by various judgments of the Hon'ble ITAT Delhi benches which have consistently held in favour of the assessee on this issue. Even in the impugned matter itself a similar issue was also raised in Assessment Years 2005-06 and 2008-09 and The Commissioner of Income Tax, Meerut vide his order dated 21-09-2010 in appeal number 297107-08 for the A.Y. 2005- 06 and the Commissioner of Income Tax, Noida vide his order dated 29-04-2013 in appeal number 685/274/2010-11/ Noida for the A.Y. 2008-09 respectively have allowed the loss as claimed by the assessee to be carried forward to the next, year. And further, the departmental appeal for both the above years stand dismissed by the ITAT, New Delhi in appeal numbers 5627/0el/2010 dated 26/08/2011 for Ay 2005-06 and 4119/Del/2013 dated 20/03/2015 for A.Y. 2008-09 respectively. In the case of Director of Income-tax v. Raghuvanshl Charitable Trust [2011] 197 TAXMAN 170 (Delhi) it has been held that Section t 1 of the Income-tax Act, 1961 _ Charitable or religious trust - Exemption of Income from property held under - Whether a trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years - held, yes- whether adjustment of deficit of current year against income of subsequent year would amount to application of income of trust or charitable purposes in subsequent year within the meaning of section 11 (1 )(a)-held, Yes.
Thus following the rule of consistency and in respectful agreement with the aforesaid order of the Honorable ITAT, I allow the surplus/loss of Rs. (-) 48,00,215/- as brought onward A.Y. 2009-10 be allowed to be carry forward to A.Y. 2011-12. The AO is directed to compute the loss accordingly and allow the same to be carried forward to A.Y.2011-12. In the result, the appeal of the assessee is allowed.”
8.1 After perusing the aforesaid Ld. CIT(A)’s finding, we find that Ld. CIT(A) has referred and followed the decisions of the various Hon’ble High Court including the ITAT, Delhi Bench in the case of Director of Income Tax vs. Raghuvanshi Charitable Trust (2011) 197 Taxman 170 (Delhi) wherein it has been held that Section 11 of the Income Tax Act, 1961 – Charitable or religious trust – Exemption of income from property held under – Whether a trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years – held, yes, whether adjustment of deficit of current year against income of subsequent year would amount to application of income of trust for charitable purposes in subsequent year within the meaning of section 11(1)(a)-held, yes. Therefore, in our considered opinion, Ld. CIT(A) thus following the rule of consistency rightly allow the surplus / loss of Rs. (-)
48,00,215/- as brought forward AY 2009-10 be allowed to be carry forward to AY 2011-12 and accordingly the AO was rightly directed to compute the loss accordingly and allow the same to be carried forward to AY 2011-12.
8.2 In the background of the aforesaid discussions and respectfully following the precedents, we are of the view that Ld. CIT(A) has passed a well reasoned order which does not need any interference on our part, hence, we uphold the same and dismiss the ground raised by the Revenue.
9. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced in the Open Court on 16/12/2016.