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Income Tax Appellate Tribunal, KOLKATA BENCH ‘A’, KOLKATA
Before: Shri Veeravalli Durga Rao, JM & Shri M. Balaganesh, AM]
order
: December 08, 2017 ORDER
Per Veeravalli Durga Rao, JM
This appeal is preferred by the revenue against the order of Ld. CIT (Appeals) – 25, Kolkata dated 07.11.2016 for the A.Y. 2012-13.
Facts or in brief that the assessee is a society registered under section 12A of the Income Tax Act. It has filed return of income declaring total income at Rs. Nil by claiming exemption under section 11 of the Income Tax Act. In the assessment order, the A.O. has disallowed the exemption amount of Rs. 32,68,920/- claimed by the assessee for the reason that the cost of concerned fixed assets was also claimed as an application of income in the relevant previous year. In the assessment order, he has noted that it is seen from the assessee’s income and expenditure account that the assessee has Assessment Year: 2012-13 Aurobindo Institute of Culture debited depreciation amount to Rs. 32,68,920/- but in the computation it has not claimed. Over the years, the assessee acquired different assets. The assessee has claimed the entire expenditure incurred for acquisition of capital assets and the same was treated as application of income for charitable purposes under section 11(1)(a) of the Income Tax Act, in respective years in which such assets were procured. He further observed that when capital expenditure is treated as application of income for the purpose of charitable purposes, the assessee enjoys a 100% write off of the cost of assets. In other words, when acquisition of assets is treated as application of income for charitable purposes, the value of assets stands fully written off and over and above, if depreciation is allowed, the same will be result in double deduction of capital expenditure leading to violation of provisions of section 11(1) which requires availability of actual income for charitable purpose. 3. On appeal, the Ld. CIT(A) by following the decision of the Hon’ble Jurisdictional High Court of Kolkata in the case of Commissioner of Income Tax vs Siliguri Regulated Market Committee (2014) 51 taxman.com 455 Kolkata. Directed the A.O. to allow the depreciation claimed made by the assessee. 4. On being aggrieved revenue carried the matter before the Tribunal. 5. The learned DR has submitted that he has relying on the orders passed by the A.O. on the other hand, the learned counsel for the Assessment Year: 2012-13 Aurobindo Institute of Culture assessee has relied on the orders passed by the CIT(A) and also Jurisdictional High Court in the case of Siliguri Regulated Market Committee (supra).
We have heard both the sides perused the material available on record to the authorities below. The only issue involved in this appeal whether the assessee entitled to claim depreciation or not. According to the A.O. the claim of the assessee is amounting to double deduction and which is not allowable as per Income Tax Act.
On appeal, the Ld. CIT(A) by following the decision of the Hon’ble Kolkata High Court in the case of Siliguri Regulated Market Committee (supra) allowed the appeal filed by the assessee. The Hon’ble Jurisdictional High Court as considered the issue and held that depreciation is to be allowed on assets of cost of which already been as an application of income for charitable purpose. Therefore, we respectfully follow the judgement of the Hon’ble Jurisdictional High Court, we find no infirmity in the order passed by the Ld. CIT(A). Therefore, thus this ground of appeal
raised by the revenue is dismissed.
8. The 2nd ground of appeal raised by the department relating to set off excess application/expenditure incurred in earlier year. The appellate order, Ld. CIT(A) has observed that this issue has not been discussed in the impugned assessment order but it is implied from the computation part of the claim of assessee is missing. The CIT(A) has further observed the assessee is brought the excess Assessment Year: 2012-13 Aurobindo Institute of Culture application/expenditure incurred in the assessment year 2011-12 at Rs. 52,08,410/- out of which set off to an extent of surplus of Rs. 39,90,226/- was made in the computation of total of income. In the impugned assessment order, the computation part, this aspect was absent. The Ld. CIT(A) though the A.O. has not discussed in the issue in the assessment order, he proceeded on the merits of the case and has observed that when the institution has applied excess or incurred expenditure in earlier years, it has in effect, expended in advance before it has received future income, i.e. which in any case would have been met from the future income to be received and thus allowable under section 11(1) in the year of receipt of the income.
The Ld. CIT(A) relied on the decision of Bangalore Bench in the case of Sevasadan Orphanage and Training Institute vs DCIT in dated 10.11.2015 wherein the Hon’ble Tribunal has observed as under: “It is clear from the relevant portions of the aforesaid decisions of the Hon'ble High Court of Bombay (supra) and the co-ordinate bench of the ITAT, Bangalore (supra) extracted above that the income of charitable trusts is required to be computed on commercial principles. The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income during the year can be regarded as application of the income of future years and can be adjusted. Therefore, in our view,' the claim of the assessee for carry forward of excess application is in accordance with the judicial precedents on the issue and the same is allowable.
Assessment Year: 2012-13 Aurobindo Institute of Culture In the case of Indian National Theater (supra) relied on by the learned Departmental Representative. The Hon'ble High Court of Delhi has held that to satisfy the requirements of section 11(2)(b) of the Act, the investment must necessarily come out of current year's income and the investment made in the past obviously cannot satisfy the requirements for the current year. The above decision of the Hon'ble Delhi High Court has considered the provisions of section 11(2) of the Act and has taken the view that the accumulation under Section l1(2) of the Act can be only out of current income. We, however, find that the co- ordinate benches of the Bangalore Tribunal have consistently followed the view of the Hon'ble Bombay High Court (supra) in which the application has been regarded as adjustable against the income of the future years. We are, therefore, inclined to follow the view taken by the co- ordinate benches of this Tribunal, inter alia, in the case of Baldwin Methodist Educational Society (supra), based on the view/decisions of the Hon'ble Bombay High Court in the case of Institute of Banking (supra) and the Hon'ble Gujarat High Court in the case of CIT V Shri Plot Swetamber Murti Pujak Jain Mandal reported in 211 ITR 293. In this view of the matter, the Assessing Officer is directed to allow carry forward of the excess application of Rs.7,44,328 for the year to be adjusted from income from property held under trust of the subsequent years. It is ordered accordingly. Consequently, Grounds z and 3 of assessee's appeal are allowed.
On being aggrieved, the revenue has carried the matter before the Tribunal. The learned DR relied on the order passed by the A.O. on the other hand, the Ld. CIT(A) relied on the order passed by the CIT(A).
We have heard both the sides perused the material available on record to the authorities below. The only issue for consideration is whether the excess expenditure incurred by the assessee in earlier years i.e. 2011-12 can be considered against the income received for the assessment year 2012-13 as an application or not. In this case, the assessee has incurred an amount of Rs 52,08,440/-, in the assessment year 2011-12 out of which to the extent of available surplus at Rs.
Assessment Year: 2012-13 Aurobindo Institute of Culture 39,90,226/- was claimed application of income for the year 2012-13. The Ld. CIT(A) by following the decision of the ITAT Bangalore Bench in the case of Sevasadan Orphanage and Training Institute vs DCIT (supra) as held that when the institute has applied excess or incurred expenditure in the earlier year, the same can be allowed as an application of income for subsequent years if surplus is available. In the present case the expenditure incurred by the assessee was not doubted by the A.O. It is also fact that surplus also available for the assessment year under consideration. Therefore, keeping in view the facts and circumstances of the case by following the coordinate bench in the decision of Sevasadan Orphanage and Training Institute vs DCIT (supra), we find no infirmity in the order passed Ld. CIT(A). This ground raised by the revenue is dismissed.
12. In the result, the appeal of the revenue is dismissed. Order Pronounced in the Open Court on 8th December, 2017. Sd/- Sd/- (M. Balaganesh) (Veeravalli Durga Rao) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 08/12/2017 Biswajit, Sr. PS Copy of order forwarded to:
1. Sri Aurobindo Institute of Culture, 3, Regent Park, Lakshmi House, Tollygunge, Kolkata – 700040.
2. ITO (E), Wd-1(3), 6th Floor, 10B, Middleton Row, Kolkata – 700071..
3. The CIT(A)