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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: SHRI RAJPAL YADAV & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
ITA Nos. 3035 & 2964/Ahd/2015 are appeals by the revenue preferred against two separate order of the Ld. CIT(A)-9, Ahmedabad dated 03.08.2015 pertaining to A.Ys. 2011-12 & 2012-13 and ITA No. 2965/Ahd/2015 is appeal by the revenue in the case of different assessee preferred against the order of the ld. CIT(A)-9, Ahmedabad dated 21.08.2015 pertaining to A.Y. 2011-12.
Since the grievance of the revenue is common in all these appeals, though quantum may differ, these appeals were herd together and are disposed of by this common order for the sake of convenience and brevity.
The common grievance relates to the deletion of the addition of disallowance of the carry forward of deficit.
While completing the assessment, the A.O. denied the claim of set off of deficit arising out of excess of expenditure on the ground that the same has not been out of exempt income namely corpus funds and accumulation. The A.O. was of the opinion that the application is allowed only out of current income. Any expenditure met out of opening funds should not be allowed and therefore, the assessee’s deficit is not allowed to carry forward.
Assessee carried the matter before the ld. CIT(A) wherein strong reliance was placed on the decision of the Hon’ble High Court of Gujarat in the case of Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 in which it is held that
ITA Nos. 3035 & 2964/Ahd/2015 & Others 3 . A.Ys. 2011-12 & 2012-13 when the expenses for a charitable and religious purpose have been incurred in earlier years and such expenses are adjusted against income of the subsequent year to that extent, it can be said to have been applied for charitable purposes in which such expenses are adjusted and is permissible.
Respectfully following the aforementioned findings of the Hon’ble Jurisdictional High Court, the ld. CIT(A) allowed the claim of set off of deficit brought forward from earlier years.
Before us, the ld. D.R. strongly supported the findings of the A.O. and placed reliance on the decision of the Tribunal Delhi Bench in the case of Pushpawati Singhania Research Institute for Liver, Renal & Digestive Diseases 29 SOT 316. It is the say of the ld. D.R. that while deciding the issue in favour of the revenue, the Tribunal has considered the decision of the Hon’ble Gujarat High Court in the case of Shri Plot Swetamber Murti Pujak Jain Mandal relied upon by the ld. CIT(A). Per contra, the ld. counsel relied upon the judgment of the Hon’ble High Court of Delhi in the case of Raghuvanshi Charitable Trust 8 taxmann.com 142.
We have given a thoughtful consideration to the orders of the authorities below qua the issue. We have also carefully considered the judicial decisions relied upon by the rival parties. It is true that the ld. CIT(A) followed the findings of the Hon’ble Jurisdictional High Court of Gujarat in the case of Shri Plot Swetamber Murti Pujak Jain Mandal (supra). It is equally true that the Tribunal Delhi Bench had considered the said order of the Hon’ble High Court but decided the issue in favour of the revenue and against the assessee.
ITA Nos. 3035 & 2964/Ahd/2015 & Others 4 . A.Ys. 2011-12 & 2012-13 9. We find that the Hon’ble High Court of Delhi has considered all the decisions while deciding the issue in favour of the assessee and against the revenue. The relevant findings of the Hon’ble High Court of Delhi in the case of Raghuvanshi Charitable Trust (supra) read as under:- 6. We find from the order of the Income Tax Appellate Tribunal (hereinafter referred to as „the Tribunal‟) that the Tribunal has decided the issue in favour of the assessee by placing reliance on the aforesaid judgment of the Gujarat High Court. We have gone through the judgment of Gujarat High Court in Shri Plot Swetamber Murti Pujak Jain Mandal (supra). It could not be disputed by the learned counsel for the Revenue that the question of law raised and answered in the said case was identical to the one raised in the present appeals. This question was decided in favour of the assessee interpreting the provisions of Section 11 of the Act. The relevant discussion contained in the said judgment is in the following terms: "3. The learned DR sought to rely upon the finding of AO. None was present on behalf of the assessee. We find that the issue is answered by Hon‟ble Gujarat High Court in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293 (Guj), wherein the High Court observed as under:
"We are, therefore, of the opinion that the adjustment of he (sic. the) expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made and will have to be excluded from the income of the trust u/s 11(1)(a) of the Act."
No contrary decision has been cited. From the aforesaid judgment, it is clear that there is no bar in computing income of subsequent year after allowing set off of excess amount spent on object of trust, as this also amounts to application of income. Thus, there is no infirmity in the order of the learned CIT(A)."
The submission of the learned counsel for the Revenue, however, was that the aforesaid case does not decide the question correctly. She submitted that the Gujarat High Court proceeded on the premise that there was no limitation in Section 11, which provides that the income should have been applied for charitable or religious purposes „only‟ in the year in which the income has arisen. This, according to the learned counsel, was a wrong premise and contrary to the
ITA Nos. 3035 & 2964/Ahd/2015 & Others 5 . A.Ys. 2011-12 & 2012-13 expression of provision contained in Section 11(1)(c) read with explanation and Section 11(1)(c) categorically suggests to the contrary, viz., the income has to be applied for charitable or religious purposes „only‟ in the year in which it has arisen. However, we find that the Gujarat High Court has discussed this issue in greater detail and relying upon the Circular No. 100 dated 24.01.1973 issued by the Central Board of Direct Taxes and the judgment of the Rajasthan High Court in the case of Commissioner of Income Tax vs. Maharana of Mewar Charitable Foundation [164 ITR 439 (Raj.)]. We may also point out at this state that the aforesaid view of Rajasthan High Court and Gujarat High Court has been consistently followed by other High Courts in the following judgments:
(i) Commissioner of Income Tax vs. Institute of Banking [264 ITR 110 (Bom.)];
(ii) Commissioner of Income Tax vs. Siddaramanna Charities Trust [96 ITR 275 (Mys); and
(iii) Commissioner of Income Tax vs. Matriseva Trust [242 ITR 20 (Mad.)]
It would be fruitful to refer to the discussions contained in Institute of Banking (supra), Per. Hon‟ble Mr. Justice S.H. Kapadia, which is advanced before us by the learned counsel for the Revenue to repel the same in the following words:
"Now coming to question No.3, the point which arises for consideration is: whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in the subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that tin the case of a charitable trust, their income was assessable under self- contained code mentioned in section 11 to section 13 of the Income-tax Act and that the income of the charitable trust was not assessable under the head "Profits and gains of business" under section 28 in which the provision for carry forward of losses was relevant. That, in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be
ITA Nos. 3035 & 2964/Ahd/2015 & Others 6 . A.Ys. 2011-12 & 2012-13 computed on commercial principles and if commercial principles are applied then 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 will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in the section 11 of the Act and that such adjustment will have to be excluded from the income of the trust under section 11(1)(a) of th Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1995] 211 ITR 293. Accordingly, we answer question No.3 in the affirmative, i.e., in favour of the assessee and against the Department."
It is clear from the above that as many as five High Courts have interpreted the provision in an identical and similar manner. Learned counsel for the Revenue could not show any judgment where any other High Court has taken contrary view. Since we are in agreement with the view taken by the aforesaid High Court, we answer these questions in favour of the assessee and against the Revenue.
Respectfully following the findings of the Hon’ble High Court (supra), we do not find any reason to interfere with the findings of the ld. CIT(A). All the appeals by the revenue are accordingly dismissed.
Order pronounced in Open Court on 18- 12- 2017
Sd/- Sd/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad: Dated 18/12/2017 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned.