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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI R.C.SHARMA & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
The present appeal is filed by the Revenue against the order of CIT(A)-1, Mumbai dated 08.02.2013 raising the following Grounds of appeal: 1. "That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow the deficit of Rs. 32,76,502/- (on account of excess of expenditure over income) to be carried forward without appreciating the fact that this would have the effect of granting double benefit to the assessee, first as 'accumulation' of income u/s 11(1)(a) or as corpus donation u/s 11(1)(d) in the earlier years or current year and then as 'application' of income u/s 11(1)(a) in the current or subsequent years which was legally not permissible.
2. That 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.
3. The Appellant prays that, to the extent of above grounds, the order of the Commissioner of Income- Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored.
4. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary."
2. Brief facts of the case are that the assessee filed return of income on 24.02.2009 declaring loss of Rs. 32,76,502/-. The return of income was selected for scrutiny. In the return of income, the assessee claimed an amount of Rs. 31,58,126/- on account of depreciation and claimed the applicability of section 11(1)(a) for the purpose of availing exemption. The Assessing Officer (AO) asked the assessee to explain the allowability of the claim of depreciation of Rs. 31,58,126/-, the assessee submitted its reply and contended that depreciation is allowable expenditure in view of the judgment of Bombay High Court in CIT vs. Institute of Banking 264 ITR 110 (Bom). The contention of assessee was not accepted by AO and depreciation was disallowed. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A) and succeeded therein. Aggrieved by the order of CIT(A), the Revenue has filed the present appeal before us.
We have heard Departmental Representative (DR) for Revenue and Authorised Representative (AR) for assessee and perused the material available on record. Ld. DR argued that Ld DIT wrongly given the relief to the assessee and prayed that order of the AO may be restored. Ld AR for assessee argued that this case is squarely covered by the decision of Bombay High Court in CIT vs. Institute of Banking Personnel Selection (IBPS)(supra). We have seen that Ld. CIT(A) while allowing the appeal of the assessee made the followed observations: “I have carefully considered the submissions of the appellant, assessment order and facts of the case. I find that the appellant’s claim of setting off the excess of income over expenditure against the deficit of earlier year is correct in view of the decision of Hon’ble Rajasthan High Court in the case of CIT v/s Maharashtra of Mewar Charitable Foundation (1987) 60 CTR (Raj) 40 : (1987) 164 ITR 439 (Raj) which was followed in CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 (Guj.). Therefore, this ground of appeal is allowed.”
4. We have gone through the decision of Hon’ble jurisdictional High Court in CIT vs. Institute of Banking Personnel Selection (IBPS), wherein on identical ground, the Hon’ble Bombay High Court held as under: “5. 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 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 yeas 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 in 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 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 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 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 the 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.”
Further the Hon’ble jurisdictional High Court in case of DIT vs. Mumbai Education Trust in dated 3rd May 2016 given the similar relief in respect of allowability of depreciation of capital asset acquired for the purpose of carrying out charitable activities and set off of deficit of earlier years against the income of current year.
By respectfully following the judgment of Hon’ble jurisdictional High Court, we hold that the assessee is claimed for setting off of excess income over expenditure against the deficit of earlier years is correct. In view of the above observation, we do not find any illegality or infirmity in the order passed by DIT. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 22nd June, 2016.