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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George George K, JM & Shri Laxmi Prasad Sahu, AM
O R D E R
Per George George K, JM :
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 23.11.2021. The order of the CIT(A) arises out of the order passed u/s 143(3) of the I.T.Act. The relevant assessment year is 2016-2017.
The grounds raised read as follows:
“1. The Order of the NFAC is against facts and law.
2. The NFAC is not justified in upholding the order Assistant commissioner of Income tax, in not allowing the excess application during the year to carry over on the basis of amendment to section 11 by introduction of explanation 5 by Finance Act 2021 which is effective only from 1.4.2022. Your appellant has filed the return of income based on the law that was in force at the time of filing of return of income. The claim of your appellant was covered by the decision of the various high courts /tribunals including the jurisdictional ITAT Cochin bench decision, besides its own case for the assessment year 2011-12 which was accepted by the department. These
. Chinmaya International Foundation. decisions were later upheld by the supreme court in CIT vs Subros Educational Society (96 taxman.com 652) 3. The NFAC is not correct in upholding the order of the Assistant Commissioner of Income Tax of not allowing the carry over of excess application of AY 2001-02 to 2015-16 while completing the assessment for AY 2016-17. The said issue is covered in the appellants own case for the assessment year 2011-12 where CIT(A) has held that the said claim is to be considered only in the year in which set off is claimed. The said decision is accepted by the department.”
The brief facts of the case are as follows: The assessee is a Sanskrit research institution having registration u/s 12A of the I.T.Act. For the assessment year 2016-2017, the return of income was filed on 20.09.2016 showing a receipt of Rs.5,37,52,713 and application of income of Rs.7,67,73,856. Consequently, the excess application over income amounting to Rs.2,30,21,143 was sought to be carried forward for the subsequent years. The assessment was selected for scrutiny and notice u/s 143(2) of the I.T.Act was issued on 28.07.2017. The assessment was completed u/s 143(3) of the I.T.Act vide order dated 30.10.2018. The Assessing Officer in the assessment completed u/s 143(3) of the I.T.Act, did not allow carry forward of excess application over income amounting to Rs.2,30,21,143. The A.O. also remarked in the assessment order that carry forward of excess application from 2001-2002 to 2015-2016 was also not to be allowed.
Aggrieved by the assessment completed u/s 143(3) of the I.T.Act, the assessee filed an appeal before the first appellate authority. The CIT(A) dismissed the appeal of the assessee by . Chinmaya International Foundation. holding that on account of insertion of Explanation 5 to section 11 by the Finance Act, 2021, the excess application cannot be allowed to be carried forward, since the Explanation was clarificatory in nature and would apply retrospectively.
Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The assessee has filed a paper book comprising of 42 pages enclosing therein the argument notes, statement of total income, audited accounts for the assessment year 2016-2017, the case laws relied on, etc. The brief submission of the learned AR reads as follow:-
“Your appellant filed the return of income on 20.09.2016and the law permitted excess application to be carried forward. This view is confirmed by the decision of the jurisdictional ITAT Bench and later by the Supreme Court. The explanation 5 to section 11 is relating to determine mandatory application of income i.e. 85% of gross income not after deducting carry over applications. NFAC failed to note that explanation 5 to section 11 is not applicable since the appellant had applied 85% of its gross receipts for its objects during the year without any set off or deduction or allowance of any excess application of any of the year preceding the previous year. Without prejudice to the above, NFAC is not correct in its observation that the explanation 5 to section 11 inserted by Finance Act 2021 applies retrospectively. The memorandum explaining the provisions clearly mentions that “These amendments will take effect from 01.04.2022 and will accordingly apply to the assessment year 2022-23 and subsequent years.” Also the NFAC erred in upholding the order of the Assistant Commissioner of Income Tax of not allowing the carryover of excess application of AY 2001-02to 2015-16 while completing the assessment for AY 2016-17. The said issue is covered in the appellant’s own case for the assessment year 2011-12 (copy enclosed) where CIT(A) has held that the said claim is to be considered only in the year in which set off is claimed.
. Chinmaya International Foundation.
Moreover, we are also attaching herewith order of ITAT, Cochin Bench in the case of the appellant for AY 2015-16 and AY 2017-18 where on appeal against an intimation u/s 143(1) on identical issue the appeal was allowed in favour of the appellant vide its order dated 16.03.2022.”
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. It is an admitted fact that prior to the amendment by Finance Act, 2021 by insertion of Explanation 5 to section 11 of the I.T.Act, assessee was allowed to carry forward excess application of income for the subsequent years (the issue is covered in favour of the assessee by the judgment of the Hon’ble Apex Court in the case of CIT v. Subros Educational Society reported in 96 taxman.com 652 and various other judicial pronouncements). The CIT(A) has relied on Explanation 5 to section 11 of the I.T.Act and held that the same has got retrospective application. The memorandum explaining the provision clearly mentions that these amendments will be effective from 01.04.2022 and will accordingly apply for and from assessment year 2022-2023 onwards. Therefore, the contention of the CIT(A) that it has got retrospective application is devoid of any merits. In the light of the above judgment of the Hon’ble Apex Court (supra) and other orders relied on by the assessee, namely, (i) ITAT order in the case of Cochin Port Trust v. DDIT [ITA No.66/Coch/2015 – order dated 10.09.2015], (ii) ITAT order in assessee’s own case in & 244/Coch/2021 (order dated 16.03.2022)
. Chinmaya International Foundation. and (iii) CIT(A)’s order in assessee’s own case in 4/CIT(A)-III/14-15 (dated 10.05.2016), we hold that the Income Tax Authorities have erred in not allowing the excess application during the year to be carried forward to the subsequent years. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 30th day of June, 2022.