Appeal details
Counselvise Citation
[2010] 122 COUNSELVISE.COM (IT) 5106 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
31-08-2010
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
E
Next Hearing Date
26-07-2010
Assessment Year
2006-2007
Appeal Filed On
06-04-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 595(DEL)/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER (E), MAH ARISHI VED VIGYAN VISHWA TRUST WARD-IV, NEW DELHI. VS. VIDYA PEE THAM, A-14, MOHAN COOP. INDL. ESTA TE, MAT HURA ROAD, NEW DELHI. C.O. NO. 76(DEL)/2010 (ARISING OUT OF ITA NO. 595(DEL)/2010) ASSESSMENT YEAR: 2006-07 MAHARISHI VED VIGYAN VISHWA INCOME-T AX OFFICER (E), VIDYA PEETHAM, NEW DELHI. VS. TRUST W ARD -IV, NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SMT. SANGEETA GUPTA, CIT, D R ASSESSEE BY : SHRI SANJAY KUMAR, CA ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE AND THE CROSS OBJECT ION OF THE ASSESSEE EMANATE FROM THE ORDER OF CIT(APPEALS)-XXI, NE W DELHI, PASSED ON 10.11.2009 IN APPEAL NO. 174/08-09. THE REVENUE HAS TAKEN TWO GROUNDS TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN (I) ADMITT ING ADDITIONAL EVIDENCE UNDER RULE 46A AND ACCEPTING THE SAME AS TR UE WITHOUT PASSING A ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 2 SPEAKING ORDER; AND (II) DELETING THE ADDITION MADE BY THE AO U/S 68 OF THE ACT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE DONORS AS THE CONFIRMATIO NS WERE NOT PROPERLY AUTHENTICATED. 1.1 THE APPEAL WAS HEARD ON 10.08.2010. THEREAF TER, THE BENCH CAME ACROSS THE DECISION IN THE CASE OF VIMAL CHANDR A GOLECHA VS. ITO, (1992) 134 ITR 108 (RAJASTHAN) REGARDING VALIDITY OF DIPLOMATIC AND CONSULAR OFFICER (OATHS & FEES) ACT, 1948, WHICH HAS BEARING ON THE GROUNDS TAKEN IN THE APPEAL. THEREFORE, THE APPE AL WAS FIXED FOR HEARING ON 25.08.2010. ON THIS DATE, NONE ATTENDED ON BEHALF OF THE REVENUE. NO ADJOURNMENT WAS SOUGHT. 2. IN REGARD TO THE GROUND REGARDING ADMISSION OF ADDITIONAL EVIDENCE, THE FINDING OF THE LD. CIT(APPEALS) IS THAT THE AO DID NOT AFFORD ANY OPPORTUNITY TO THE ASSESSEE BEFORE B RINGING THE AMOUNT TO TAX AS UNEXPLAINED CASH CREDIT. THE AO ALSO DID NOT REQUIRE THE ASSESSEE TO ESTABLISH IDENTITY AND CREDITWORTHINESS OF TH E DONORS. SINCE SUFFICIENT OPPORTUNITY WAS NOT GRANTED TO ADDUCE THE EVI DENCE IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPLICATION MADE BY TH E ASSESSEE UNDER RULE 46A OF THE INCOME-TAX RULES, 1962, WAS ALLOWED. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 3 2.1 THE CASE OF THE LD. DR BEFORE US IS THAT THE LD. CIT(APPEALS) ADMITTED ADDITIONAL EVIDENCE FILED BEFORE HIM REGARDING GENUINENESS OF THE DONATION. THE AO WAS REQUIRED TO FILE A REMAND REPORT ON THE ADDITIONAL EVIDENCE WHICH WAS FILED. HOWEVER, THE LD. CIT(APPEALS) DID NOT PASS A SPEAKING ORDER UNDER RULE 46A FOR T HE ADMISSION OF THE EVIDENCE OF ABOUT THE TRUTHFULNESS OF THE CONTENT S OF THE DOCUMENTS. SHE ALSO DREW OUR ATTENTION TOWARDS THE REMAND REPO RT IN WHICH THE AO OBJECTED TO FILING OF ADDITIONAL EVIDENCE ON TH E GROUND THAT SUFFICIENT OPPORTUNITY HAD BEEN ALLOWED TO THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTED THAT IF IT IS DECIDED TO ADMIT THE EVIDENCE, THE ASSESSEE MA Y BE ASKED TO FILE PROPERLY AUTHENTICATED CONFIRMATIONS, TRUST DEEDS OF THE DONORS AND THEIR BANK STATEMENTS FOR THE RELEVANT PERIODS. IT WAS HER CASE THAT THE ASSESSEE HAD FAILED TO CONFORM TO THE REQUIREM ENTS IN ASSESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS. THE REFORE, THE LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL EVIDENCE. 2.2 IN REPLY, THE LD. COUNSEL REFERRED TO THE OR DER OF THE LD. CIT(APPEALS), IN WHICH IT IS MENTIONED THAT TH E AO HAD ONLY REQUIRED ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 4 TO FILE CONFIRMATION IN RESPECT OF CORPUS DONAT ION AND NOTHING FURTHER. THEREFORE, THE ASSESSEE WAS PREVENTED BY SUFF ICIENT CAUSE IN NOT FURNISHING REQUISITE EVIDENCE FOR ESTABLISHING THE GENUINENESS OF THE DONATIONS. 2.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE LD. CIT(APPEALS) HAS MENTIONED THAT THE ASSESSEE HAD FURNISHED CONFIRMATIONS RECEIVED FROM THE DONOR S BY WAY OF FAX MESSAGE OR E-MAIL, WHICH IS ADMISSIBLE AS EVI DENCE U/S 4 OF THE INFORMATION TECHNOLOGY ACT. NOTHING FURTHER WA S DIRECTED TO BE DONE BY THE AO IN THIS MATTER. THEREFORE, THE ADDITI ONAL EVIDENCE WAS ADMITTED UNDER RULE 46A ON THE GROUND THAT SUFF ICIENT OPPORTUNITY WAS NOT GRANTED TO FURNISH THE REQUISITE EVIDENCE. THE LD. DR WAS NOT ABLE TO DISPLACE THIS FINDING OF THE LD. CIT(APPEALS). T HEREFORE, WE ARE OF THE VIEW THAT HE WAS RIGHT IN ADMITTING THE EVIDE NCE ON THE GROUND THAT SUFFICIENT OPPORTUNITY WAS NOT GRANTED TO THE ASSESSEE IN THIS MATTER IN THE ASSESSMENT PROCEEDINGS. THUS, THIS GROUND IS DISMISSED. 3. IN REGARD TO THE OTHER GROUND, THE LD. DR SU BMITTED THAT THE CONFIRMATIONS WERE FILED BY WAY OF FAX MESSAGE OR E-MAIL, WHICH DO NOT ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 5 AMOUNT TO SUBMISSION OF ORIGINAL CONFIRMATIONS. FUR THER, THESE CONFIRMATIONS DID NOT CONTAIN ANY DIRECTION TO APPLY THE DONATION TOWARDS THE CORPUS OF THE TRUST. IN ABSENCE O F FILING PROPERLY AUTHENTICATED EVIDENCE, AUTHENTICATED BY APPROPRIA TE OFFICIALS, THE LD. CIT(APPEALS) ERRED IN HOLDING THAT THE DONATIO NS WERE GENUINE. IN THIS CONNECTION, RELIANCE WAS PLACED ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF SREELEKHA BANERJEE & OTHERS VS. CIT (1963) 49 ITR 112. IT WAS HELD IN THIS CASE THAT THERE WER E MATERIALS TO SHOW THAT RS. 51,000/- DID NOT FORM PART OF THE CASH BALANCE OF THE ASSESSEE. THE ASSESSEE ALSO DID NOT SATISFACTORILY PROVE BEFO RE THE DEPARTMENT THE SOURCE OF THE MONEY. THEREFORE, IT WAS HELD THA T THE REVENUE WAS JUSTIFIED IN HOLDING THAT THE AMOUNT IS ASSESSABL E AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. FURTHER, RELIANCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMAD HANIF VS. CIT, (1963) 50 ITR 1. IT WAS HELD I N THIS CASE THAT THE ONUS OF PROVING THE SOURCE OF MONEY FOUND TO HAVE BEEN R ECEIVED BY THE ASSESSEE IS ON HIM. EITHER HE HAS TO SHOW THAT THE RECE IPT WAS NOT INCOME OR THAT IT WAS EXEMPT FROM TAXATION UNDER ANY PROVI SION OF THE ACT. IN THE ABSENCE OF SUCH PROOF, THE ITO IS ENTITLED TO TA X THE AMOUNT AS INCOME. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 6 3.1 IN REPLY, THE LD. COUNSEL REFERRED TO COPIE S OF CONFIRMATION LETTERS PLACED IN THE PAPER BOOK FROM PAGE NUMBERS 30 TO 47 ALONG WITH SOME ATTENDANT CORRESPONDENCE OF THE NATURE OF REQUES T MADE BY THE ASSESSEE FOR DONATION, REMITTANCE BY THE DONORS ETC. IT IS ACC EPTED THAT THE CONFIRMATION LETTERS DO NOT CONTAIN ANY DIRECTION TO TREAT TH E DONATION TOWARDS THE CORPUS FUND OF THE ASSESSEE. HOWEVER, IT WAS HIS CASE THAT EVEN IF THE DONATIONS ARE CONSIDERED AS DONATION SIMPLICITER , NO INCOME IS LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE AS THE WHOL E OF THE AMOUNT HAS BEEN APPLIED TOWARDS CHARITABLE PURPOSES. APPLICATI ON OF SUCH INCOME IS TO BE DEDUCTED U/S 11(1)(A) WHILE COMPUTING THE TOTAL I NCOME OF THE ASSESSEE. IT HAS BEEN SUBMITTED THAT THE DONATIONS ARE F ROM THE PERSONS WHO HAVE BEEN HABITUALLY DONATING MONIES TO THE ASSESSE E FOR CARRYING OUT ITS CHARITABLE ACTIVITIES. THE ASSESSEE HAS ALSO I NTIMATED THE DONATIONS TO THE HOME MINISTRY UNDER FCRA AND NO ADVERSE CONCLUS ION HAS BEEN DRAWN BY THE MINISTRY IN THIS MATTER. THEREFORE, IT HA S BEEN ARGUED THAT NOT ONLY THE GENUINENESS OF THE DONATION HAS BEEN PROVED B Y THE ASSESSEE BUT NOTHING REMAINS TAXABLE EVEN IF THE DONATIONS ARE CONSIDERED AS NORMAL DONATIONS AND NOT TOWARDS THE CORPUS FUND OF TH E ASSESSEE. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 7 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE ASSESSEE HAS FILED CONFIRMATION S BEFORE THE AO BY WAY OF FAX MESSAGE OR E-MAIL RECEIVED BY IT FROM THE DON ORS. THIS EVIDENCE IS NOT THE ORIGINAL EVIDENCE BUT TRANSMISSION OF A COPY THEREOF. HOWEVER, THE ASSESSEE HAS ALSO PRODUCED ORIGINAL DOCUMENT S BEFORE THE LD. CIT(A) AS MENTIONED IN PARAGRAPH NO. 2.10 OF THE IMPUGNED ORDER. IN THE CASE OF VIMAL CHANDRA GOLECHA VS. ITO, (1982) 134 ITR 10 8, THE HONBLE RAJASTHAN HIGH COURT HAD AN OCCASION TO DEAL WI TH THE PROVISIONS CONTAINED IN DIPLOMATIC AND CONSULAR OFFICERS (OA THS AND FEES) ACT, 1948. IT HAS BEEN HELD THAT IF A COPY OF FOREIGN DOCU MENT IS SOUGHT TO BE ADMITTED AS EVIDENCE, IT HAS TO BE AUTHENTICATED BY INDIAN DIPLOMATIC AND CONSULAR OFFICER IN THAT COUNTRY WHO HAD BEEN EMP OWERED TO ADMINISTER OATH AND DO ANY NOTARIAL ACT, WHICH ANY NOTARY PUBLIC MAY DO WITHIN A STATE. THIS ISSUE WAS RAISED IN THE COURSE OF CLARIFICATION SOUGHT ON 25.08.2010. THE CASE OF THE LD. COUNSEL IS THAT AUTHENTICATION BY INDIAN DIPLOMATIC AND CONSULLAR OFFICER IN THE COUNTRY FR OM WHICH THE DONATIONS ORIGINATED IS AN ALTERNATE METHOD FOR THE AUTHENTI FICATION BY THE NOTARY. THAT ACT DOES NOT REPLACE NOTARY BY THE COUNSULLAR OFFICER. IT IS AN ADMITTED FACT THAT THE DONATIONS ORIGINATED FROM FOUR COUNTRIES OR JURISDICTION, THE USA, THE U.K., SWITZERLAND AND THE CHANNEL ISLAND. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 8 THE DOCUMENTS WERE PRODUCED BEFORE THE LD. CIT(A) IN ORIGINAL AND WERE DULY NOTARIZED. THE DOCUMENTS WERE OTHERWISE ADM ISSIBLE DOCUMENTS. THEREFORE, THERE HAS NOT BEEN ANY VIOLATION OF THA T ACT. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PORTION OF THE JUDG MENT FROM THE CASE OF VIMAL CHANDRA GOLECHA IS REPRODUCED AS UNDER:- SIMILARLY, THERE IS NO FORCE IN THE ARGUMENT T HAT S. 3, DIPLOMATIC AND CONSULAR OFFICERS (OATHS AND FE ES) ACT, 1948, IS UNCONSTITUTIONAL. SECTION 3(1) CONFERS P OWER ON THE INDIAN DIPLOMATIC AND CONSULAR OFFICERS IN FORE IGN COUNTRIES TO ADMINISTER ANY OATH AND DO ANY NOTARIAL ACT WHICH ANY NOTARY PUBLIC MAY DO WITHIN A STATE AND EVERY O ATH SO ADMINISTERED AND NOTARIAL ACT SO DONE SHALL BE A S EFFECTUAL AS IF DULY ADMINISTERED OR DONE BY ANY LAWFUL AU THORITY IN A STATE. SECTION 3(2) LAYS DOWN THAT A DOCUMEN T PURPORTING TO HAVE BEEN AUTHENTICATED IN THE MANNER PRESCRIBED A ND BEARING A SEAL OF SUCH DIPLOMATIC OR CONSULAR OFFICER S HALL BE ADMITTED IN EVIDENCE WITHOUT PROOF OF THE SEAL OR SIGNATURE OF THE OFFICER CONCERNED OR OF THE OFFICIAL CHAR ACTER OF THAT PERSON. COUNSEL FOR THE PETITIONER ATTACKED THE CONSTITUTIONALITY OF THIS SECTION MAINLY ON THE GROUND THAT IT ARBITRARILY DISPENSES WITH THE FORMAL PROOF OF A DOCUMENT, AS REQUIRED BY THE INDIAN EVIDENCE ACT, AND THUS E NABLES A COURT TO ADMIT AN UNPROVED DOCUMENT MERELY ON THE STRENGTH THAT IT BEARS THE AUTHENTICATING SEAL AND SIGNATURES OF A DIPLOMATIC OR CONSULAR OFFICER. WE FIND NO FORCE IN THIS ARGUMENT. SECTION 3 DOES NOT DISPENSE WIT H THE PROOF OF A DOCUMENT ACCORDING TO LAW IF IT IS TO BE USE D AS EVIDENCE IN A COURT OF LAW. ALL THAT THE SECTION DOES I S TO ENABLE A COURT TO DISPENSE WITH THE PROOF OF THE GENUIN ENESS OF THE SEAL AND SIGNATURES OF A DIPLOMATIC OR CONSULAR O FFICER ON A PARTICULAR DOCUMENT. IF THE DOCUMENT IS OTHERWI SE RELEVANT AND PROVED ACCORDING TO LAW, ITS PHOTO COPY CA N BE ADMITTED IN EVIDENCE PROVIDED SUCH COPY IS D ULY AUTHENTICATED IN THE MANNER PRESCRIBED BY THE DI PLOMATIC AND CONSULAR OFFICERS (OATHS AND FEES) ACT, 1948. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 9 3.3 IT IS THE SUBMISSION OF THE AO BEFORE THE LD. C IT(APPEALS) IN THE REMAND REPORT THAT DULY AUTHENTICATED EVIDENCE HAS NOT BEEN FILED. THIS SUBMISSION IS NOT LEGALLY TENABLE AS DISCUSSED AB OVE. FURTHER, THE DONATIONS FROM THESE PARTIES WERE RECEIVED IN PAST. INTIMATION ABOUT THE DONATIONS WAS ALSO FURNISHED TO THE HOME MINIST RY. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). C.O. NO.76(DEL)/2010 4. GROUND NO. 1 IS THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN HOLDING THAT DEPRECIATION IS NOT ALLOWABLE AS AP PLICATION OF INCOME. 4.1 IN THIS CONNECTION, IT WAS URGED BEFORE THE L D. CIT(A) THAT THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN THE WAY IN WHICH NORMAL COMMERCIAL INCOME IS COMPUTED TO ARRIVE AT THE I NCOME AVAILABLE FOR APPLICATION TOWARDS CHARITABLE PURPOSES. THE LD. CIT(A) DID NOT AGREE WITH THE AFORESAID CONTENTION. IT HAS BEEN MENTIO NED THAT THE CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE IS ALLOWED AS APPLICATION OF INCOME IN THE YEAR IN WHICH THE EXPENDITURE HAS BEEN IN CURRED. SINCE THE CAPITAL EXPENDITURE HAS BEEN ALLOWED IN ITS ENTIRETY, D EPRECIATION CANNOT BE DEDUCTED AGAIN. ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 10 4.2 BEFORE US, THE LD. COUNSEL RELIED ON THE DE CISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT(EXEMPTION) VS. FRAMJEE CAWASJEE INSTITUTE (1993) 109 CTR 463. THE QUESTI ON BEFORE THE HONBLE COURT WAS-WHETHER, ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING THE AO TO TAKE DEPRECIATION INTO ACCOUNT IN COMPUTING THE INCOME FROM DEPRECIABLE ASSETS WHEN IN FACT THE FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THESE ASSETS? THE HONBLE COURT CONSIDERED BOARD CIRCU LAR DATED 26.11.1968, IN WHICH IT HAS BEEN CLARIFIED THAT IN CASE OF A BUSINESS UNDERTAKING HELD UNDER TRUST, ITS INCOME WILL BE INCOME AS S HOWN IN THE ACCOUNTS OF THE UNDERTAKING AND THAT WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAINS OR OTHER SOURCES, THE INCOME SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. A REFERENCE HAS ALSO BEEN MADE TO THE QUESTION WHICH AROSE IN THE CAS E OF LAXMI CHARITABLE TRUST IN APPLICATION U/S 256(2) BEFORE THE COUR T, IN WHICH THE APPLICATION WAS REJECTED. FINALLY, THE FINDING OF THE TRIBU NAL THAT IN COMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEAR, TH E COST OF WHICH HAS BEEN ALLOWED AS DEDUCTION, DEPRECIATION HAS TO BE CO NSIDERED IN COMPUTING THE ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 11 INCOME AVAILABLE FOR APPLICATION OF INCOME. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 4.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AN D RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE QUESTION BEFORE THE HO NBLE BOMBAY HIGH COURT AROSE IN A TOTALLY DIFFERENT CONTEXT. IN T HAT CASE, THE ASSESSEE HAD BEEN EARNING INCOME FROM DEPRECIABLE ASSETS AN D THE QUESTION WAS ABOUT FINDING OUT THE INCOME AVAILABLE FOR APPLICATION T O THE OBJECTS OF THE INSTITUTE. RELYING ON THE BOARD CIRCULAR, IT H AS BEEN HELD THAT WHEN BUSINESS INCOME IS TO BE COMPUTED, IT SHOULD BE DONE IN THE MANNER IN WHICH IT IS UNDERSTOOD IN NORMAL COMMERCE OR TRA DE. BEFORE US THE LD. COUNSEL HAS NOT MADE OUT ANY CASE FOR COMPUTAT ION OF BUSINESS INCOME, WHICH IS AVAILABLE WITH THE ASSESSEE FOR APPLICAT ION TOWARDS THE OBJECTS OF THE TRUST. MAJOR PORTION OF THE INCOME OF MORE THAN RS. 36 CRORE HAS BEEN EARNED BY THE ASSESSEE BY WAY OF DONATIONS AND INTEREST. THE ASSESSEE HAS ALSO SHOWN RECEIPT OF FEES AMOUNT ING TO ABOUT RS. 30.54 LAKH. NO CASE HAS BEEN MADE OUT BEFORE US THA T THE FEES IS EARNED ON ACCOUNT OF CONDUCT OF ANY BUSINESS. THEREFORE, THE RATIO OF THE CASE OF FRAMJEE CAWASJEE INSTITUTE (SUPRA) IS NOT APPLICABL E. IN SUCH CIRCUMSTANCES, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 11(1 )(A) FROM ITS GROSS RECEIPTS ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 12 AS THERE IS NO QUESTION OF COMPUTING INCOME UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. THUS, THIS GRO UND IS DISMISSED. 5. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRED IN HOLDING THAT PROVISIONS REGARDING CARRY FORWARD AND SET-OFF OF THE LOSSES ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 5.1 IN THIS CONNECTION, IT HAS BEEN MENTIONED IN TH E IMPUGNED ORDER THAT THE PROVISIONS ARE APPLICABLE IN CASE OF AN AS SESSEE CARRYING ON THE BUSINESS. THESE PROVISIONS ARE NOT APPLICABLE T O A CHARITABLE TRUST. 5.2 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF GONVIND U NAICKER ESTATE VS. ASSISTANT DIRECTOR OF INCOME-TAX & ANOTHER (200 1) 248 ITR 368. IN THIS CASE, DEFICIT AROSE IN EARLIER TWO YEARS BY REASON OF PAYMENT OF INTEREST AND PART OF PRINCIPAL TO THE BANK FRO M WHICH IT HAD OBTAINED SUBSTANTIAL LOANS FOR PUTTING UP A BUILDING IN PLACE OF THE OLD BUILDING. THE NEW BUILDING WAS A COMMERCIAL COMPLEX FROM WHICH RENTAL INCOME WAS MADE. THE SET-OFF WAS DISALLOWED ON THE GR OUND THAT THERE IS NO PROVISION IN THE ACT WHICH WOULD PERMIT THE ASSES SEE TO CARRY FORWARD ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 13 DEFICITS OF EARLIER YEARS TO THE LATER YEAR. THE HONBLE COURT REFERRED TO ITS EARLIER DECISION IN THE CASE OF CIT VS. RAO BAH ADUR CALAVALA CUNNAN CHETTY CHERITIES (1982) 135 ITR 485, WHEREIN AT PAGE 495, IT HAS BEEN OBSERVED THAT INCOME FROM PROPERTIES HELD UNDER TRUST WOULD HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITH OUT REFERENCE TO PROVISIONS, WHICH ARE ATTRACTED BY SECTION 14 O F THE ACT. IT HAS BEEN MENTIONED THAT FROM THE AFORESAID DECISION, IT IS CLEAR THAT THE EXPENDITURE INCURRED ON RELIGIOUS OR CHARITABLE PURPOSES IN E ARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR . THEREFORE, THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) WAS SET ASIDE WITH A VIEW TO DECIDE THE MATTER AFRESH IN ACCORDANCE WITH LAW. 5.3 AS AGAINST THE AFORESAID, THE LD. DR RELI ED ON THE ORDERS OF THE LOWER AUTHORITIES. 5.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. FROM THE STATEMENT OF ASSESSABLE INCO ME FILED BY THE ASSESSEE, IT IS SEEN THAT THE DEFICIT HAS BEEN WORKED OUT AT RS. 26,68,20,691/-. IN THE NOTES IT IS MENTIONED THAT THE DEFICIT MAY BE ALLOWED AS APPLICATION IN FUTURE YEARS WHERE THERE IS A SURPLUS. THUS, I T IS NOT A CASE WHERE ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 14 DEFICIT OF EARLIER YEARS IS SOUGHT TO BE ADJUST ED AGAINST THE INCOME OF THIS YEAR. THE QUESTION OF ADJUSTMENT OF DEFICIT OF THIS YEAR WILL ARISE ONLY IN THE SUBSEQUENT YEAR AND, THUS, WHAT IS TO BE R EQUIRED TO BE DONE IN THIS YEAR IS TO WORK OUT SURPLUS OR DEFICIT OF THIS YEAR. THEREFORE, THE QUESTION IS ONLY OF ACADEMIC INTEREST, BECOMING RELEVANT ONLY IN THE SUBSEQUENT YEAR. AS THE DECISION WILL BE REQUIRED TO B E TAKEN IN SUBSEQUENT YEAR, THE QUESTION NEED NOT BE ANSWERED BY US. THE ASSESSEE MAY AGITATE THE MATTER IN THE YEAR IN WHICH SUCH DEFICIT IS TO BE ADJUSTED AND TO THAT EXTENT, THE ORDER OF THE LD. CIT(APPEALS) IS MODI FIED. IN OTHER WORDS, THE FINDING OF THE LD. CIT(A) THAT THE DEFICIT CA NNOT BE CARRIED FORWARD IS SET ASIDE BUT THE QUESTION OF ACTUAL SET-OFF W ILL HAVE TO BE DECIDED BY THE AO IN THE YEAR IN WHICH IT IS SOUGHT TO BE ABSORBED AS PER LAW. THE GROUND OF APPEAL IS DISMISSED WITH AFORESAID OBSE RVATIONS. 6. IN THE RESULT, THE APPEAL OF THE REVENUE AN D THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 AUGUST, 2010. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 31ST AUGUST,2010. SP SATIA ITA NO. 595(DEL)/2010 & C.O.NO. 76(DEL)/2010 15 COPY OF THE ORDER FORWARDED TO:- MAHARISHI VED VIGYAN VISHWA VIDYA PEETHAM, NEW DELH I. ITO(E), TRUST WARD-IV, NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.
