DCIT (Exemptions) Chennai Circle, CHENNAI V. The Council of Seventh Day Adventist Educational Institutions, CHENNAI

ITA 1014/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7482 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 23-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G N RAGHAVENDRA RAO
• Keywords: Business income; Depreciation; Set aside
• Section: 143(3); 12A; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NO.1012, 1013 & 1014/CHNY/2018. #$% &$ / ASSESSMENT YEARS : 2008-09, 2009-10 & 2010-2 011. THE DEPUTY COMMISSIONER OF INCOME TAX, EXEMPTIONS, CHENNAI 600 034. VS. M/S. THE COUNCIL OF SEVENTH DAY ADVENTIST EDUCATIONAL INSTITUTIONS, NO.AA-148, THIRD AVENUE, ANNA NAGAR, CHENNAI 600 040. [PAN AAATC 0175A] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. G.N. RAGHAVENDRA RAO, JCIT. +,'( ) * /RESPONDENT BY : SHRI. R.M. NARAYANAN, C.A. # - ) . /DATE OF HEARING : 24-07-2019 /0&% ) . /DATE OF PRONOUNCEMENT : 25-07-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THERE ARE APPEALS FILED BY THE REVENUE DIRECTED AG AINST COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS)-17, CHENNAI (CIT(A) FOR SHORT) DATED 12.01.2018 FOR T HE ASSESSMENT YEARS 2008-09, 2009-10 & 2010-2011. 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE THE SAME VIDE THIS C OMMON ORDER. ITA NOS.1012 T0 1014 /2018 :- 2 -: 3. FOR THE SAKE OF CONVENIENCE AND CLARITY THE FACTS R ELEVANT TO THE APPEAL IN ITA NO.1012/CHNY/2018 FOR ASSESSMENT YEAR 2008-09 ARE STATED HEREIN. 4. THE REVENUE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2.1 THE ID. CIT (A) ERRED IN HOLDING THAT THE ASSES SEE IS ELIGIBLE TO SET OFF OF BROUGHT FORWARD EXCESS APPLICATION OF FU NDS TO SUBSEQUENT YEARS. 2.2 THE ID. CIT (A) FAILED TO OBSERVE THAT THERE IS NO PROVISION IN THE INCOME TAX ACT WHICH ALLOWS FOR DETERMINATION O F LOSS U/S 11 AND CARRY FORWARD OF THE SAME TO SUBSEQUENT YEAR TO BE SET OFF AGAINST INCOME OF THE SUBSEQUENT YEAR. 2.3. THE CIT(A) FAILED TO OBSERVE THAT THE INCOME O F THE TRUST IS NOT COMPUTED ON THE PRINCIPLES OF BUSINESS INCOME W HICH CONTAINS THE PROVISIONS OF CARRY FORWARD OF LOSSES OF EARLIER YEAR AND SET OFF SUCH LOSSES AGAINST THE INCOME OF THE C URRENT YEAR. 2.4 THE ID. CIT(A) FAILED TO CONSIDER THE DECISION OF ITAT, DELHI IN THE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTIT UTE FOR LIVER, RENAL & DIGESTIVE DISEASES VS DY.DIT (2009)29 SOT 3 16, ITAT, CHENNAI DECISIONS IN THE CASE OF ANJUMAN-E-HIMAYATH -LSLAM VS.ADIT(EXEMPTION) - IV, CHENNAI FOR THE A.Y. 2009- 10 REPORTED IN[2015] 59 TAXMANN.COM 379 AND M/S INTER CHURCH SE RVICE ASSOCIATION IN ITA NO.1253/MDS/2014 DATED 05/02/201 6. 2.5 THE LD.CIT(A) FAILED TO OBSERVE THAT CARRY FORW ARD OF EXCESS APPLICATION OF FUNDS WOULD RESULT IN NOTIONAL APPLI CATION OF INCOME IN SUBSEQUENT YEAR WHICH IS NOT PERMISSIBLE IN LAW. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE NAMELY M/S. THE COUNCIL OF SEVENTH DAY ADVENTIST EDUCATIONAL INSTITUTIONS IS A TRUS T DULY REGISTERED UNDER THE PROVISIONS OF SECTION 12A OF THE INCOME TAX ACT, 1961 (IN ITA NOS.1012 T0 1014 /2018 :- 3 -: SHORT THE ACT) AND IT IS RUNNING EDUCATIONAL INST ITUTIONS. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 WAS FILED ON 26.05.2009 DISCLOSING TOTAL INCOME OF D42,07,29,087/- BEFO RE CLAIMING EXEMPTION U/S.11 OF THE ACT. AGAINST THE SAID RETU RN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER, (OSD) EXEMPTIONS III, CHENNAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 31.12.2010 PASSED U/S. 143(3) OF THE ACT WITHOUT A LLOWING THE DEPRECIATION ON APPLICATION OF INCOME, PLACING RELI ANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ESCORTS, 199 ITR 43 . 6. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), CONTENDING THAT DEPRECIATION SHOULD BE ALL OWED ON COMMERCIAL PRINCIPLES AND EXCESS APPLICATION OF INCOME ON EAR LIER YEARS SHOULD BE ALLOWED TO BE CARRIED FORWARD AND SET OFF AGAIN ST SUBSEQUENT YEAR INCOME. LD. CIT(A) PLACING RELIANCE ON THE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MEDICAL T RUST OF THE SEVENTH DAY ADVENTISTS VS. DIT, EXEMPTION-III, CHENNAI IN TCA NO.949 OF 2015 AND 771 OF 2016 DATED 08.08.2017 DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION AS APPLICATION OF INCOME AND ALSO DIRECTED THE ASSESSING OFFICER THAT EXCESS APPLICATION OF INCOM E IN EARLIER YEARS SHOULD BE ALLOWED SET OFF AGAINST CURRENT YEAR INC OME PLACING RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS. MATRISEVA TRUST, 242 ITR 20 AND HONBLE MADHYA PRADESH HIGH ITA NOS.1012 T0 1014 /2018 :- 4 -: COURT IN THE CASE OF CIT VS. GUJRATI SAMAJ, 213 TAXMAN 182 , ALLOWED THE APPEAL OF THE ASSESSEE. 7. BEING AGGRIEVED BY THE DECISION OF THE CIT(A) IN AL LOWING SET OFF OF EXCESS APPLICATION OF INCOME IN EARLIER YEAR S, THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 8. IT IS CONTENTED THAT THERE IS NO PROVISIONS IN THE INCOME TAX ACT ALLOWING EXCESS APPLICATION OF INCOME TO CARRY FORWARD AND SET OFF AGAINST INCOME OF THE TRUST IN THE SUBSEQUENT YEAR S. THEREFORE, IT IS SUBMITTED THAT THE LD. CIT(A) OUGHT NOT HAVE ALLOWE D SET OFF OF EXCESS APPLICATION OF INCOME OF EARLIER YEARS AGAINST THE CURRENT YEAR INCOME. 9. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTATI VE RELIED ON THE DECISIONS OF HONBLE JURISDICTIONAL HIGH CO URT IN THE CASES OF CIT VS. MATRISEVA TRUST, (2003) 128 TAXMAN 261 AND DIT, EXEMPTION II AND CHENNAI VS. MEDICAL TRUST OF THE SEVENTH DAY ADVENTISTS, (2017) 84 TAXMANN.COM 202. 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL IS WHETHER OR NOT EXCESS APPLICATION OF INCOME IN EARLIER YEARS CAN BE CARRI ED FORWARD FOR THE PURPOSE OF SET OFF AGAINST INCOME OF THE TRUST IN T HE SUBSEQUENT YEARS. THOUGH THERE IS NO PROVISION UNDER THE INCOME TAX A CT TO ALLOW SUCH EXCESS APPLICATION OF INCOME FORWARD TO THE CHARITA BLE TRUST IN THE ITA NOS.1012 T0 1014 /2018 :- 5 -: SUBSEQUENT YEARS. HOWEVER, THE JURISDICTIONAL HIGH COURT IN THE CASE OF MATRISEVA TRUST (TRUST) DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE AND THE RELEVANT POSITION OF THE JUDGMENT HELD AS FOLLOWS: 5. WITH REGARD TO THE SECOND QUESTION, THE TRIBUN AL HAS HELD THAT THE TRUST IS ENTITLED TO SET OFF THE AMOUNT OF EXCESS A PPLICATION OF THE LAST YEAR AGAINST THE DEFICIENCY OF RS. 82,516 OF THE PR ESENT ASSESSMENT YEAR . WHEN SIMILAR QUESTIONS CAME UP BEFORE THE RAJASTHAN HIGH COURT AND THE GUJARAT HIGH COURT IN THE CASES OF CIT V. MAHARANA OF MEWAR CHARITABLE FOUNDATION [1987] 1 64 ITR 439 AND CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAM MANDAL [1995] 211 ITR 239, RESPECTIVELY, BOTH THE RAJASTHAN HIGH COURT AND THE GUJARAT HIGH COURT HAV E ANSWERED THE QUESTIONS IN FAVOUR OF THE ASSESSEE AN D AGAINST THE REVENUE. EVEN THE HONBLE SUPREME COURT IN THE CASE OF CIT (E) VS. SUBROS EDUCATIONAL SOCIETY, (2018) 166 DTR 257 UPHELD THE SAME PROPOSITION OF LAW. HOWEVER, FROM THE PERUSAL OF THE ASSESSMEN T ORDER, WE DO NOT FIND ANY TAXABLE INCOME WHICH IS REQUIRED TO BE S ET OFF, AGAINST EXCESS APPLICATION OF INCOME IN THE EARLIER YEARS. SIMILARLY, THERE IS NO MATERIAL SHOWN TO US SHOWING THE AVAILABILITY OF E XCESS APPLICATION OF INCOME WHICH IS ELIGIBLE TO BE CARRIED FORWARDED T O THE SUBSEQUENT YEARS. FURTHER, MATERIAL POINT THAT TO BE NOTED T HAT EXCESS APPLICATION OF INCOME IS REQUIRED TO BE DETERMINED IN THE YEARS OF APPLICATION OF INCOME IN THE EARLIER YEARS. THEREFORE, WE REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURP OSE OF VERIFYING AVAILABILITY OF EXCESS APPLICATION OF INCOME IN T HE EARLIER YEARS, IF SO AVAILABLE THE SAME SHOULD BE ALLOWED TO BE CARRY F ORWARD TO THE ITA NOS.1012 T0 1014 /2018 :- 6 -: SUBSEQUENT YEARS FOR SET OFF AGAINST THE INCOME IN THE SUBSEQUENT YEAR. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NOS.1013 & 1014/CHNY/2018, FOR A.Y 2009-10 AND 10-11 8 . SINCE, THE FACTS IN THE PRESENT APPEALS ARE IDENT ICAL TO THE FACTS IN ITA NO.1012/CHNY/2018, FOR THE REASONS MEN TIONED THEREIN, WE PARTLY ALLOW THE APPEALS FOR STATISTICAL PURPOSE ON THE ABOVE LINES INDICATED IN APPEAL ITA NO.1012/CHNY/2018 SUPRA. HE NCE, THE ABOVE CAPTIONED APPEALS FILED BY THE REVENUE ARE PARTLY A LLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 25TH DAY OF JULY, 2019, AT CH ENNAI. SD/- SD/- ( . ! ) (DUVVURU RL REDDY) ' #$ /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED: 25 TH JULY, 2019. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF