The DCIT(Exemption), Circle-1, Ahmedabad V. Dudhsagar Research and Development Association. (O/o. Dudhsagar Dairy), Mehsana

ITA 1116/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1018 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 02-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3); 11

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 1116/AHD/2018 ( ASSESSMENT YEAR : 2014-15) THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTIONS) CIRCLE-1, AHMEDABAD / VS. DUDHSAGAR RESEARCH AND DEVELOPMENT ASSOCIATION O/O. DUDHSAGAR DAIRY, HIGH WAY ROAD, MEHSANA 384002 ./ ./ PAN/GIR NO. : AAATD1312J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ALOK SINGH, CIT.D.R. / RESPONDENT BY : SHRI S. N. SOPARKAR, A.R. DATE OF HEARING 04/12/2019 !'# / DATE OF PRONOUNCEMENT 18/12/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-7, AHMEDABAD, (CIT(A) IN SHORT), DATED 28.02.2018 ARISING IN THE ASSESSMENT ORDER DATED 29.12.2016 PA SSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2014-15. ITA NO.1116/AHD/18 [DCIT(EXEMP.) VS. DUDHSAGAR RESEARCH AND DEVELOPMENT ASSOCIATION] A.Y. 2014-15 - 2 - 2. THE GROUND OF APPEAL RAISED BY REVENUE READS AS UNDER: 1. THE LD. CIT(A) HAS ERRED IN THE LAW AND ON FACT S IN ALLOWING THE BENEFIT OF THE DEFICIT OF EARLIER YEARS AGAINST THE INCOME OF SUBSEQUENT YEAR IN ABSENCE OF ANY EXPRESS PROVISION IN THE ACT REGARDING THE SAME AND ALSO BY OVERLOOKING THE DECI SIONS IN FAVOUR OF REVENUE IN THIS REGARD. 3. THE ASSESSEE IS A TRUST ENGAGED IN THE ACTIVIT IES OF ANIMAL HUSBANDRY, PROGENY TESTING AND IMPROVEMENT, VACCINA TION PROGRAMS FOR MILCH ANIMALS, TRAINING PROGRAMS FOR ARTIFICIAL INSEMINATION TECHNICIANS, TRAINING FOR MILK PRODUCERS ETC. DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE TRUST HAS CLAIMED SET O FF OF DEFICITS INCURRED IN THE EARLIER YEARS. THE AO WHILE PASSIN G THE ASSESSMENT ORDER UNDER S.143(3) OF THE ACT DID NOT TAKE COGNIZ ANCE OF THE CARRIED FORWARD DEFICIT FOR BEING SET OFF. 4. IN THE FIRST APPEAL AGAINST THE AFORESAID ACTION OF THE AO, THE CIT(A) ALLOWED CARRY FORWARD OF EXCESS EXPENSES OVE R NEXT YEARS. THE RELEVANT PARA OF THE ORDER OF THE CIT(A) DEALIN G WITH THE ISSUE READS AS UNDER: 8. GROUND OF APPEAL NO.5 IS IN RESPECT OF SET OFF OF DEFICIT BROUGHT FORWARD FROM EARLIER YEARS AGAINST THE ASSESSED INC OME. AS PER THE JUDGEMENT IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. SHRI PLOT SWETAMBER MURTIPUJAK BY THE HON GUJARAT HIGH COURT, THE EXCESS OF EXPENDITURE OVER THE INCOME IS ALLOWED TO BE SET-OF F AGAINST FUTURE INCOME OF THE EXEMPTED ENTITY. HOWEVER, THE APPLICA TION OF INCOME WOULD PRECEDE THE ACCUMULATION OF INCOME. THEREFORE THE AO IS DIRECTED TO COMPUTE THE INCOME FIRST BY ALLOWING TH E EXPENDITURE INCURRED TOWARDS THE OBJECTS OF THE TRUST IN EARLIE R YEARS. THEREAFTER IF ANY EXCESS OF INCOME REMAINS OVER EXPENSES THEN THE SAME WOULD BE ALLOWED TO BE ACCUMULATED. IN OTHER WORDS, THE APPE LLANT CANNOT CLAIM THE DEFICIT AS WELL AS EXCESS IN THE SAME YEAR. THE GROUND OF APPEAL NO.5 IS ALLOWED FOR STATISTICAL PURPOSES SUBJECT TO ACTUAL CALCULATION BY THE AO AS DIRECTED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.1116/AHD/18 [DCIT(EXEMP.) VS. DUDHSAGAR RESEARCH AND DEVELOPMENT ASSOCIATION] A.Y. 2014-15 - 3 - 6. THE LEARNED DR FOR THE REVENUE RELIED UPON THE O RDER OF THE AO WHILE THE LEARNED AR FOR THE ASSESSEE RELIED UPO N THE ORDER OF THE CIT(A) AS WELL AS VARIOUS JUDICIAL PRONOUNCEMEN TS IN THIS REGARD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SOLITARY QUESTION THAT ARISES FOR ADJUDICATION IS W HERE THE TRUST HAS INCURRED DEFICIT DUE TO EXCESS SPENDING ON THE OBJE CT OF THE TRUST DURING THE PARTICULAR YEAR; WHETHER EXCESS EXPENDIT URE INCURRED IN EARLIER YEARS BY THE TRUST COULD BE ALLOWED TO BE S ET OFF AGAINST THE INCOME OF SUBSEQUENT YEAR BY INVOKING SECTION 11 OF THE ACT. THE ISSUE IS NO LONGER RES INTEGRA. THE HONBLE GUJARAT HIGH COURT IN CIT VS. SHRI PLOT SHWETAMBER MURTI PUJAK JAIN MANDA L (1995) 211 ITR 0293 (GUJ) HAS RENDERED DECISION FAVOURABLE TO THE ASSESSEE O N THE VERY ISSUE. THE HONBLE GUJARAT HIGH COURT HAS HELD THAT THERE IS NOTHING IN THE LANGUAGE OF SECTION 11(1)(A) OF T HE ACT TO INDICATE THAT THE INCOME FROM TRUST PROPERTY SHOULD HAVE BEE N APPLIED FOR CHARITABLE OR RELIGIOUS TRUSTS ONLY IN THE YEAR IN WHICH SUCH INCOME HAS ARISEN. THE EXPENDITURE INCURRED IN THE EARLIE R YEAR CAN BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZ ATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER Y EAR WOULD AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS TRUSTS. THE HONBLE GUJARAT HIGH COURT FURTHER HEL D THAT INCOME DERIVED FROM TRUST PROPERTY HAS TO BE COMPUTED ON C OMMERCIAL PRINCIPLES AND CONSEQUENTLY DEFICIT ARISING OUT OF EXPENDITURE OVER INCOME FOR THE PREVIOUS YEAR SHOULD, THEREFORE, BE SET OFF AGAINST SURPLUS OF INCOME OVER EXPENDITURE RELATING TO THE SUBSEQUENT YEAR. SIMILAR VIEW HAS BEEN EXPRESSED IN CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 164 ITR 439 (RAJ) AND CIT VS. MATRISEVA TRUST (2000) 242 ITR 20 (MAD) . WHATEVER LITTLE CONTROVERSY MIGHT BE EXISTING HAS BEEN PUT TO REST BY THE RECENT ITA NO.1116/AHD/18 [DCIT(EXEMP.) VS. DUDHSAGAR RESEARCH AND DEVELOPMENT ASSOCIATION] A.Y. 2014-15 - 4 - DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT(EXEMPTION) VS. SUBROS EDUCATION SOCIETY (2018) 303 CTR 1 (SC). HENCE, THE CIT(A) IN OUR VIEW HAS CORRECTLY APPLI ED THE LAW AS EVOLVED BY THE JUDICIAL PRECEDENTS. IN THE ABSE NCE OF ANY INFIRMITY IN THE ORDER OF THE CIT(A), WE DECLINE TO INTERFERE THEREWITH. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 18/12/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 18/12/2019