ACIT-(E), Circle-1, Bangalore V. M/s. Bhagwan Mahaveer Memorial Jain Educational and Cultural Trust, Bangalore

ITA 1514/BANG/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5007 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 19-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: H N KHINCHA
• Keywords: Capital asset; Depreciation; Charitable institution; Permanent establishment; Question of law; Benefit of exemption; Revenue expenditure; Capital expenditure
• Section: 143(3); 12A; 32; 263; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE - PRESIDENT AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NOS. 1514 & 1515 /BANG/2016 ASSESSMENT YEARS : 2010-11 & 2011- 12 ITA NO. 137 /BANG/2017 ASSESSMENT YEARS : 2012-13 THE ASST. COMMISSIONER OF INCOME-TAX (EXEMPTION), BANGALORE . VS. BHAGWAN MAHAVEER MEMORIAL JAIN EDUCATIONAL AND CULTURAL TRUST, NO.285, II FLOOR, ESWARI MANSION, AVENUE ROAD, BANGALORE-560 002. PAN AABTS 1497 G APPELLANT RESPONDENT ITA NOS. 1730, 1731 & 1732 ASSESSMENT YEARS : 2010-11, 2011-12 & 2012- 13 BHAGWAN MAHAVEER MEMORIAL JAIN EDUCATIONAL AND CULTURAL TRUST, NO.285, II FLOOR, ESWARI MANSION, AVENUE ROAD, BANGALORE-560 002. PAN AABTS 1497 G VS. THE ASST. COMMISSIONER OF INCOME-TAX (EXEMPTION), BANGALORE . APPELLANT RESPONDENT REVENUE BY : SHRI PRADEEP KUMAR, CIT (DR) ASSESSEE BY : SHRI H.N KHINCHA, C.A DATE OF HEARING : 14-08-2019 DATE OF PRONOUNCEMENT : 21-08- 2019 ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 2 OF 23 O R D E R PER N.V. VASUDEVAN, VICE-PRESIDENT ITA NO.1730 TO 1732/BANG/2016 ARE APPEALS BY THE REVENUE, WHILE ITA NO. 1514 & 1515/BANG/2016 & ITA NO.250/BANG/2017 ARE APPEALS BY THE REVENUE. THESE APPEALS ARE DIRECTED AGAINT THREE ORDERS OF CIT(A)-14, LTU, BAN GALORE ALL DATED 29.7.2016 RELATING TO AY 2010-11 TO 2012-13. 2. WE SHALL FIRST TAKE UP THE APPEALS OF THE REVENUE F OR CONSIDERATION. THE FIRST COMMON ISSUE THAT ARISES FOR CONSIDERATION IN ALL THESE APPEALS OF THE REVENUE IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION MADE BY THE AO WHICH WAS DELETED BY TH E CIT(A). THE ASSESSEE IS A CHARITABLE TRUST WITH OBJECTS TO PROV IDE EDUCATION BY RUNNING SEVERAL EDUCATIONAL INSTITUTIONS. IN THE C OURSE OF ASSESSMENT U/S. 143(3) OF THE ACT FOR AY 2010-11 TO 2012-13, THE AO NOTICED FROM THE DETAILS OF DEPRECIATION CLAIMED , THAT DEPRECIATION WAS CLAIMED ON ASSETS, THE COST OF ACQ UISITION OF THE SAID ASSETS HAD BEEN CLAIMED BY THE ASSESSEE AS CAP ITAL EXPENDITURE TOWARDS APPLICATION OF FUNDS TOWARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUCH. ACCORDING TO THE AO, ALLOWING SUCH A CLAIM WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION. ON THE FACTS O F THE PRESENT CASE, HE WAS OF THE VIEW THAT THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43 IS SQUARELY APPLICABLE, WHEREIN IT HAS BEEN CATEGO RICALLY HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED I N RESPECT OF CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, NO DEPR ECIATION IS ALLOWABLE U/S 32 ON THE SAME ASSET. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 3 OF 23 3. THE ASSESSEE POINTED OUT THAT HON'BLE HIGH COURT O F KARNATAKA IN THE CASE OF ALL SAINTS CHURCH, 148 ITR 786 (KAR) AND SOCIETY OF SISTERS OF ST. ANN, 146 ITR 28 (KAR) HAS TAKEN THE VIEW THAT WHERE CAPITAL EXPENDITURE ON ACQUISITION OF DE PRECIABLE ASSET IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE, ALLOWING DEPRECIATION ON THE VERY SAME CAPITAL ASSET WOULD N OT AMOUNT TO DOUBLE ALLOWANCE. THE ASSESSEE ALSO POINTED OUT TH AT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFFERENT SET OF FACTS. 4. THE AO HOWEVER, HELD THAT ALLOWANCE OF DEPRECIATIO N WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMP TION AS APPLICATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION A ND DOUBLE BENEFIT ON THE SAME ASSET. THE AO REFERRED TO THE DECISION OF THE OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST O F ACQUISITION OF DEPRECIABLE ASSET WAS ALLOWED AS APPLICATION OF INC OME FOR CHARITABLE PURPOSE AMOUNTS TO DOUBLE DEPRECIATION A ND THEREFORE DEPRECIATION CANNOT BE ALLOWED. THE AO ALSO DISTING UISHED THE CASES CITED BY THE ASSESSEE. 5. ON APPEAL BY THE ASSESSEE, THE CIT(A), DELETED THE ADDITION MADE BY THE AO. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE RELEVANT GROUND OF APPEAL RAISED BY THE ASSESSEE IS GROUND N O.1 (I) TO (IV) IN ALL THE APPEALS RELATING TO DISALLOWANCE OF DEPRECI ATION. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 4 OF 23 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO R ELIED ON THE ORDER OF AO. THE LEARNED COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE CIT(A). WE HAVE CONSIDERED THE ORDER OF THE AO. IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE IT AT BANGALORE BENCH IN THE CASE OF DDIT(E) V. CUTCHI MEMON UNION (2013) 60 SOT 260 BANGALORE ITAT , WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL. IN THE AFORESAID CASE, THE ASSESSEE CLAIMED DEPRECIATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT CAPITAL ASSET, C OST OF ACQUISITION WAS CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWING DE PRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELI ANCE ON THE DECISION OF HON'BLE SUPREME COURT IN ESCORTS LTD. (SUPRA) . THE CIT(A), HOWEVER, ALLOWED THE CLAIM OF ASSESSEE. ON FURTHER APPEAL BY THE REVENUE, THE TRIBUNAL HELD AS FOLLOWS:- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTIO N FOR COMPUTING INCOME OF CHARITABLE INSTITUTIONS, THEN T HERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERI VING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR OBSOLESCEN CE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITUTION IN DETER MINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHAR ITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 5 OF 23 BENEFIT. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORE SAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERI NG SEVERAL DECISIONS ON THAT ISSUE AND ALSO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CH ARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HA VE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SE CTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COU RT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE O F TWO DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE ACT, O NE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTI FIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE CO URT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN TH E BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. I N VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSU E DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENU E IS DISMISSED. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 6 OF 23 8. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. R AJASTHAN & GUJARATI CHARITABLE FOUNDATION POONA, (2018) 89 T AXMANN.COM 127(SC) HAS SINCE CONFIRMED THE VIEW THAT DEPRECIAT ION HAS TO BE ALLOWED AS A DEDUCTION EVEN WHEN THE COST OF ACQUIS ITION OF THE DEPRECIABLE ASSET HAS BEEN TREATED AS APPLICATION O F INCOME IN THE YEAR OF ITS ACQUISITION. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINCE BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY TH E FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INSERTION OF SU B-SECTION (6) TO SECTION 11 OF THE ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION , THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WI THOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION O R OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF W HICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 9. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PROS PECTIVE AND WILL APPLY ONLY FROM A.Y. 2015-16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) HAS TO BE REVERSED. CONSEQUENTLY GROUND NO.2 RAISED BY THE ASSESSEE IS ALLOWED. 10. THE SECOND COMMON ISSUE THAT ARISES FOR CONSIDERAT ION IN THE APPEALS BY THE REVENUE WHICH IS PROJECTED BY TH E REVENUE IN GROUNDS OF APPEAL NO.2 (A) TO (C) IN ALL THE APPEAL S, IS AS TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSE SSEE, A TRUST, IS ENTITLED TO CARRY FORWARD EXPENDITURE INCURRED IN E XCESS OF ITS INCOME FOR SETTING OFF AGAINST INCOME OF THE SUCCEE DING YEARS? THE ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 7 OF 23 ASSESSEE IS A TRUST REGISTERED U/S. 12A OF THE ACT. THE ASSESSEE FILED A RETURN OF INCOME CLAIMING CARRY FORWARD OF EXCESS APPLICATION OF INCOME PERTAINING TO CURRENT YEAR AND EARLIER YE ARS AGAINST THE INCOME OF THE FUTURE ASSESSMENT YEARS. THE ASSES SEE SOUGHT TO CARRY FORWARD THE EXCESS APPLICATION FOR SETTING OF F AS APPLICATION OF INCOME IN THE SUBSEQUENT ASSESSMENT YEARS. ACCORDI NG TO THE AO THERE WAS NO PROVISION IN THE ACT FOR CARRY FORWARD OF EXCESS EXPENDITURE OF EARLIR YEAR TO BE ADJUSTED AGAINST I NCOME OF THE SUBSEQUENT YEAR AND HE THEREFORE DENIED THE CLAIM O F THE ASSESSEE. 11. ON APPEAL BY THE ASSESSEE, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 12. THE LEARNED DR REITERATED THE STAND OF THE AO THAT THERE IS NO PROVISION IN THE ACT TO ALLOW CARRY FORWARD OF EXCE SS APPLICATION OF INCOME FOR SET OFF AS APPLICATION OF INCOME IN SUBS EQUENT YEARS. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE CIT(A). 14. WE HAVE CONSIDERED HIS SUBMISSION. SECTION 11 (1)(A) DOES NOT CONTAIN ANY WORDS OF LIMITATION TO THE EFFECT THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPO SE ONLY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. THE APPLICATIO N FOR CHARITABLE PURPOSES AS CONTEMPLATED IN SECTION 11(1)(A) TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSE S INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. HENCE, EVEN IF TH E EXPENSES FOR SUCH PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEA RS AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSE QUENT YEAR, THE INCOME OF SUCH SUBSEQUENT YEAR CAN BE SAID TO BE AP PLIED FOR ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 8 OF 23 CHARITABLE OR RELIGIOUS PURPOSES IN THE YEAR IN WHI CH SUCH ADJUSTMENT TAKES PLACE. IN OTHER WORDS, THE SET-OFF OF EXCESS OF EXPENDITURE INCURRED OVER THE INCOME OF EARLIER YEA RS AGAINST THE INCOME OF A LATER YEAR WILL AMOUNT TO APPLICATION O F INCOME OF SUCH LATER YEAR. THE ABOVE IS THE POSITION OF LAW AS HE LD IN THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION 164 ITR 439 (RAJ) CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL 211 ITR 293 (GUJ.). IN CIT VS. INSTITUTE OF BANKING PERSONN EL SELECTION 264 ITR 110 (BOM) IT WAS HELD THAT IN CASE OF CHARITABL E TRUST WHOSE INCOME IS EXEMPT UNDER S. 11, EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS AND SUCH ADJUSTMENT WOULD BE APPLICATION OF INCOME FOR SUBSE QUENT YEARS AND THAT DEPRECIATION IS ALLOWABLE ON THE ASSETS TH E COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UND ER S. 11 IN PAST YEARS. IN GOVINDU NAICKER ESTATE VS. ADIT 248 ITR 368 (MAD), THE HONBLE MADRAS HIGH COURT HELD THAT THE INCOME OF T HE TRUST HAS TO BE ARRIVED AT HAVING DUE REGARD TO THE COMMERCIAL P RINCIPLES, THAT S. 11 IS A BENEVOLENT PROVISION, AND THAT THE EXPENDIT URE INCURRED ON RELIGIOUS OR CHARITABLE PURPOSES IN EARLIER YEAR OR YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THE PRINCIPLE THAT THE LOSS INCURRED UNDER ONE HEAD CAN ONLY BE S ET OFF AGAINST THE INCOME FROM THE SAME HEAD IS NOT OF ANY RELEVAN CE, IF THE EXPENDITURE INCURRED WAS FOR RELIGIOUS OR CHARITABL E PURPOSES, AND THE EXPENDITURE ADJUSTED AGAINST THE INCOME OF THE TRUST IN A SUBSEQUENT YEAR, WOULD NOT AMOUNT TO AN INCIDENCE O F LOSS OF AN EARLIER YEAR BEING SET OFF AGAINST THE PROFIT OF A SUBSEQUENT YEAR. THE OBJECT OF THE RELIGIOUS AND CHARITABLE TRUST CAN ON LY BE ACHIEVED BY INCURRING EXPENDITURE AND IN ORDER TO INCUR THAT EX PENDITURE, THE ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 9 OF 23 TRUST SHOULD HAVE AN INCOME. SO LONG AS THE EXPENDI TURE INCURRED IS ON RELIGIOUS OR CHARITABLE PURPOSES, IT IS THE EXPE NDITURE PROPERLY INCURRED BY THE TRUST, AND THE INCOME FROM OUT OF W HICH THAT EXPENDITURE IS INCURRED, WOULD NOT BE LIABLE TO TAX . THE EXPENDITURE, IF INCURRED IN AN EARLIER YEAR IS ADJUSTED AGAINST THE INCOME OF A LATER YEAR, IT HAS TO BE HELD THAT THE TRUST HAD IN CURRED EXPENDITURE ON RELIGIOUS AND CHARITABLE PURPOSES FROM THE INCOM E OF THE SUBSEQUENT YEAR, EVEN THOUGH THE ACTUAL EXPENDITURE WAS IN THE EARLIER YEARS, IF IN THE BOOKS OF ACCOUNT OF THE TR UST SUCH EARLIER EXPENDITURE HAD BEEN SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THE EXPENDITURE THAT CAN BE SO ADJUSTED CAN O NLY BE EXPENDITURE ON RELIGIOUS AND CHARITABLE PURPOSES AN D NO OTHER. THE HIGH COURT RELIED ON THE DECISION IN THE CASE OF CI T VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR.). 15. WE ARE THEREFORE OF THE VIEW THAT THERE IS NO MERIT IN GROUNDS RAISED BY THE REVENUE IN THIS REGARD AND THE SAME I S DISMISSED. 16. THE THIRD ISSUE THAT ARISES FOR CONSIDERATION IN ITA NO.1515/BANG/2016 FOR AY 2011-12 IS AS TO WHETHER 1 5% ACCUMULATION FOR APPLICATION IN FUTURE HAS TO BE CA LCULATED ON GROSS RECEIPTS OR NET RECEIPTS AFTER DEDUCTION OF REVENUE EXPENDITURE. THE ASSESSEE CLAIMED ACCUMULATION OF INCOME FOR APPLICA TION FOR CHARITABLE PURPOSE AT 15% OF THE GROSS RECEIPTS. T HE AO WAS OF THE VIEW THAT ACCUMULATION WILL BE ALLOWED ONLY TO THE EXTENT OF 15% OF THE INCOME AFTER REVENUE EXPENDITURE. IN OTHER WOR DS INCOME TO BE SET APART U/S.11(1)(A) OF THE ACT HAS TO BE COMPUTE D AT 15% OF THE NET INCOME I.E., GROSS RECEIPTS MINUS REVENUE EXPEN DITURE AND NOT ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 10 OF 23 ON THE GROSS RECEIPTS AS CLAIMED BY THE ASSESSEE. SINCE IN THE CASE OF THE ASSESSEE, THE GROSS RECEIPTS AFTER REVENUE E XPENDITURE WAS NIL, THE AO DENIED THE BENEFIT OF ACCUMULATION TO T HE ASSESSEE. 17. ON APPEAL BY THE ASSESSEE, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS RAISED THE AFORESAID GROUND OF APPEAL BEFORE THE TR IBUNAL. 18. THE ISSUE TO BE DECIDED IS THEREFORE AS TO WHETHER FOR THE PURPOSE OF COMPUTING ACCUMULATION OF INCOME OF 15% UNDER SEC.11(1)((A) OF THE ACT, ONE HAS TO TAKE THE GROSS RECEIPTS OR GROSS RECEIPTS AFTER EXPENDITURE FOR CHARTIABLE PURPOSE I .E., THE NET RECEIPTS. THIS IS ISSUE IS NO LONGER RES INTEGRA A ND HAS BEEN DECIDED BY THE SPECIAL BENCH MUMBAI IN THE CASE OF BAI SONA BAI HIRJI AGIARY TRUST VS. ITO 93 ITD 0070 (SB). THE FACTS I N THE AFORESAID CASE WERE THAT THE ASSESSEE WAS A PUBLIC CHARITABLE TRUST ENJOYING EXEMPTION UNDER S. 11 OF THE IT ACT. AS PER THE REQ UIREMENT OF S. 11(1) OF THE IT ACT, AS IT PREVAILED AT THAT POINT OF TIME, THE ASSESSEE HAD TO APPLY 75 PER CENT OF ITS INCOME FOR THE OBJE CTS AND PURPOSES OF THE TRUST AND THE ASSESSEE WAS PERMITTED TO ACCU MULATE OR SET APART UP TO 25 PER CENT OF ITS INCOME, WHICH WAS SU BJECT TO FULFILMENT OF OTHER CONDITIONS. WHILE CALCULATING T HE AFORESAID 25 PER CENT, THE IMPORTANT QUESTION WHICH AROSE WAS AS TO WHETHER FOR THIS PURPOSE, THE GROSS INCOME EARNED BY THE ASSESSEE IS RELEVANT OR THE INCOME AS COMPUTED IN ACCORDANCE WITH THE PROVISION S OF IT ACT. IN OTHER WORDS, WHETHER OUTGOINGS FROM OUT OF GROSS IN COME WHICH ARE IN THE NATURE OF APPLICATION OF INCOME, SHOULD BE F IRST DEDUCTED ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 11 OF 23 FROM THE GROSS INCOME AND 25 PER CENT OF ONLY THE R EMAINING AMOUNT SHOULD BE ALLOWED TO BE ACCUMULATED OR SET A PART. THE SPECIAL BEN CH OF THE ITAT ON THE ISSUE HELD AS FO LLOWS: 9. COMING TO THE MERITS OF THE ISSUE, WE ARE OF THE VI EW THAT THE SAME IS CLEARLY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANIZATION (SUPRA). IN THE DECISION, TH EIR LORDSHIPS, AFTER TAKING NOTE OF PROVISIONS OF S. 11 (1)(A), HAVE HELD AS UNDER : 'HAVING REGARD TO THE PLAIN LANGUAGE OF THE ABOVE PROVISION, IT IS CLEAR THAT A CHARITABLE OR RELIGIO US TRUST IS ENTITLED TO ACCUMULATE TWENTY-FIVE PER CENT OF I TS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. FOR THE PRESENT PURPOSES, THE DONATIONS THE ASSESSEE RECEIV ED, IN THE SUM OF RS. 2,57,376, WOULD CONSTITUTE ITS PROPERTY AND IT IS ENTITLED TO ACCUMULATE TWENTY-FI VE PER CENT THEREOUT. IT IS UNCLEAR ON WHAT BASIS THE REVE NUE CONTENDED THAT IT WAS ENTITLED TO ACCUMULATE ONLY TWENTY FIVE PER CENT OF RS. 87,010. FOR THE AFORESAID REASONS, THE CIVIL APPEAL IS DISMISSED.' IT IS CLEAR FROM THE ABOVE THAT DEDUCTION OF TWENTY -FIVE PER CENT WAS HELD TO BE ALLOWABLE NOT ON TOTAL INCOME A S COMPUTED UNDER THE IT ACT. ANY AMOUNT OR EXPENDITUR E, WHICH WAS APPLICATION OF INCOME, IS NOT TO BE CONSI DERED FOR DETERMINING TWENTY FIVE PER CENT TO BE ACCUMULATED. THEIR LORDSHIPS, AS NOTED EARLIER, AFFIRMED THE DECISION OF KERALA HIGH COURT IN (1997) 141 CTR (KER) 502 : (1997) 228 ITR 620 (KER) (SUPRA) WHEREIN IT IS HELD AS UNDER : 'AT THE OUTSET, THE STATUTORY LANGUAGE OF S. 11(1)( A) OF THE IT ACT, 1961, RELATES TO THE INCOME DERIVED BY THE TRUST FROM PROPERTY. THE TRUST IS REQUIRED TO BE WH OLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, AND THE INCOM E IS EXPECTED TO HAVE RELATION TO THE EXTENT TO WHICH SU CH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. IT IS ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 12 OF 23 THEREAFTER THE STATUTORY PROVISION PROCEEDS FURTHER THAT SUCH INCOME IS NOT TO BE UNDERSTOOD TO BE IN EXCESS OF 25 PER CENT OF THE INCOME FROM SUCH PROPERTIES. IN OTHER WORDS, THE VERY LANGUAGE OF THE STATUTORY PROVISION UNDER CONSIDERATION SETS APART 25 PER CEN T OF THE INCOME FROM THE SOURCE OF PROPERTY WITH REFEREN CE TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED FOR S UCH PURPOSES, CHARITABLE OR RELIGIOUS. IN OTHER WORDS, FOR THE PURPOSE OF S. 11(1)(A) OF THE ACT, THE INCOME I N TERMS OF RELEVANCE WOULD BE THE INCOME OF THE TRUST FROM AND OUT OF WHICH 25 PER CENT IS SET APART IN ACCORDANCE WITH THE SPIRIT OF THE STATUTORY PROVISI ON.' THIS MEANS THAT, WHEN IT IS ESTABLISHED THAT TRUST IS ENTITLED TO FULL BENEFIT OF EXEMPTION UNDER S. 11(1), THE SA ID TRUST IS TO GET THE BENEFIT OF TWENTY-FIVE PER CENT AND THIS TW ENTY-FIVE PER CENT HAS TO BE UNDERSTOOD AS INCOME OF THE TRUST UN DER THE RELEVANT HEAD OF S. 11(1). IN OTHER WORDS, INCOME T HAT IS NOT TO BE INCLUDED FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME WOULD BE THE AMOUNT EXPENDED FOR PURPOSES OF TRUST IN INDIA. THEIR LORDSHIPS IN THE ABOVE CASE HAVE EMPHASIZED O N THE CLEAR AND UNAMBIGUOUS LANGUAGE OF S. 11(1)(A) AND D ECIDED THE MATTER ON THE BASIS OF THE SAME. IT HAS BEEN HE LD THAT AS PER THE STATUTORY LANGUAGE OF THE ABOVE SECTION THE INCOME WHICH IS TO BE TAKEN FOR PURPOSE OF ACCUMULATION IS THE INCOME DERIVED BY THE TRUST FROM PROPERTY. IF BOTH THE DECISIONS ARE CAREFULLY READ, IT BECOME S EVIDENT THAT ANY EXPENDITURE WHICH IS IN THE SHAPE OF APPLI CATION OF INCOME IS NOT TO BE TAKEN INTO ACCOUNT. HAVING FOUN D THAT TRUST IS ENTITLED TO EXEMPTION UNDER S. 11(1), WE A RE TO GO TO THE STAGE OF INCOME BEFORE APPLICATION THEREOF AND TAKE INTO ACCOUNT 25 PER CENT OF SUCH INCOME. THEIR LORDSHIPS HAVE POINTED THAT THE SAME HAS TO BE TAKEN ON 'COMMERCIA L' BASIS AND NOT 'TOTAL INCOME' AS COMPUTED UNDER THE IT ACT . THEIR LORDSHIPS IN THE DECIDED CASE REJECTED THE CONTENTI ON OF THE REVENUE THAT THE SUM OF RS 1,70,369 WHICH WAS SPENT AND APPLIED BY THE ASSESSEE FOR CHARITABLE PURPOSES WAS REQUIRED TO BE EXCLUDED FOR PURPOSE OF TAKING AMOUNT TO BE ACCUMULATED. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 13 OF 23 HAVING REGARD TO THE CLEAR PRONOUNCEMENT OF THEIR L ORDSHIPS OF THE SUPREME COURT, IT IS DIFFICULT TO ACCEPT THA T OUTGOINGS WHICH ARE IN THE NATURE OF APPLICATION OF INCOME AR E TO BE EXCLUDED. THE INCOME AVAILABLE TO THE ASSESSEE BEFO RE IT WAS APPLIED IS DIRECTED TO BE TAKEN AND THE SAME IN THE PRESENT CASE IS RS. 3,42,174. TWENTY FIVE PER CENT OF THE A BOVE INCOME IS TO BE ALLOWED AS A DEDUCTION. SIMILAR VIEW HAS A LSO BEEN TAKEN BY THE HONBLE MADHYA PRADESH HIGH COURT IN P ARSI ZORASTRIAN ANJUMAN TRUST VS. CIT (SUPRA). NO REASON WHATSOEVER HAS BEEN GIVEN BY THE REVENUE AUTHORITIE S FOR DEDUCTING RS. 2,17,126 IN THIS CASE FOR PURPOSES OF S. 11(1)(A). THE DECISION CITED ON BEHALF OF THE REVENUE DID NOT TAKE INTO ACCOUNT THE DECISION OF THE SUPREME COURT REFERRED TO ABOVE. THE CIRCULAR OF CBDT HAS ALSO BEEN CONSIDERED BY TH E HONBLE KERALA HIGH COURT IN ITS DECISION REFERRED TO ABOVE . ACCORDINGLY THE QUESTION REFERRED TO IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 19. THE AFORESAID DECISION CLEARLY SUPPORTS THE PLEA O F THE ASSESSEE. FOLLOWING THE SAME, WE HOLD THAT THE ACC UMULATION U/S.11(1)(A) OF THE ACT SHOULD BE ALLOWED AS CLAIME D BY THE ASSESSEE. THE RELEVANT GROUND OF APPEAL OF THE REV ENUE IS ACCORDINGLY DISMISSED. 20. IN THE RESULT, THE APPEALS BY THE REVENUE ARE DISMI SSED. 21. AS FAR AS THE APPEALS BY THE ASSESSEE ARE CONCERNED , THERE ARE BASICALLY 3 ISSUES TO BE ADJUDICATED. THE FIRS T ISSUE TO BE ADJUDICATED IS AS TO WHETHER THE EXPENDITURE INCURR ED BY THE ASSESSEE IN FOREIGN CURRENCY IS OUTSIDE INDIA FOR T HE PURPOSE OF EDUCATIONAL TOURS UNDERTAKEN BY THE STUDENTS OF THE ASSESSEE CAN BE DISALLOWED ON THE GROUND THAT THE INCOME HAS NOT BEEN APPLIED FOR CHARITABLE PURPOSES IN INDIA WITHIN THE MEANING OF SEC. 11(1) (A) OF THE ACT. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 14 OF 23 22. THE SECOND ISSUE TO BE DECIDED IS AS TO WHETHER CAP ITAL EXPENDITURE CAN BE DISALLOWED ON THE GROUND THAT TH E PAYMENT IN RESPECT OF CAPITAL EXPENDITURE HAS NOT BEEN MADE TO THE CONCERNED PERSON. 23. THE 3 RD ISSUE TO BE ADJUDICATED IS AS TO WHETHER THE AMOUN T BORROWED BY THE ASSESSEE WHICH WAS USED FOR ACQUIRI NG CAPITAL ASSET SHOULD NOT BE ALLOWED AS APPLICATION OF INCOM E FOR THE PURPOSE OF CHARITABLE PURPOSES. 24. AS FAR AS 3 RD ISSUE IS CONCERNED THE LD COUNSEL FOR THE ASSESSEE POINTED OUT THAT IN ASST. YEAR 2012-13, TH E AO HAS ALLOWED REPAYMENT OF THE AMOUNT BORROWED FOR ACQUIRING CAP ITAL ASSET AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES. HIS SUBMISSION WAS THAT IF A SIMILAR RELIEF COULD BE ALLOWED IN RESPEC T OF REPAYMENT OF AMOUNTS BORROWED IN THE YEAR IN WHICH THEY ARE REPA ID AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE THEN T HAT WOULD BE SUFFICIENT. WE ARE OF THE VIEW THAT SINCE THE AO I N ASST. YEAR 2012- 13 HAS CONSIDERED REPAYMENT OF AMOUNT BORROWED FOR ACQUIRING CAPITAL ASSET HIS APPLICATION OF INCOME FOR CHARITA BLE PURPOSE ALSO GAVE SIMILAR TREATMENT FOR THE CAPITAL EXPENDITURE INCURRED IN ASST. YEAR 2010-11 AND 2011-12 AND TREAT REPAYMENT OF LOA NS AS APPLICATION FOR CHARITABLE PURPOSES. WE HOLD AND D IRECT ACCORDINGLY. 25. AS FAR AS ISSUE 1 ST IS CONCERNED THE FACTUAL DETAILS ARE AS FOLLOWS. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 15 OF 23 IN ASST. YEAR 2010-11, THE AO INCURRED EXPENDITURE OF RS.40,62,059/- IN FOREIGN CURRENCY OUTSIDE INDIA. THE DETAILS OF WHICH ARE AS FOLLOWS:- 26. IT IS NOT IN DISPUTE THAT THE AFORESAID EXPENSES WE RE INCURRED TOWARDS EDUCATIONAL TOUR I.E VISIT BY STUDENTS TO F OREIGN UNIVERSITIES FOR PROMOTION OF EDUCATIONAL ACTIVITIES. ACCORDIN G TO THE AO U/S 11(1)(A) OF THE ACT INCOME OF CHARITABLE INSTITUTIO N SHALL NOT BE INCLUDED IN THE TOTAL INCOME ONLY TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. ACCO RDING TO THE AO SINCE THE AFORESAID EXPENDITURE WAS NOT INCURRED IN INDIA THE ASSESSEE CANNOT CLAIM THE BENEFIT OF DEDUCTION OF T HE AFORESAID EXPENDITURE AS AN APPLICATION OF INCOME. ACCORDING LY THE AFORESAID SUM WAS ADDED TO THE TOTAL INCOME OF THE ASSESEE. SIMILAR EXPENSES INCURRED NOT IN ASST. YEAR 2011-2 AND 201 2-13 WERE ALSO DISALLOWED FOR THE SAME REASON AND ADDED TO THE TOT AL INCOME OF THE ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 16 OF 23 ASSESSEE. THE DETAILS OF THE EXPENDITURE INCURRE D IN ASST. YEAR 2011-12 ARE AS FOLLOWS:- 27. THE DETAILS OF EXPENDITURE INCURRED IN ASST. YEAR 2 012-13 WAS SUM OF RS.24,50,195/-. THE BREAKUP OF THE AFORESAI D EXPENDITURE IS NOT AVAILABLE IN THE ORDER OF ASSESSMENT. 28. THE ACTION OF THE AO WAS CONFIRMED BY THE CIT(A). 29. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 30. WE HAVE HEARD THE SUBMISSIONS OF THE LD COUNSEL FOR THE ASSESSEE AND THE LD DR RELIED ON THE ORDER OF THE C IT(A). THE LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT(E) VS. OHIO UNIVERSITY, CHRIST COLLEGE (2018) 408 ITR 352 (KAR). THE AFORE SAID DECISION THE QUESTION THAT AROSE FOR CONSIDERATION WAS WHETHER T HE PAYMENTS ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 17 OF 23 MADE TO PREFESSORS OF OHIO UNIVERSITY, USA COULD BE ALLOWED AS DEDUCTION. THE HONBLE KARNATAKA HIGH COURT AFTER REFERRING TO THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF NASSC OM VS. DDIT, 130 TTJ 377 WHICH WAS LATER CONFIRMED BY THE HONBLE DE LHI HIGH COURT IN THE DECISION REPORTED IN 21 TAXMANN.COM 231(DEL. ) CAME TO THE FOLLOWING CONCLUSION AND HELD AS FOLLOWS:- 6. DEPENDING UPON THE NORMAL ACCOUNTING PRACTICES ADOPTED BY THE ASSESSEE IN ORDINARY COURSE C BUSINESS, IF A PROVISION FOR AN EXPENDITURE IS MADE IN A PARTICULAR YEAR AND THE AMOUNT IN QUESTION 'SPENT ' IN THE SUBSEQUENT PERIOD, IT CANNOT BE SAID THAT TH E AMOUNT IS NOT 'APPLIED' FOR THE SPECIFIED PURPO IN THAT RELEVANT ASSESSMENT YEAR. IN THE PRESENT CASE. THE TRIBUNAL HAS FOUND THAT THE PAYMENT MADE TO TI PROFESSORS OF OHIO UNIVERSITY, USA WHO VISITED THE CLASS ROOMS OF THE RESPONDENT - EDUCATIONAL INSTITU TION IN BANGALORE AND IMPARTED HIGHER EDUCATION TO THE STUDENTS OF THE RESPONDENT - TRUST, THE PROVISION F OR SUCH PAYMENTS TO THE OHIO UNIVERSITY WAS MADE IN THE RELEVANT YEAR AND THE REMITTANCES OR PAYMENT WA S MADE IN THE NEXT YEAR ITSELF, WHICH PAYMENTS HAVE ALSO BEEN BROUGHT TO TAXATION UNDER THE INDIAN INCO ME TAX ACT, AS OHIO UNIVERSITY, USA HAD A 'PERMANENT ESTABLISHMENT' IN INDIA AND OFFERED THE SAID RECEIP TS OF REMITTANCES FROM THE RESPONDENT - TRUST TO TAXATIO N IN INDIA. 7. THUS, NEITHER THE LIABILITY FOR PAYMENT WAS ADMITTED BY THE RESPONDENT - TRUST BY MAKING A PROVISION FOR SUCH PAYMENT IS DISPUTED BY THE REVENUE NOR THE FACT OF ACTUAL PAYMENT MADE IN THE SUBSEQUENT OR NEXT YEAR IS ALSO DISPUTED. THEREFOR E, IN FACT AND IN SUBSTANCE, THE CONDITION OF 'APPLICA TION OF THE INCOME' OF THE CHARITABLE TRUST FOR THE SPE CIFIED PURPOSE, NAMELY OF IMPARTING HIGHER EDUCATION IS SATISFIED AND THE EXEMPTION TO THE SAID CHARITABLE ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 18 OF 23 TRUST CANNOT HE DENIED ON THE ANVIL OF NON-FULFILLM ENT OF' THE SAID CONDITIONS UNDER SEC. 11(A) OF THE AC T. 31. THE HONBLE HIGH COURT ALSO HELD AS FOLLOWS:- 15. THUS, WE ARE OF THE OPINION THAT IN VIEW OF THE FINDINGS OF FACT RECORDED BY THE LEARNED TRIBUNAL THAT A PROVISION WAS MADE TO THE OHIO UNIVERSITY FOR CHARITABLE ACTIVITY BY WAY OF EDUCATION BEING IMPARTED IN INDIA AND THE FACT OF THE ACTUAL PAYMENT MADE TO THE OHIO UNIVERSITY IN THE VERY NEXT YEAR AND THAT TOO OFFERED FOR TAXATION IN INDIA BEING UNDISPUTED, NO SUCH SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR FURTHER CONSIDERATION. 32. HE ALSO DREW OUR ATTENTION TO THE DECISION OF THE H ONBLE DELHI HIGH COURT IN THE CASE OF INSTITUTE OF CHARTE RED ACCOUNTANT OF INDIA VS. DDIT WHEREIN AN IDENTICAL ISSUE TRIBUNA L HELD AS FOLLOWS:- 17. IT IS QUITE CLEAR FROM THE ABOVE PROVISIONS THAT THERE IS NO SUCH CONDITION AS BEING STATED BY THE DIT(EXEMPTION) IN SECTION 1O(23C)(IV). FURTHERMORE, SECTION 11(L)(C) IS APPLICABLE ONLY WITH REFERENCE TO THOSE TRUSTS WHICH ARE CLAIMING EXEMPTION U/S 11, AND IT IS NOT APPLICABLE TO EXEMPTION U/S 10(23C)(IV). DUE CLARIFICATION WAS GIVEN TO THE DIT(EXEMPTION) DURING THE COURSE OF PROCEEDINGS U/S 263 AS STATED ABOVE. HOWEVER, THE OBJECTION RAISED BY THE DIT(EXEMPTION) WITH REGARD TO CBDT PERMISSION IS APPLICABLE WHEN ANY EXPENDITURE IS INCURRED WHICH TENDS TO PROMOTE INTERNATIONAL WELFARE. HOWEVER, THE INSTITUTE DOES NOT HAVE ANY WELFARE NOR ANY ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 19 OF 23 EXPENDITURE HAS BEEN INCURRED FOR THAT PURPOSE. HOWEVER, THE EXPENDITURE HAS BEEN INCURRED ON OVERSEAS TRAVEL ETC. WHICH WAS FOR THE PURPOSE OF ITS OBJECT. MERE FACT THAT EXPENDITURE HAS BEEN INCURRED ON FOREIGN TRAVEL WILL NOT MEAN THAT INSTITUTE HAS INCURRED SUCH EXPENSES FOR PURPOSES WHICH ARE NOT FOR INDIA. 18. AFTER GOING THROUGH VARIOUS PROVISIONS UNDER THE CHARTERED ACCOUNTANTS ACT, WE FOUND THAT INSTITUTE HAS OBLIGATION U/S 15(2)(J) OF THE CHARTERED ACCOUNTANTS ACT 1949 TO MAINTAIN STATUS AND STANDARD OF PROFESSIONAL QUALIFICATION OF CHARTERED ACCOUNTANCY AND FOR THAT PURPOSE, IT IS NECESSARY TO OBSERVE DEVELOPMENTS TAKING PLACE IN THE WORLD. THE EXPENDITURE SO INCURRED WOULD BE FOR THE PURPOSE IN INDIA AND NOT INTERNATIONAL WELFARE AS ALLEGED BY THE DIT(EXEMPTION). FURTHERMORE, SINCE THE ASSESSEE WAS CLAIMING EXEMPTION U/S 10(23C)(IV), WHERE THERE IS NO SUCH CONDITION, THUS DIT(EXEMPTION) OTHERWISE WAS ALSO NOT JUSTIFIED IN INVOKING SECTION 11(L)(C) OF THE ACT. AS PER OUR CONSIDERED VIEW, WHETHER IT IS EXEMPTION U/S 10(23C)(IV) OR EXEMPTION U/S 11, OVERSEAS EXPENSES WILL NOT COME IN THE WAY OF ALLOWING EXEMPTION. 33. THE LD DR RELIED ON THE ORDER OF THE AO. 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS WE HA VE ALREADY SEEN UNDER THE PROVISION OF SEC. 11(1)(A) O F THE ACT EXEMPTION IS ALLOWED ONLY TO THE EXTENT INCOME OF C HARITABLE TRUST IS APPLIED TO SUCH PURPOSES IN INDIA. THE HONBLE KARN ATAKA HIGH COURT DEALING WITH AN IDENTICAL SITUATION HELD THAT WHEN TEACHING SERVICES WERE RENDERED TO ASSESSEE EDUCATIONAL TRUS T BY FACULTY ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 20 OF 23 MEMBERS OF FOREIGN UNIVERSITY AND WHEN SUCH SERVICE S WERE UTILIZED FOR THE PURPOSE OF TRUST OBJECTIVE OF IMPARTING E DUCATION IN INDIA PAYMENT MADE TO FOREIGN UNIVERSITY TOWARDS FACULTY TEACHING CHARGES WAS ALLOWABLE AS DEDUCTION. WE ARE THEREFO RE OF THE VIEW THAT IN THE LIGHT OF THE DECISION THAT HONBLE KARN ATAKA HIGH COURT THE DEDUCTION CLAIMED SHOULD BE ALLOWED. IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT APPLIED THE INCOME FOR CHARITABLE PURPOSES OUTSIDE INDIA AS BENEFICIARIES OF THE EDUCATION IMPARTED OU TSIDE INDIA WHERE THE ASSESSEES STUDENTS. ACCORDINGLY THE RELEVANT GROUNDS OF APPEAL FOR THE ASSESSEE ARE ALLOWED. 35. AS FAR AS SECOND ISSUE IS CONCERNED THE QUESTION TH AT ARISES FOR CONSIDERATION IS THAT WHEN THE ASSESSEE INCUR RED CAPITAL EXPENDITURE FOR ACQUISITION OF CAPITAL ASSETS BUT THE PAYMENT FOR ACQUISITION OF THE AFORESAID CAPITAL ASSETS WERE OU TSTANDING AND WERE NOT PAID, CAN IT BE REGARDED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. THE AO WAS OF THE VIEW THAT TH E DEDUCTION CAN BE CLAIMED ONLY ON THE BASIS OF ACTUAL PAYMENT AND NOT ON THE BASIS OF THE OUTSTANDING LIABILITY SHOWN IN THE BALANCE S HEET. THE VIEW OF THE AO WAS CONFIRMED BY THE CIT(A) AGAINST WHICH TH E ASSESSEE HAS PREFERRED PRESENT APPEAL BEFORE THE TRIBUNAL. 36. THE LD DR RELIED ON THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE CIT(A) IN UPHOLDING THE ORDER OF THE AO CAME TO THE CONCLUSION THAT UNPAID PAID LIABILITY WILL NOT AMOUNT TO APPLI CATION OF INCOME U/S 11(1)(A) OF THE ACT. 37. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSEE I S IN THE APPEAL BEFORE THE TRIBUNAL. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 21 OF 23 38. THE LD DR RELIED ON THE ORDER OF THE CIT(A). THE L D COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. OHIO UNIVERSITY, CHRIST COLLEGE (SUPRA) AND ALSO THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. TRUSTEES OF HEH, THE N IZZAMS CHARITABLE TRUST (1981) 7 TAXMANN.COM 178 (AP). TH E HONBLE A.P. HIGH COURT IN THE AFORESAID DECISION TOOK THE VIEW THAT THE WORD APPLIED USED IN SEC. 11(1)(A) SHOULD NOT BE EQUAT ED WITH THE WORD SPENT. THE COURT THEREFORE HELD THAT THE AMOUNT WHICH WAS SANCTIONED FOR USE FOR CHARITABLE PURPOSES, WHICH WAS NOT ACTUALLY SPENT IN THE RELEVANT PREVIOUS YEAR WOULD ALSO CONS TITUTE APPLICATION OF FUNDS FOR CHARITABLE PURPOSES WITHIN THE MEANING OF SEC. 11(1)(A) OF THE ACT. RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF GEM AND JEWELLERY IN RESPECT OF EXPORT PROMOTION COUNSEL VS. VI TH ITO WHEREIN IT WAS HELD THAT INCOME OF A TRUST HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES TAKING INTO ACCOUNT PROVISIONS OF THE ACT. 39. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RELEVA NT SUBMISSION AND ARE OF THE VIEW THAT THE PLEA OF THE ASSESSEE DESERVES TO BE ACCEPTED. AS THE DECISION OF THE HO NBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF NIZZAM TRUST (SUP RA) SUPPORTS THE PLEA OF THE ASSESSEE. THE LAW IS WELL SETTLED THAT THE INCOME OF A TRUST HAS TO BE COMPUTED KEEPING IN MIND COMMERCIA L PRINCIPLES AS PER THE ACCEPTED COMMERCIAL PRINCIPLES AMOUNT DUE B UT NOT PAID AND SHOULD ALSO TO TAKEN INTO CONSIDERATION FOR DET ERMINING INCOME. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 22 OF 23 40. IN VIEW OF EH ABOVE, THE RELEVANT GROUND OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWED. 41. IN THE RESULT, THE APPEAL OF THE REVENUE ARE DISMIS SED WHILE THE APPEALS BY THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN OPEN COURT ON 21 ST AUGUST, 2019 . SD/- SD/- (JASON P.BOAZ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER VICE-PRESIDENT. BANGALORE, DATED, THE 21ST AUGUST, 2019. /VMS/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTAN T REGISTRAR, ITAT, BANGALORE. ITA NOS.1514, 1515, 1730, 1731 & 1732/BANG/2016 ITA NO.137/BANG/2017 PAGE 23 OF 23 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. DICTATION NOTE ENCLOSED . 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER .