ACIT, Meerut V. M/s. Association of Management Studies, Meerut

ITA 1536/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8074 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-04-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 13-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: RAJIV SINGHAL
• Keywords: Charitable institution; Capital expenditure
• Section: 143(3); 12AA; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDIP SINGH , JM ITA NO. 1536 /DEL/201 4 : ASSTT. YEAR : 2005 - 06 ASSTT. COMMISSIONER OF INCO ME TAX, CIRCLE - 1, MEERUT VS M/S ASSOCIATION OF MANAGEMENT STUDIES, 17, MALL ROAD, MEERUT (APPELLANT) (RESPONDENT) PAN NO. A AATA7059B ITA NO. 1725/DEL/2014 : ASSTT. YEAR : 2005 - 06 M/S ASSOCIATION OF MANAGEMEN T STUDIES, 17, MALL ROAD, MEERUT VS ADDL. COMMISSIONER OF INCOME TAX, RANGE - 1, MEERUT (APPELLANT) (RESPONDENT) PAN NO. AAATA7059B ASSESSEE BY : SH. RAJIV SINGHAL, ADV. REVENUE BY : SH. K. K. JAISWAL, DR DATE OF HEARING : 18 .0 4 .201 6 DATE OF PRONOUNCE MENT : 27 .04 .201 6 ORDER PER N. K. SAINI, AM : THESE CROSS APPEALS BY THE DEPARTMENT AND THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 31.12.2013 OF LD. CIT(A), MEERUT . 2. IN TH E DEPARTMENTAL APPEAL, F OLLOWING GROUNDS HAVE BEEN RAISED: ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 2 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED IN ALLOWING THE BENEFIT OF BROUGHT FORWARD AND SET OFF LOSSES CLAIMED BY THE ASSES SEE. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS JUSTIFIED IN ALLOWING THE BENEFIT OF CARRY FORWARD OF DEFICIT OF EXPENDITURE TO THE EXTENT TO WHICH THE APPLICATION OF INCOME FOR CHARITABLE AND RE LIGIOUS PURPOSES HAS BEEN SOURCED OUT OF INCOME OF THE ASSESSEE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/OR DELETE ANY GROUND(S) OF APPEAL. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) , MEERUT, MAY BE SET ASIDE AND THAT OF THE AO RESTORED. 3. FROM THE ABOVE GROUND, IT IS GATHERED THAT THE GRIEVANCE OF THE DEPARTMENT RELATES TO THE BENEFIT OF BROUGHT FORWARD AND SET OFF LOSSES CLAIMED BY THE ASSESSEE, ALLOWED TO THE ASSESSEE. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING A LOSS OF RS.56,41,320/ - FOR THE YEAR UNDER CONSIDERATION AND BROUGHT FORWARD ED LOSS OF RS.1,41,32,428/ - . THE ASSESSEE WAS HAVING THE REGISTRATION ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 3 U/S 12AA OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND CLAIMED EXEMPTION U/S 11 OF THE ACT. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN INCOME OF RS.1,77,58,272/ - AND HAD SHOWN APPLICATION OF SUCH INCOME IN TERMS OF SECTION 11(1)(A) OF THE ACT O F RS.2,33,99,593/ - LEADING TO AN EXCESS APPLICATION OF RS.56,41,320/ - . IN THE PRECEDING YEAR ALSO THE EXCESS APPLICATION OF INCOME HAD BEEN MADE TO THE EXTENT OF RS.1,41,32,428/ - WHICH HAD BEEN CLAIMED AS BROUGHT FORWARD DEFICIENCY AVAILABLE FOR SET OFF AS APPLICATION AGAINST THE INCOME OF SUBSEQUENT YEARS. IN THE PRESENT CASE, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 20.03.2007 AT NIL INCOME AND NO BROUGHT FORWARD LOSS/DEFICIENCY WAS CONSIDERED TO BE ELIGIBLE FOR CARRY FORWARD TO THE SUBSEQUENT YEARS. 5. HOWEVER, THE LD. CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 26.06.2009 . AGAINST THE SAID ORDER, T HE DEPARTMENT PREFERRED AN APPEAL TO THE ITAT WHEREIN VIDE ORDER DATED 31.12.2009 IN ITA NO. 3726/DEL/2009, THE ISSUE WAS SET ASIDE TO THE FILE OF THE AO FOR RE - ADJUDICATION. IN THE SAID ORDER THE ITAT OBSERVED THAT NONE OF THE AUTHORITIES HAD DISCUSSED THE COMPLETE FACTS OF THE CASE. THEREAFTER, THE AO IN THE ORDER DATED 14.12.2010 ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 4 PASSED U/S 254/143(3) OF THE A CT HAD GIVEN THE WORKING OF THE LOSS/DEFICIENCY FOR THE YEAR UNDER CONSIDERATION FOR THE PURPOSES OF SECTION 11(1) OF THE ACT. HOWEVER, HE HELD THAT SINCE THE AMOUNT CLAIMED AS APPLICATION OF INCOME WAS IN THE NATURE OF CAPITAL EXPENDITURE, THE LOSS COULD NO T BE ALLOWED TO BE CARRY FORWARDED . AGAINST THE SAID ORDER, TH E ASSESSEE PREFERRED AN APPEAL TO THE LD. CIT(A) WHO ALLOW ED THE BENEFIT OF CARRY FORWARD TO THE ASSESSEE. 6 . NOW THE DEPARTMENT IS IN APPEAL. DURING COURSE OF HEARING THE LD. COUNSEL FOR THE A SSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 27 .07.2015 IN THE CASE OF DEVENDER KUMAR GARG CHARITABLE TRUST & OTHERS VS ACIT, CIRCLE - 1, MEERUT IN ITA NO. 3030/DEL/2015 & OTHER S FOR THE ASSESSMENT Y EAR 2010 - 11 WHEREIN BY FOLLOWING THE EARLIER ORDER DATED 28.03.2015 IN ITA NO.4118/DEL/2013 FOR THE ASSESSMENT YEAR 2008 - 09 IN THE SAID ASSESSEE S OWN CASE, T HE AO WAS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD ED LOSS TO BE ADJUSTED AGAI NST THE CURRENT YEAR AND THE REMAINING AMOUNT TO BE CARRIED FORWARD TO BE SET OFF AGAINST SURPLUS OF NEXT YEAR S INCOME. THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 6 & 7 OF THE AFORESAID ORDER DATED 27.07.2015 WHICH READ AS UNDER: ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 5 6. I HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS BEEN DECIDED IN ASSESSEE S FAVOUR VIDE ORDER DATED 20.03.2015 IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 IN ITA NO.4118/DEL/2013 BY THE ITAT, B BENCH, NEW DELHI, WHEREIN THE UNDERSIGNED IS CO - SIGNATORY. IN THE SAID ORDER RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 6 AND 7 WHICH READ AS UNDER: - 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING THE BENEFIT OF CARRIED FORWARD OF LOSS. THE ASSESSING OFFICER HELD THAT THE LOSS SUFFERED WAS ON ACCOUNT OF CAPITAL EXPENDI TURE AND AS SUCH SAME CANNOT BE ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS. THIS ISSUE ACCORDING TO US IS NO LONGER RES INTEGRA. THE DELHI BENCH OF THE TRIBU NAL IN THE CASE OF ADDL. CIT VS M/S CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY (SUPRA) HAD HE LD THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE LOSSES AGAINST THE SUBSEQUENT YEAR'S SURPLUS. THE RELEVANT FINDINGS OF THE COORDINATE BENCH ORDER READS AS FOLLOWS: - '5.......THE CIT(A) HAS MADE A REFERENCE IN THOSE ASSESSMENT YEARS TO SECTION 11(4) OF THE INCOME - TAX ACT IN THE CASE OF CIT VS. INSTITUTE OF BANKING REPORTED IN 264 ITR PAGE 110 AN ARGUMENT WAS RAISED BEFORE THE HON'BLE MUMBAI HIGH COURT BY THE REVENUE THAT IN THE ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 6 CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF CONTAI NED CODE MENTIONED IN SECTION 11 TO 13 OF INCOME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS' U/S 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT ACCORDING TO THE RE VENUE, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST THE INCOME OF SUBSEQUENT YEARS. THIS ARGUMENT WAS REJECTED BY THE BOMBAY HIGH COURT AND IT HAS BEEN HELD THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE RELIGIOUS PURPOSE IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SU BSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF THE INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSE. THE LEARNED CIT(A) HAS FOLLOWED THIS DECISION APART FROM OTHERS REFERRED ABOVE......' 7. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE HOLD THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE TO CARRY FORWARD THE LOSSES OF THE CURRENT YEAR AGAINST SURPLUS OF THE SUBSEQUENT YEAR. IT IS ORDERED ACCORDINGLY. 7. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 20. 03.2015 FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE S OWN CASE, THE IMPUGNED ORDER IS SET ASIDE AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR CARRIED FORWARD LOSS ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 7 TO BE ADJUSTED AGAINST THE CURRENT YEAR AND THE REMAINING AMOUNT TO BE CARRIE D FORWARD TO BE SET OFF AGAINST SURPLUS OF NEXT YEAR S INCOME. 7 . SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE AFORESAID REFERRED TO CASE OF DEVENDER KUMAR GARG VS ACIT, CIRCLE - 1, MEERUT IN ITA NO. 3030/DEL/2015 FOR THE ASSESSMENT YEAR 2010 - 11. SO, RESPECTFULLY FOLLOWING THE SAID ORDER DATED 27.07.2015, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 8 . NOW WE WILL DEAL WITH THE APPEAL OF THE AS SESSEE IN ITA NO. 1725/DEL/2015. F OLLOWING GROUNDS HAVE BEEN RAISED IN THIS AP PEAL: 1. THAT THE LD. CIT(A) HAS ERRED FIRSTLY IN RENAMING THE CARRY FORWARD OF SURPLUS APPLICATION OF FUNDS TO BE DEFICIT OF EXPENDITURE. TO THIS EXTENT, THE RELIEF ALLOWED DESERVES TO BE CORRECTED. 2. THAT THE LD. CIT(A) HAS ERRED IN RESTRICTING THE C ARRY FORWARD OF APPLICATION OF INCOME MINUS LOANS, ADVANCES OR VOLUNTARY DONATIONS WHEREAS THE SAME SHOULD BE CALCULATED AND ALLOWED TO BE CARRIED FORWARD IN TOTALITY AS CLAIMED. 9 . DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THERE WAS MISTAKE IN THE WORKING GIVEN BY THE AO IN THE COMPUTATION OF INCOME AND IN ITA NO . 1536 /DE L/2014 ASSOCIATION OF MANAGEMENT STUDIES 8 RESTRICTING THE CARRY FORWARD OF APPLICATION OF INCOME WHICH HAS ALSO NOT BEEN CONSIDERED AND APPRECIATED BY THE LD. CIT(A) IN RIGHT PROSPECTIVE . HE REQUESTED THAT A DIRECTION MAY BE GIVEN TO THE AO TO CORRECT THE MISTAKE IN THE CALCULATION MADE IN THE ASSESSMENT ORDER . THE LD. DR DID NOT OBJECT IF THE DIRECTION IS GIVEN TO THE AO AS DESIRED BY THE LD. COUNSEL FOR THE ASSESSEE. IN VIEW OF THE ABOVE, WE DIRECT THE AO TO VERIFY FROM THE RECORD AND CORRECT THE MISTAKE, IF ANY, IN THE CALCULATION DONE BY HIM. 10 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSED AND THAT OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ( ORDER PRON OUNCED IN THE COURT ON 27 /04 / 201 6 ) SD/ - SD/ - ( KULDIP SINGH ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 /04 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR