The Dy. CIT (Exemptions), Circle-2, Ahmedabad V. M/s. Kasturben Jagjivanbhai Bhalodia Charitable Trust, Rajkot

ITA 1545/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5865 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 22-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; TDS
• Section: 143(3); 40(a)(ia); 11

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1545/AHD/2017 ( ASSESSMENT YEAR : 2013-14) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS) CIRCLE-2, AHMEDABAD 2 ND FLOOR, NATURE VIEW BUILDING, OPP: H. K. HOUSE, ASHRAM ROAD, AHMEDABAD 380009 / VS. M/S. KASTURBEN JAGJIVANBHAI BHALODIA CHARITABLE TRUST., DWARKADHISH COMPLEX, TAGORE ROAD, VIRANI CHOWK, RAJKOT 360 002 ./ ./ PAN/GIR NO. : AABTK7076P ( APPELLANT ) .. ( / RESPONDENT ) & ./ I.T.A. NO. 1546/AHD/2017 ( ASSESSMENT YEAR : 2013-14) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS) CIRCLE-2, AHMEDABAD 2 ND FLOOR, NATURE VIEW BUILDING, OPP: H. K. HOUSE, ASHRAM ROAD, AHMEDABAD 380009 / VS. PRABHUDAS VALJIBHAI PATEL SMARAK TRUST., C/O S. N. K. SCHOOL, UNIVERSITY ROAD, RAJKOT 360 005 ./ ./ PAN/GIR NO. : AAATP3940L ( APPELLANT ) .. ( / RESPONDENT ) & ./ I.T.A. NO. 1547/AHD/2017 ( ASSESSMENT YEAR : 2013-14) DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTIONS) CIRCLE-2, AHMEDABAD / VS. LANCER ARMY SCHOOL SOCIETY, G-5, ANAND MAHAL ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 2 - 2 ND FLOOR, NATURE VIEW BUILDING, OPP: H. K. HOUSE, ASHRAM ROAD, AHMEDABAD 380009 APARTMENT, NEW RANDER ROAD, SURAT - 395009 ./ ./ PAN/GIR NO. : AAATL1730A ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VINOD TANWANI, SR. D.R. / RESPONDENT BY : SHRI PRAKASH R. UDESHI, A.R. / WRITTEN SUBMISSION DATE OF HEARING 29/03/2019 !'# / DATE OF PRONOUNCEMENT 30/04/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED THREE APPEALS HAVE BEEN FILED AT THE INSTANCE OF THE REVENUE IN CASE OF THREE DIFFERENT ASSESSEES AG AINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-9, AHMEDAB AD (CIT(A) IN SHORT), DATED 04.04.2017, 05.04.2017 & 03.04.201 7 ARISING IN THE ASSESSMENT ORDER DATED 28.01.2016, 28.01.2016 & 15. 02.2016 RESPECTIVELY PASSED BY THE ASSESSING OFFICER (AO) U NDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 20 13-14. ITA NO. 1545/AHD/2017 (M/S. KASTURBEN JAGJIVANBHAI BHALODIA) 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO ALLOW THE CARRY FORWARD OF DEFICIT OF RS.66,41,6 91/- WHILE THERE IS NO PROVISION IN INCOME-TAX ACT TO CARRY FORWARD THE EXCESS EXPENDITURE INCURRED BY THE TRUST DURING THE YEAR A ND SET OFF IT AGAINST THE INCOME OF SUBSEQUENT YEAR. 3. THE ASSESSEE IS A CHARITABLE TRUST ENGAGED IN ED UCATION SERVICES. THE RETURN FILED BY THE ASSESSEE TRUST WAS SUBJECTE D TO SCRUTINY ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 3 - ASSESSMENT FOR THE AY 2013-14 IN QUESTION. IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE AO OBSERVED THAT THE ASSES SEE TRUST HAS SHOWN INCOME OF RS.5,24,91,569/- AND EXPENSES OF RS .5,91,33,260/- IN THE RETURN OF INCOME. IT WAS THUS FOUND THAT THE N ET RESULT OF THE ABOVE INCOME AND EXPENSES WORKS OUT TO DEFICIT OF RS.66 ,41,691/- WHICH WAS CLAIMED TO BE CARRIED FORWARD IN THE SUBSEQUENT YEAR FOR ITS UTILIZATION AS APPLICATION OF INCOME IN THE SUBSEQU ENT YEAR. THE AO DISALLOWED THE AFORESAID CARRY FORWARD OF DEFICIT I .E. EXCESS APPLICATION DURING THE YEAR TO THE SUBSEQUENT YEAR ON THE GROUND THAT SECTION 11 OF THE ACT DOES NOT PROVIDE FOR SET OFF OF EXCESS EXPENDITURE INCURRED DURING THE YEAR AGAINST THE IN COME OF THE LATTER YEARS. 4. AGGRIEVED BY THE DENIAL OF CARRY FORWARD OF EXCE SS EXPENDITURE (EXCESS APPLICATION OF INCOME) OVER INCOME, THE ASS ESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. THE CIT(A) FOUND MERIT IN THE CLAIM OF CARRY FOR WARD OF EXCESS EXPENDITURE AND CONSEQUENTLY REVERSED THE ACTION OF THE AO. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS, CASE LAW RELIED UPON AND THE OBSERVATIONS MADE BY THE A.O. IN THE A SSESSMENT ORDER. THE APPELLANT HAS RELIED UPON THE ORDER OF JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS SHRI PLOT SHWETARNBAR MURTIPUJAK JAI N MANDAL 211 ITR 293(GUJ.) AND CIT V/S. SACRED HEART CHURCH 278 ITR 180. HON'BLE GUJARAT HIGH COURT IN THE CASE OF SHRI PLOT SHWETAM BAR MURTIPUJAK JAIN MANDAL HAS HELD AS FOLLOWS ;- 'A BARE PERUSAL OF SECTION 11 OF THE INCOME-TAX ACT , 1961, SHOWS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCO ME IS APPLIED TO SUCH PURPOSES IN INDIA IS TO BE EXCLUDED FOR THE PURPOSE S OF COMPUTING THE INCOME OF THE TRUST FOR THE PURPOSE OF ASSESSMENT T HERE ARE NO WORDS OF LIMITATION IN THIS SECTION PROVIDING THAT THE INCOM E SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY I N THE YEAR IN WHICH THE INCOME HAD ARISEN, THE WORD 'APPLY' MEANS 'TO PUT T O USE' OR 'TO TURN TO USE' OR 'TO MAKE USE' OR 'TO PUT PRACTICAL USE'. HA VING REGARD TO THE PROVISIONS OF SECTION 11 OF THE ACT, IT IS CLEAR TH AT WHEN THE INCOME OF A ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 4 - TRUST IS USED OR PUT TO USE TO MEET THE EXPENSES IN CURRED FOR RELIGIOUS OR CHARITABLE PURPOSES, IT IS APPLIED FOR CHARITABLE O R RELIGIOUS PURPOSES. THE APPLICATION OF THE INCOME FOR CHARITABLE OR REL IGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED T O MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. IN O THER WORDS, EVEN IF EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED FOR THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGA INST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAI D TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR I N WHICH THE EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ADJUSTED. THERE IS NOTHING IN THE LANGUAGE OF SECTION 11(1)(A) OF T HE ACT TO INDICATE THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZATION OF SU CH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER YEAR, WOULD NOT AMOU NT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. INCOME DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL P RINCIPLES AND IF COMMERCIAL PRINCIPLES FOR DETERMINING THE INCOME AR E APPLIED, IT IS BUT NATURAL THAT THE ADJUSTMENT OF THE EXPENSES INCURRE D BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YE AR AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAV E TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE A ND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BE EN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SE CTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRU ST UNDER SECTION 11 (1) (A).' 4.3 I AGREE WITH THE CONTENTION OF THE APPELLANT AS WELL AS THE RELIANCE PLACED ON THE DECISION OF JURISDICTIONAL GUJARAT HI GH COURT IN THE CASE OF CIT VS SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL (SUPRA) AND HEREBY DIRECT THE A.O TO ALLOW THE CARRY FORWARD OF DEFICI T OF RS.66,41,691/- AGAINST FUTURE INCOME. ACCORDINGLY, GROUND OF APPEA L NO.1 RAISED BY THE APPELLANT IS ALLOWED. 6. FURTHER AGGRIEVED BY THE AFORESAID ACTION OF THE CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED DR FOR THE REVENUE RELIED UPON THE O RDER OF THE AO WHILE THE LEARNED AR FOR THE ASSESSEE RELIED UPON T HE ORDER OF CIT(A) AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS IN THIS REGARD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE SOLITARY QUESTION THAT ARISES FOR ADJUDICATION WHET HER THE TRUST HAS INCURRED DEFICIT DUE TO EXCESS SPENDING ON THE OBJE CT OF THE TRUST DURING THE PARTICULAR YEAR AND WHETHER SUCH PAST DE FICIT SHOULD BE ALLOWED TO BE SET OFF AGAINST THE SURPLUS MADE BY T HE ASSESSEE IN THE SUBSEQUENT YEAR. THE ISSUE IS NO LONGER RES INTEGRA. THE HONBLE ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 5 - GUJARAT HIGH COURT IN CIT VS. SHRI PLOT SHWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 0293 (GUJ) HAS RENDERED DECIS ION FAVOURABLE TO THE ASSESSEE ON THE VERY ISSUE. THE HONBLE GUJ ARAT HIGH COURT HAS HELD THAT THERE IS NOTHING IN THE LANGUAGE OF SECTI ON 11(1)(A) OF THE ACT TO INDICATE THAT THE INCOME FROM TRUST PROPERTY SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS TRUSTS ONLY IN THE YEAR IN WHICH SUCH INCOME HAS ARISEN. THE EXPENDITURE INCURRED IN THE EARLIER YEAR CAN BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UT ILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER Y EAR WOULD AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELI GIOUS TRUSTS. THE HONBLE GUJARAT HIGH COURT FURTHER HELD THAT INCOME DERIVED FROM TRUST PROPERTY HAS TO BE COMPUTED ON COMMERCIAL PRI NCIPLES AND CONSEQUENTLY DEFICIT ARISING OUT OF EXPENDITURE OVE R 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 CHARITA BLE FOUNDATION (1987) 164 ITR 439 (RAJ) AND CIT VS. MATRISEVA TRUS T (2000) 242 ITR 20 (MAD). HENCE, THE CIT(A) IN OUR VIEW HAS CORREC TLY APPLIED THE LAW AS EVOLVED BY THE JUDICIAL PRECEDENTS. IN THE ABSENCE OF ANY INFIRMITY IN THE ORDER OF THE CIT(A), WE DECLINE TO INTERFERE THEREWITH. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ITA NO. 1546/AHD/2017 (PRABHUDAS VALJIBHAI PATEL SM ARAK TRUST) 10. THE GROUND OF APPEAL RAISED BY THE REVENUE READ S AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN DIRECTING THE A.O. T O ALLOW THE CARRY FORWARD OF DEFICIT OF RS.2,72,31,546/- WHILE THERE IS NO PROVISION IN INCOME-TAX ACT TO CARRY FORWARD THE EX CESS EXPENDITURE INCURRED BY THE TRUST DURING THE YEAR A ND SET OFF IT AGAINST THE FUTURE INCOME. ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 6 - 11. THE ISSUE INVOLVED IN CAPTIONED APPEAL IS IDENT ICAL TO ITA NO.1545/AHD/2017. IN PARITY, WE DO NOT SEE ANY MERI T IN THE CONTROVERSY RAISED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO. 1547/AHD/2017 (LANCER ARMY SCHOOL SOCIETY) 13. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER: I. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.3,26,272 MADE U/S. 40(A)(IA) OF THE ACT AND C ONSIDERING THAT THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT MADE TO RELIANCE CAPITAL LTD., WHICH IS NON -BANKING FINANCE INSTITUTION. II. THE LD.CIT(A) HAS FURTHER ERRED IN DIRECTING TH E A.O. TO ALLOW THE CARRY FORWARD OF DEFICIT OF RS.84,73,737/- WHILE TH ERE IS NO PROVISION IN INCOME-TAX ACT TO CARRY FORWARD THE EX CESS EXPENDITURE INCURRED BY THE TRUST DURING THE YEAR AND SET OFF I T AGAINST THE INCOME OF SUBSEQUENT YEAR. 14. GROUND NO.1 CONCERNS DISALLOWANCE OF RS.3,26,27 2/- TOWARDS INTEREST ON LOAN TAKEN FOR VEHICLES FROM RELIANCE C APITAL LTD. BY RESORTING TO SECTION 40(A)(IA) OF THE ACT ON THE GR OUND THAT THE ASSESSEE WAS UNDER STATUTORY OBLIGATION TO DEDUCT T DS FROM INTEREST PAYMENT MADE TO ABOVE COMPANY IN WHICH THE ASSESSEE HAS FAILED. 15. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEA RNED AR FOR THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 4 0(A)(IA) OF THE ACT ARE APPLICABLE ONLY FOR COMPUTING BUSINESS INCOME A ND THE SAME IS NOT APPLICABLE TO ASSESSEE BEING A CHARITABLE TRUST IN VIEW OF THE DECISION OF THE CO-ORDINATE BENCH IN MAHATMA GANDHI SEVA MAN DIR VS. DDIT (EXEMPTION) (2012) 52 SOT 26 (MUM-TRIB.). THE LEAR NED AR ACCORDINGLY SUBMITTED THAT INTERFERENCE WITH THE OR DER OF THE CIT(A) IS CALLED FOR. 16. IN VIEW OF THE ISSUE ALREADY LOOKED INTO BY THE CO-ORDINATE BENCH IN MAHATMA GANDHI SEVA MANDIR (SUPRA), WE DO NOT SE E ANY REASON TO ITA NOS. 1545 TO 1547/AHD/17 [M/S. KASTURBEN J. BHA LODIA CHARITABLE TRUST & 2 ORS.] A.Y. 2013-14 - 7 - INTERFERE WITH THE ORDER OF THE CIT(A). THE CIT(A) HAS RIGHTLY HELD THAT SECTION 40(A)(IA) OF THE ACT DENYING DEDUCTION OF EXPENDITURE ON THE GROUND OF NON-DEDUCTION OF TDS IS NOT APPLICABL E IN THE CASE OF CHARITABLE TRUST OR INSTITUTION WHERE INCOME AND EX PENDITURE IS COMPUTED IN TERMS OF SECTION 11 OF THE ACT. GROUND NO. 1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 17. GROUND NO.2 IS IDENTICAL TO THE APPEAL OF THE R EVENUE IN ITA NOS. 1545 & 1546/AHD/2017. IN PARITY, WE DO NOT SE E ANY MERIT IN THE CONTROVERSY RAISED BY THE REVENUE. ACCORDINGLY, GR OUND NO.2 OF THE REVENUES APPEAL IS DISMISSED. 18. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 19. IN THE COMBINED RESULT, ALL THREE REVENUES APP EALS ARE DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 30/04/2019 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 30/04/2019