Deputy Commissioner of Income Tax (Exemption) Circle-1 , Bangalore V. M/s Swami Vivekananda Youth Movement , Mysuru

ITA 1550/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5562 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 13-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 12A; 12; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SHRI JASON P BOAZ, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.1550/BANG/2017 (ASST. YEAR - 2013- 14) THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTION), CIRCLE-1, BENGALURU. . APPELLANT VS. M/S SWAMI VIVEKANANDA YOUTH MOVEMENT, NO.CA-2, KIADB HOUSING AREA, RING ROAD, HEBBAL, MYSURU. . RESPONDENT APPELLANT BY : SHRI RAMESH KUMAR, ADDL. CIT RESPONDENT BY : NONE DATE OF HEARING : 7-2-2018 DATE OF PRONOUNCEMENT : 9-2-2018 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 14, LTU, BANGALORE DATED 28/4/2017 FOR ASS T. YEAR 2013-14. 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT F OR DISPOSAL OF THIS APPEAL ARE AS UNDER:- 2.1 THE ASSESSEE TRUST, REGISTERED U/S 12A OF THE I NCOME-TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 11/9/198 5, FIELD ITS RETURN OF ITA NO.1 550/B/17 2 INCOME FOR ASST. YEAR 2013-14 ON 22/8/2013 DECLARIN G NIL INCOME AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT. THE RE TURN WAS PROCESSED U/S 143(1) OF THE ACT AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT VIDE ORDER DATED 11/6/2015 WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT NIL, BUT AFTER (I) DISALLOWANCE OF DEPRECIATION AND (II) DISALLOWANCE OF CLAIM FOR CARRY FORWARD OF EXCESS EXPENDITURE FO R ADJUSTMENT AGAINST INCOME OF YEARS WHERE SURPLUS INCOME WOULD BE AVAILABLE, BY HOLDING THAT EXEMPTION U/S 11(1)(A) OF THE ACT IS A LLOWABLE ONLY FOR APPLICATION OF THE CURRENT YEARS INCOME. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT , DATED 11 /6/2015 FOR ASST. YEAR 2013-14, THE ASSESSEE FILED AN APPEAL BE FORE THE CIT(A)-14, LTU, BANGALORE. THE LD CIT(A) DISPOSED OFF THE APP EAL VIDE THE IMPUGNED ORDER DATED 28/4/2017 ALLOWING THE ASSESSE E PARTIAL RELIEF BY (I) ALLOWING THE ASSESSEES CLAIM FOR CARRY FORW ARD OF EXCESS EXPENDITURE FOR APPLICATION AGAINST SURPLUS INCOME OF SUBSEQUENT YEARS (II) UPHOLDING THE AOS DISALLOWANCE OF THE A SSESSEEES CLAIM FOR DEPRECIATION. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-14, LTU, BANGALORE DATED 28/4/2017 FOR ASST. YEAR 2013-14, H AS FILED THIS APPEAL BEFORE THE TRIBUNAL, RAISING THE FOLLOWING GROUNDS THEREIN:- A) THE CIT (A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW SET-OFF OF EXCESS EXPENDITURE/APPL ICATION PERTAINING TO CURRENT ASST. YEAR AND EARLIER YEARS AGAINST THE INCOME OF THE FUTURE ASST. YEAR WITHOUT APPRECI ATING ITA NO.1 550/B/17 3 THE FACT THAT AS PER THE SCHEME OF TAXATION OF CHAR ITABLE OR RELIGIOUS TRUST/INSTITUTION AS CODIFIED U/S.11,1 2 AND 13, IS NO PROVISION FOR COMPUTING LOSS FROM PROPERTY HE LD UNDER TRUST/INSTITUTION ON ACCOUNT OF EXCESS APPLIC ATION OF INCOME/FUNDS OF THE TRUST. B) THE CIT (A) HAS FAILED TO APPRECIATE THE FACT TH AT THE NORMAL COMPUTATION OF INCOME UNDER RESPECTIVE HEADS AS ENVISAGED U/S 15 TO 59 ARE NOT APPLICABLE TO THE COMPUTATION OF INCOME IN RESPECT OF CHARITABLE TRUST/INSTITUTION FOR THE PURPOSE OF CLAIMING EXEMP TION UNDER SEC.11, 12 AND 13 AND, THEREFORE, THE PROVISI ONS RELATING SET-OFF OF LOSS FROM ONE SOURCE AGAINST TH E INCOME FROM ANOTHER SOURCE, SET-OFF OF I FROM ONE H EAD AGAINST INCOME FROM ANOTHER HEAD AND CARRY FORWARD AND SET-OFF OF LOSS AGAINST THE INCOME OF SUBSEQUEN T YEARS AS ENVISAGED U/S 70 TO 79 ARE ALSO NOT APPLICABLE T O THE CHARITABLE TRUSTS/INSTITUTIONS. C) THE CIT (A) HAS FAILED TO DISCUSS THE ISSUE IN DETAIL BRINGING OUT THE FACTS AND APPLYING THE RELEVANT PROVISIONS OF THE ACT, BUT CAME TO A CONCLUSION THA T EXCESS EXPENDITURE/EXCESS APPLICATION SHALL BE ALLO WED TO BE CARRIED FORWARD AND SET-OFF AGAINST THE INCOME O F THE FUTURE ASSESSMENT YEARS AND, THEREBY, RENDERING THE ORDER PERVERSE. ITA NO.1 550/B/17 4 3.2 GROUND NO.1(A)( TO (C) CARRY FORWARD OF EXCES S EXPENDITURE OF RS.98,87,901/- FOR ADJUSTMENT AGAINST INCOME OF SUBSEQUENT YEARS 3.2.1 THE LD DR SUBMITTED THAT CARRY FORWARD OF EXC ESS EXPENDITURE FOR APPLICATION AGAINST INCOME IN SUBSEQUENT YEARS IS NOT PERMISSIBLE SINCE THERE IS NO SPECIFIC PROVISION IN THIS REGARD IN EITHER SECTIONS 11 AND 13 OF THE ACT WHICH ARE IN RESPECT OF ASSESSMEN T OF TRUSTS AND, THEREFORE, CONTENDED THAT ASSESSEES CLAIM BE REJEC TED. STRONG SUPPORT WAS PLACED TO THE ORDERS OF THE A.O ON THIS ISSUE. 3.3 ACCORDING TO THE LD AR FOR THE ASSESSEE, THE AS SESSEE IS ENTITLED TO CARRY FORWARD THE EXCESS/EXPENDITURE FOR APPLICA TION AGAINST SURPLUS INCOME OF SUBSEQUENT YEARS. IT IS SUBMITTED THAT T HE SAID ISSUE IS COVERED BY VARIOUS DECISIONS OF THE CO-ORDINATE BE NCH OF THIS TRIBUNAL IN THE FOLLOWING CASES : (I) ACIT VS. CITY HOSPITAL CHARITABLE TRUST (2015) 42 ITR (TRIB) 583, BANGALORE (II) DDIT VS. JYOTHI CHARITABLE TRUST (60 TAXMANN. COM 165) (III) SHRADDHA TRUST (ITA NO.899/BANG/2016 DATED 7 /4/2017; (IV) DCIT VS. MANIPAL ACADEMY OF HIGHER EDUCATION (2015) 44 ITR (TRIB) 18 (BANG) 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. WE FIND THAT THE ISSUE BEFOR E US OF CARRY FORWARD OF EXCESS EXPENDITURE FOR ADJUSTMENT AGAINS T INCOME OF SUBSEQUENT YEARS IS COVERED BY THE DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN THE CASE OF JYOTHI CHAR ITABLE TRUST (60 TAXMANN.COM 165) AND THE CASE OF ITO (EXEMPTION) VS . SHRADDHA TRUST IN ITA NO.899/BANG/2016 DATED 7/4/2017. IN T HE CASE OF ITA NO.1 550/B/17 5 SHRADDHA TRUST (SUPRA) THE CO-ORDINATE BENCH AT PAR A 8 OF ITS ORDER HAS HELD AS UNDER:- 8. THE FINAL GROUNDS OF APPEAL RELATES TO CARRY FORWARD OF EXCESS APPLICATION OF INCOME TO SUBSEQUE NT YEARS THIS ISSUE IS COVERED AGAINST THE REVENUE BY CO- ORDINATE BENCH OF TRIBUNAL IN THE CASE OF DEPUTY DI RECTOR OF INCOME-TAX VS. JYOTHY CHARITABLE TRUST (60 TAXMA NN.COM 165). THE RELEVANT PART OF THE ORDER IS REPRODUCED BELOW: 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 PURPOSE ONLY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. THE APPLICATION FOR CHARITABLE PURPOSES AS CONTEMPLATED IN SECTION 1 1(L)(A) TAKES PLACE IN TH E YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. HENCE, EVEN IF THE EXPENSES FOR SUCH PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEARS AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF SUCH SUBSEQUENT YEAR CAN HE SAID TO BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES IN THE YEAR IN WHICH SUCH ADJUSTMENT TAKES PLACE. IN OTHER WORDS, THE SET-OFF OF EXCESS OF EXPENDITURE INCURRED OVER ITA NO.1 550/B/17 6 THE INCOME. OF EARLIER YEARS AGAINST THE INCOME OF A LATER YEAR WILL: AMOUNT TO APPLICATION OF INCOME OF SUCH LATER YEAR. THE ABOVE IS THE POSITION OF LA W AS HELD IN THE CASE OF CIT V. MAHARANA OF MEWAR CHARITABLE FOUNDATION [1987] 164 ITR 439/[1986] 29 TAXMANN 476 (RAJ) AND CIT VS. PLOT SWETAMBER MARLI PUJAK JAIN MANDAL [1995] 211 ITR 293 (GUJ.). IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION [2003] 264 ITR 110/131 TAXMAN 386 (BOM.) IT WAS HELD THAT IN CASE OF CHARITABLE TRUST WHOSE INCOME IS EXEMPT UNDER S. 11, EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST INCOME AT SUBSEQUENT YEARS AND SUCH ADJUSTMENT WOULD BE APPLICATION OF INCOME FOR SUBSEQUENT YEARS AND THAT DEPRECIATION IS ALLOWABLE ON THE ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER 11 IN PAST YEARS. IN GOVINDU NAICKCR ESTATE V. ASST. DIT [2001] 248 ITR 368/[1999] 105 TAXMAN 719 (MAD), THE HON'BLE MADRAS HIGH COURT HELD THAT THE INCOME OF THE TRUST HAS TO BE ARRIVED AT HAVING DUE REGARD TO THE COMMERCIAL PRINCIPLES, THAT S. II IS A BENEVOLENT PROVISION, AND THAT THE EXPENDITURE INCURRED ON RELIGIOUS OR CHARITABLE PURPOSES IN EARLIER YEAR OR YEARS CAN BE ADJUSTED ITA NO.1 550/B/17 7 AGAINST THE INCOME OF THE SUBSEQUENT EAR. THE PRINCIPLE THAT THE LOSS INCURRED UNDER ONE HEAD CAN ONLY BE SET OFF AGAINST THE INCOME FROM THE SAME HEAD IS NOT OF ANY RELEVANCE, IF THE EXPENDITURE INCURRED WAS FOR RELIGIOUS OR CHARITABLE PURPOSES, AND THE EXPENDITURE ADJUSTED AGAINST THE INCOME OF THE TRUST IN A SUBSEQUENT YEAR, WOULD NOT AMOUNT TO AN INCIDENCE OF LOSS OF AN EARLIER YEAR BEING SET O FF AGAINST THE PROFIT OF A SUBSEQUENT YEAR. THE OBJECT OF THE RELIGIOUS AND CHARITABLE TRUST CAN ONLY BE ACHIEVED BY INCURRING EXPENDITURE AND IN ORDER TO INCUR THAT EXPENDITURE, THE TRUST SHOULD HAVE AN INCOME SO LONG AS THE EXPENDITURE INCURRED IS ON RELIGIOUS OR CHARITABLE PURPOSES, IT IS THE EXPENDITURE PROPERLY INCURRED BY THE TRUST, AND THE INCOME FROM OUT OF WHICH 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 INCURRED EXPENDITURE ON RELIGIOUS AND CHARITABLE PURPOSES FROM THE INCOME OF THE SUBSEQUENT YEAR, EVEN THOUGH THE ACTUAL EXPENDITURE WAS IN THE EARLIER YEARS, IF IN THE BOOKS OF ACCOUNT OF THE TRUST SUCH EARLIER EXPENDITURE HAD BEEN SET OFF AGAINST THE INCOME OF ITA NO.1 550/B/17 8 THE SUBSEQUENT YEAR. THE EXPENDITURE THAT CAN BE SO ADJUSTED CAN ONLY BE EXPENDITURE ON RELIGIOUS- AND CHARITABLE PURPOSES AND NO OTHER. THE HIGH COURT RELIED ON THE DECISION IN THE CASE OF SOCIETY OF SISTERS OF ST. ANNE (SUPRA ).' RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE A BOVE DECISION WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVEN UE. 3.4.2 FOLLOWING THE DECISION OF THE CO-ORDINATE BEN CH IN THE CASE OF SHRADDHA TRUST IN ITA NO.899/BANG/2016 DATED 7/4/20 17 (SUPRA), WE DISMISS THE GROUND NO.1(A) TO (C) RAISED BY THE RE VENUE AND UPHOLD THE ORDER OF THE LD CIT(A) IN DIRECTING THE AO TO ALLOW CARRY FORWARD OF EXCESS EXPENDITURE FOR ADJUSTMENT AGAINST INCOME OF SUBSEQUENT YEARS. 4. IN THE RESULT, REVENUES APPEAL FOR ASST. YEAR 2013-14 IS DISMISSED, ORDER PRONOUNCED IN THE OPEN COURT ON 9TH FEBRUARY, 2018 . SD/- SD/- (LALIET KUMAR) ( JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE DATED : 9/2/2018 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETAR Y, ITAT, BANGALORE.