Foundation for Indian Sporting Talent (FIST), Bangalore V. Income Tax Officer (Exemptions), Ward-1, Bagalore

ITA 1711/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5318 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 21-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 143(3); 12A; 32; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO S . 1665 & 1666/BANG/2017 ASSESSMENT YEAR S : 2011 - 12 & 2012 - 13 THE INCOME TAX OFFICER (EXEMPTIONS), WARD 1, BENGALURU. VS. M/S. FOUNDATION FOR INDIAN SPORTING TALENT (FIST), NO.183/1, KODIGEHALLI, THINDLU MAIN ROAD, VIDYARANYAPURA POST, BANGALORE 560 097. PAN: A AATF 1767H APP EL L ANT RESPONDENT I TA NO S . 1 710 & 1 711 /BANG/2017 ASSESSMENT YE AR S : 2011 - 12 & 2012 - 13 M/S. FOUNDATION FOR INDIAN SPORTING TALENT (FIST), BANGALORE 560 097. PAN: A AATF 1767H VS. THE INCOME TAX OFFICER (EXEMPTIONS), WARD 1, BENGALURU. APP EL L ANT RESPONDENT A SSESSEE BY : SHRI C. RAMESH, CA REVENUE BY : SHRI R .N. SIDDAPPAJI, ADDL.CIT(DR)(ITAT) , BENGALURU. DATE OF HEARING : 03 . 01 . 201 9 DATE OF PRONOUNCEMENT : 25 . 01 . 201 9 ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 2 OF 16 O R D E R PER BENCH THESE ARE CROSS APPEALS BY THE REVENUE (ITA NOS.1 710 & 11/B/2017) AND THE ASSESSEE (ITA NOS.1655 & 1666/B/ 17) DIRECTED AGAINST THE COMMON ORDER DATED 31.05.2017 OF THE CIT(APPEAL S)-14, LTU, BANGALORE RELATING TO ASSESSMENT YEARS 2011-12 & 20 12-13 RESPECTIVELY. 2. AS FAR AS THE APPEALS OF THE REVENUE ARE CONCERN ED, THE TWO COMMON ISSUES RAISED BY THE REVENUE IN BOTH THE APP EALS ARE WITH REGARD TO (A) THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO ALLOW DEPRECIATION ON ASSETS, THE COST OF WHICH WAS ALREADY CONSIDERED AS APPLICATION FOR CHARITABLE PURPOSE IN THE YEAR OF ACQUISITION. THE STAND OF THE REVENUE IS THAT THE ASSESSEE WILL HAVE DOUBLE BENEFIT IF DEPRE CIATION IS ALLOWED ON THE ASSETS IN THE YEAR OF ACQUISITION AND SUBSEQUENT AS SESSMENT YEARS WHEN THE COST OF ACQUISITION OF THE ASSET IS CONSIDERED AS APPLICATION OF INCOME BY THE ASSESSEE FOR CHARITABLE PURPOSE IN THE YEAR OF ACQUISITION OF THE ASSET; (B) WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN HOLDING T HAT ASSESSEE, A TRUST, IS ENTITLED TO CARRY FORWARD EXPENDITURE INC URRED IN EXCESS OF ITS INCOME FOR SETTING OFF AGAINST INCOME OF THE SUCCEEDING YE ARS? 3. THE ASSESSEE IS A CHARITABLE TRUST WITH OBJECTS TO IDENTIFY ELIGIBLE BENEFICIARIES FOR THE PURPOSE OF NURTURING, PROMOTI NG, ENCOURAGING AND DEVELOPING THEIR TALENT SO THAT THEY CAN COMPETE AS PROFESSIONAL SPORTS PERSONS IN INDIA AND ABROAD AND OTHER OBJECTS TO SE CURE COMPLIANCE OF THE ABOVE MAIN OBJECT. THE ASSESSEE WAS GRANTED RECOGN ITION AS CHARITABLE TRUST U/S.12A OF THE ACT BY THE DIT(EXEMPTION) VIDE ORDER DATED 13.2.2006. ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 3 OF 16 4. AS FAR AS THE FIRST ISSUE IS CONCERNED, THE FACT S ARE THAT IN THE COURSE OF ASSESSMENT U/S. 143(3) OF THE ACT FOR AY 2011-12 & 2012-13, THE AO NOTICED FROM THE DETAILS OF DEPRECIATION CLAIMED, T HAT THE DEPRECIATION WAS CLAIMED ON ASSETS, THE COST OF ACQUISITION OF THE S AID ASSETS HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE TOWA RDS APPLICATION OF FUNDS TOWARDS THE OBJECTS OF THE TRUST AND ALLOWED AS SUCH. ACCORDING TO THE AO, ALLOWING SUCH A CLAIM WOULD AMOUNT TO ALLOW ING DOUBLE DEDUCTION. ON THE FACTS OF THE PRESENT CASE, HE WAS OF THE VIE W THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43 IS SQUARELY APPLICABLE, WHEREIN IT HAS BEEN CATEGOR ICALLY HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED I N RESPECT OF CAPITAL EXPENDITURE ON SCIENTIFIC RESEARCH, NO DEPRECIATION IS ALLOWABLE U/S 32 ON THE SAME ASSET. 5. THE ASSESSEE POINTED OUT THAT HON'BLE HIGH COUR T OF 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 DEPRECIABLE ASSET IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE, ALLOWING DEPRECIA TION ON THE VERY SAME CAPITAL ASSET WOULD NOT AMOUNT TO DOUBLE ALLOWANCE. THE ASSESSEE ALSO POINTED OUT THAT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFFERENT SET OF FACTS. THE AO HOWEVER, HELD THAT ALLOWANCE OF DEPRECIATION WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMPTION AS APPLICATION OF INCOME AMOUNTS TO DOUBL E DEDUCTION AND DOUBLE BENEFIT ON THE SAME ASSET. THE AO REFERRED TO THE D ECISION 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 OF ACQUISITION OF D EPRECIABLE ASSET WAS ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 4 OF 16 ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PUR POSE AMOUNTS TO DOUBLE DEPRECIATION AND THEREFORE DEPRECIATION CANNOT BE A LLOWED. THE AO ALSO DISTINGUISHED THE CASES CITED BY THE ASSESSEE. 6. ON APPEAL BY THE ASSESSEE, THE CIT(A), FOLLOWING TH E DECISIONS RENDERED IN THE CASE OF ST. ANNS CONVENT 349 ITR 559 (KARN) AND DR.T.M.A. PAI FOUNDATION, MANIPAL IN ITA NO. 481 TO 485/BANG/ 2009 DATED 16.2.2010 , HELD THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIATIO N HAS TO BE ALLOWED. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE H AS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RE LIED ON THE ORDER OF AO. WE HAVE CONSIDERED THE ORDER OF THE AO. IDENTIC AL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN THE CA SE 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, COST OF ACQUI SITION WAS CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITIO N. THE AO TOOK THE VIEW THAT ALLOWING DEPRECIATION WOULD AMOUNT TO ALLOWING DOUB LE DEDUCTION AND PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT I N 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 D EPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING INCOME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PR ESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHI NG BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATIO N, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECT ION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMO UNT OF ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 5 OF 16 DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONBLE KARNATAK A 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 INSTITU TION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PUR POSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE 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 AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GR OUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISI ONS ON THAT ISSUE AND ALSO THE DECISION 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 CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUN DS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COURT MA DE A REFERENCE TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCT IONS UNDER DIFFERENT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITUR E OF A CAPITAL NATURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE COURT THEREAFTER HELD THAT A T RUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOU BLE DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KAR NATAKA 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, INC OME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDU CTIBLE WHILE ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 6 OF 16 COMPUTING SUCH INCOME. IN VIEW OF THE AFORESAID DEC ISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. 9. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINC E BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INSERTION OF SUB-SECTION (6) TO SECTION 11 OF TH E ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTIO N OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RE SPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 10. AS ALREADY STATED, THE AFORESAID AMENDMENT IS P ROSPECTIVE 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) DOES NOT CALL FOR ANY INTERFERENCE. CONSEQUENTLY, THE ISSUE RAISED BY THE REVENUE IN TH IS REGARD IS WITHOUT ANY MERIT AND THE SAME IS DISMISSED. 11. THE SECOND ISSUE THAT ARISES FOR CONSIDERATION IN T HIS APPEAL WHICH IS PROJECTED BY THE REVENUE IN GROUNDS OF APPEAL, IS A S TO WHETHER THE CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT ASSESSEE , A TRUST, IS ENTITLED TO CARRY FORWARD EXPENDITURE INCURRED IN EXCESS OF ITS INCOM E FOR SETTING OFF AGAINST INCOME OF THE SUCCEEDING YEARS? THE ASSESSEE IS A T RUST REGISTERED U/S. 12A OF THE ACT. FOR THE A.YS. 2011-12 AND 2012-13, THE ASSESSEE FILED A RETURN OF INCOME CLAIMING SET OFF OF AN AMOUNT OF RS.1,05,68, 070 AND RS.68,01,832 ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 7 OF 16 RESPECTIVELY. ON ACCOUNT OF BROUGHT FORWARD LOSS. THE ASSESSEE SOUGHT TO CARRY FORWARD THE EXCESS APPLICATION FOR SETTING OF F AS APPLICATION OF INCOME IN THE SUBSEQUENT ASSESSMENT YEARS. ACCORDING TO THE A O THERE WAS NO PROVISION IN THE ACT FOR CARRY FORWARD OF EXCESS EX PENDITURE OF EARLIER YEAR TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEAR A ND HE THEREFORE DENIED THE CLAIM OF THE ASSESSEE. 12. ON APPEAL BY THE ASSESSEE, THE CIT(A) DIRECTED THE AO TO ALLOW CLAIM OF THE ASSESSEE AND IN DOING SO, FOLLOWED THE DECIS ION RENDERED BY THE ITAT BANGALORE IN THE CASE OF DR.T.M.A. PAI FOUNDATION, MANIPAL IN ITA NO. 481 TO 485/BANG/2009 DATED 16.2.2010. 13. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE H AS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 14. IN THE GROUNDS OF APPEAL, THE REVENUE HAS REITE RATED THE STAND OF THE AO THAT THERE IS NO PROVISION IN THE ACT TO ALL OW CARRY FORWARD OF EXCESS APPLICATION OF INCOME FOR SET OFF AS APPLICATION OF INCOME IN SUBSEQUENT YEARS. THE LD. DR REITERATED THE STAND OF THE REVEN UE AS CONTAINED IN THE GROUNDS OF APPEAL. 15. 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 ON LY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. THE APPLICATION FOR CHARITAB LE PURPOSES AS CONTEMPLATED IN SECTION 11(1)(A) TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FO R CHARITABLE OR RELIGIOUS PURPOSES. HENCE, EVEN IF THE EXPENSES FOR SUCH PURP OSES HAVE BEEN INCURRED IN THE EARLIER YEARS AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF SUCH SUB SEQUENT YEAR CAN BE SAID TO BE APPLIED FOR CHARITABLE OR RELIGIOUS PURP OSES IN THE YEAR IN WHICH ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 8 OF 16 SUCH ADJUSTMENT TAKES PLACE. IN OTHER WORDS, THE SE T-OFF OF EXCESS OF EXPENDITURE INCURRED OVER THE INCOME OF EARLIER YEA RS AGAINST THE INCOME OF A LATER YEAR WILL AMOUNT TO APPLICATION OF INCOME O F SUCH LATER YEAR. THE ABOVE IS THE POSITION OF LAW AS HELD IN THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION 164 ITR 439 (RAJ) AND CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL 211 ITR 293 (GUJ. ) . IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION 264 ITR 110 (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 AG AINST INCOME OF SUBSEQUENT YEARS AND SUCH ADJUSTMENT WOULD BE APPLI CATION OF INCOME FOR SUBSEQUENT YEARS AND THAT DEPRECIATION IS ALLOWABLE ON THE ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF I NCOME UNDER 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 THE TRUST HAS TO BE ARRIVED AT HAVING DUE REGARD TO THE COMMERCIAL PRINCIPLES, THA T S. 11 IS A BENEVOLENT PROVISION, AND THAT THE EXPENDITURE INCURRED ON REL IGIOUS OR CHARITABLE PURPOSES IN EARLIER YEAR OR YEARS CAN BE ADJUSTED A GAINST THE INCOME OF THE SUBSEQUENT YEAR. THE PRINCIPLE THAT THE LOSS INCURR ED UNDER ONE HEAD CAN ONLY BE SET OFF AGAINST THE INCOME FROM THE SAME HE AD IS NOT OF ANY RELEVANCE, IF THE EXPENDITURE INCURRED WAS FOR RELI GIOUS OR CHARITABLE 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 SUBSEQUE NT 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 S HOULD 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 LI ABLE TO TAX. THE ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 9 OF 16 EXPENDITURE, IF INCURRED IN AN EARLIER YEAR IS ADJU STED 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 O F THE SUBSEQUENT YEAR, EVEN THOUGH THE ACTUAL EXPENDITURE WAS IN THE EARLI ER YEARS, IF IN THE BOOKS OF ACCOUNT OF THE TRUST SUCH EARLIER EXPENDITURE HA D BEEN SET OFF AGAINST THE INCOME OF 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 O F CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR.) . 16. WE ARE THEREFORE OF THE VIEW THAT THERE IS NO M ERIT IN THE ISSUE RAISED IN THIS REGARD BY THE REVENUE. ACCORDINGLY, THE SAM E ARE DISMISSED. 16. IN THE RESULT, THE APPEALS BY THE REVENUE ARE D ISMISSED. 17. AS FAR AS THE APPEALS OF THE ASSESSEE ARE CON CERNED, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN BOTH THE AYS ARE I DENTICAL AND THEY ARE AS FOLLOWS: THE APPELLANT OBJECTS TO THE ASSESSMENT ORDER ON T HE FOLLOWING GROUNDS IN SO FAR AS IT IS PREJUDICIAL TO THE APPEL LANT AS IT IS OPPOSED TO LAW AND CIRCUMSTANCES OF THE CASE - 1) THE A.O. AND CIT (A) WAS NOT CORRECT IN NOT APPR ECIATING THE FACTS THAT THE EXPENDITURE INCURRED IN FOREIGN CURRENCY ARE INCURRED FOR THE CHARITABLE PURPOSE IN INDIA FOR TH E BENEFIT OF INDIAN BENEFICIARIES AND SUCH EXPENDITURES INCURRED ARE WITHIN THE PRECINCTS OF THE MAIN OBJECTIVE OF THE TRUST. 2) THE A.O. IS NOT CORRECT IN NOT CONSIDERING THE E XPENDITURE INCURRED IN SUBSEQUENT YEAR BEFORE FILING OF RETURN OF INCOME AS PER SECTION 11(1)(A) OF THE IT ACT AND NOT CONSIDER ING THE APPLICATION FOR ACCUMULATION OF INCOME FILED IN FOR M 10. ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 10 OF 16 3) THE APPELLANT OBJECTS TO THE LEVY OF INTEREST U/ S.234 B & C CONSEQUENTIAL TO THE ABOVE ADDITIONS, AS IT IS CHAR ITABLE INSTITUTION, EXEMPT FROM TAX, HENCE THERE CANNOT BE LEVY OF INTE REST ON THE ASSESSED TAX OR THERE CANNOT BE ANY ADVANCE TAX PAY MENT DUE ON ITS RETURNED INCOME. 4) THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR TO DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. WHEREFORE ON THE ABOVE GROUNDS AND ON SUCH OTHER GR OUNDS THE APPELLANT PRAYS THE APPELLATE AUTHORITY TO DELETE T HE ADDITIONS AS ABOVE AND MAY PASS SUCH OTHER AS THE APPELLATE AUTH ORITY DEEMS FIT. 17. THE FIRST COMMON ISSUE IN BOTH THE APPEALS BY T HE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF EXPENDITURE INCURRED IN F OREIGN CURRENCY. AS ALREADY STATED, THE ASSESSEE IS A CHARITABLE TRUST. ITS OBJECTS ARE AS FOLLOWS:- I) IDENTIFYING ELIGIBLE BENEFICIARIES FOR THE PURP OSE OF NURTURING, PROMOTING, ENCOURAGING AND DEVELOPING TH EIR TALENT SO THAT THEY CAN COMPETE AS PROFESSIONAL SPORTS PERSON S IN INDIA AND ABROAD. II) PAYING OR REIMBURSING THE FEES OR OTHER CONSIDE RATION PAID BY THE ELIGIBLE BENEFICIARIES TO SPORTS TRAINERS, C OACHES, CLUBS, GYMNASIUMS, OR FOR THE PURCHASE OF SPORTS GEAR, EQU IPMENT OR OTHER ARTICLES RELATING TO SPORTING ACTIVITY GENERA LLY. III) PAYING OR REIMBURSING THE EXPENSES INCURRED ON TRAVEL, INCLUDING, AIR FARES, LODGING AND BOARDING OF ELIGI BLE BENEFICIARIES FOR ENGAGING IN SPORTING ACTIVITY IN INDIA AND ABRO AD. IV) SELECTING ELIGIBLE BENEFICIARIES TO FORM REPRES ENTATIVE TEAMS AND NURTURING, PROMOTING, ENCOURAGING AND DEV ELOPING THE TEAM MEMBERS TO PARTICIPATE IN COMPETITIONS, CHAMPI ONSHIP IN INDIA AND ABROAD. ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 11 OF 16 V) ARRANGING, SPONSORING OR PROVIDING FOR OR ASSIST ING IN ARRANGING, SPONSORING OR PROVIDING FOR SPORTS RELAT ED TOURS OR EXCURSIONS IN INDIA AND ABROAD AND THE COST OF TRAV EL, BOARDING AND LODGING IN CONNECTION THEREWITH. VI) ADVANCING, PROMOTING, SUPPORTING, SPONSORING AN D ENCOURAGING SPORTING ACTIVITIES BY ORGANIZING OR AS SISTING IN ORGANIZING SPORTS EVENTS, SPORTS MEETS, TRAINING CA MPS AND TO SECURE THE PARTICIPATION IN AND PROMOTION OF SUCH S PORTS EVENTS SPORTS MEETS, TRAINING CAMPS AND THE LIKE BY THE EL IGIBLE BENEFICIARY ETC. 18. THE ASSESSEE WAS ESTABLISHED WITH THE MAIN OBJE CT AND PURPOSE OF PROVIDING FINANCIAL SUPPORT, TRAINING AND GLOBAL EX POSURE AND EXPERT GUIDANCE TO BUDDING TENNIS PLAYERS BELOW THE AGE OF 18. 19. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2011-12 & 2012-13, THE AO NOTICED THAT ASSESSEE HAD INCURRED A SUM OF RS.78,58,960 IN AY 2011-12 AND A SUM OF RS.35,91,611 IN AY 2012-13. T HE ASSESSEE EXPLAINED BEFORE THE AO THAT IT WAS TRAINING YOUNGS TERS TO MASTER THE GAME OF TENNIS AND IN THIS REGARD SENT THE STUDENTS FOR TRAINING ABROAD. THE EXPENSES WERE TOWARDS TRAINING, TRAVEL, AIR-TICKETS , ENTRY TAX, LODGING & BOARDING EXPENDITURE OF ELIGIBLE BENEFICIARIES FOR ENGAGING IN THE GAME OF TENNIS IN INDIA AND ABROAD. THE AO, HOWEVER, WAS O F THE VIEW THAT U/S. 11(1)(A) OF THE INCOME-TAX ACT, 1961 [THE ACT], I NCOME OF A CHARITABLE TRUST WHICH IS APPLIED IN INDIA FOR CHARITABLE PURP OSE IS ALONE EXEMPT AND SINCE THE EXPENDITURE IN QUESTION WAS NOT INCURRED IN INDIA, THE AO HELD THAT THE SAME WILL NOT AMOUNT TO APPLICATION OF INC OME. ACCORDINGLY, THE AFORESAID SUMS WERE ADDED TO THE TOTAL INCOME OF TH E ASSESSEE. 20. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CON FIRMED THE ORDER OF THE AO. THE CIT(A) EXAMINED THE AGREEMENT BETWEEN THE TENNIS PLAYERS ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 12 OF 16 AND THE ASSESSEE AND FOUND THAT RELATIONSHIP BETWEE N THE TRAINING INSTITUTE AND THE BUDDING TENNIS PLAYERS WAS NOT WITH ANY CHA RITABLE INTENT AND PURPOSE, BUT WAS CLEARLY COMMERCIAL. IN THAT VIEW OF THE MATTER, THE ADDITION MADE BY THE AO WAS CONFIRMED BY THE CIT(AP PEALS). AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE IS IN AP PEAL BEFORE THE TRIBUNAL. 21. WE HAVE HEARD THE RIVAL SUBMISSIONS. IDENTICA L ISSUE WAS CONSIDERED BY THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. ASSOCIATED CHAMBERS OF COMMERCE & INDUSTRY OF INDIA , ITA NO.343/2016 JUDGMENT DATED 24.05.2016. IN THE AFORESAID DECISI ON, THE HONBLE DELHI HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL THAT SE NDING DELEGATES TO FOREIGN COUNTRIES CANNOT BE HELD AS OUTSIDE THE MAI N OBJECTS OF THE ASSESSEE. THEREFORE, EXEMPTION CANNOT BE DENIED ON THE GROUND THAT EXPENSES WERE INCURRED OUTSIDE INDIA. 22. THE LD. DR, HOWEVER, PLACED RELIANCE ON THE DEC ISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES, 345 ITR 362 (DEL) , WHEREIN A CONTRARY VIEW WAS TAKEN. 23. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE DECISION OF THE ITAT DELHI TRIBUNAL RENDERED IN THE CASE OF DDIT V. ASSOCIATED CHAMBER OF COMMERCE & INDUSTRY OF INDIA, ITA NO.652 5/DEL/2013, ORDER DATED 31,97,2915 WHEREIN THE DECISION CITED BY THE LD. DR IN THE CASE OF CIT V. NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES, 345 ITR 362 (DEL) ,WAS ALSO CONSIDERED AND THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF H.E.H. NIZAMS RELIGIOUS ENDOWMENT TRUST V. CIT, 59 ITR 582, HELD AS FOLLOWS:- ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 13 OF 16 7. ON VIGILANT PERUSAL OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF H.E.H. NIZAM'S RELIGIOUS ENDOW MENT TRUST VS. COMMISSIONER OF INCOME TAX (SUPRA), WE ARE IN A GREEMENT WITH THE CONTENTION OF THE LD. COUNSEL OF THE ASSES SEE THAT THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THAT CASE. ON CAREFUL READING OF SAID JUDGMENT OF HONBLE SUPREME COURT, IT IS AMPLY CLEAR THAT IN THAT CASE, THE ASSESSEE NIZAMS TRUST WAS DENIED EXEMPTION IN REGARD TO THE APPLICATION OF IN COME FROM PROPERTY AS PER SECOND PART OF CLAUSE (I) OF SECTIO N 4(3) OF THE INCOME TAX ACT 1922 (AS APPLICABLE AT THAT TIME) WH ICH WERE APPLIED OR FINALLY SET APART FOR RELIGIOUS OR CHARI TABLE PURPOSES OUTSIDE TAXABLE TERRITORIES. IN THE PRESENT CASE, I T IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE ASSOCIATION APPLIED I TS INCOME OR RECEIPTS OUTSIDE TAXABLE TERRITORIES BECAUSE THE IS SUE BEFORE US ONLY RELATES TO EXPENSE TOWARDS FOREIGN TRAVELLING OF DELEGATION SENT BY THE ASSESSEE ASSOCIATION FOR THE PURPOSES O F PROMOTION OF TRADE AND INDUSTRY IN INDIA WHICH IS THE MAIN OBJEC T OF THE ASSESSEE ASSOCIATION. IN VIEW OF ABOVE, WE RESPECTF ULLY HOLD THAT THE BENEFIT OF THE RATIO OF THE SAID DECISION OF HO NBLE SUPREME COURT IN THE CASE OF H.E.H. NIZAM'S RELIGIOUS ENDOW MENT TRUST VS. COMMISSIONER OF INCOME TAX (SUPRA) IS NOT AVAIL ABLE FOR THE REVENUE AS THE FACTS AND CIRCUMSTANCES OF THE PRESE NT CASE ARE DISTINGUISHABLE FROM THAT CASE. 8. UNDISPUTEDLY AND ADMITTEDLY, THE MAIN OBJECTIVE OF THE ASSESSEE ASSOCIATION IS TO PROMOTE TRADE AND INDUST RY IN INDIA THAT IN THE PRESENT ERA OF ECONOMIC GLOBALIZATION, SENDI NG DELEGATION TO FOREIGN COUNTRIES CANNOT BE HELD AS OUTSIDE THE AMBIT OF MAIN OBJECTIVE OF THE ASSESSEE ASSOCIATION. PER CONTRA, FROM THE ARTICLE OF ASSOCIATION AVAILABLE AT PAGE 3 TO 38 OF THE ASS ESSEES PAPER BOOK, IT IS VIVID THAT THE MAIN OBJECTS AS CONTAINE D IN CLAUSE (3) OF THE MEMORANDUM OF ASSOCIATION, OBJECTIVES CANNOT BE FULFILLED WITHOUT SENDING FOREIGN DELEGATION AND, THEREFORE, FOREIGN TRAVELLING EXPENSES INCURRED BY THE ASSESSEE CANNOT BE HELD AS APPLICATION OF INCOME OUTSIDE TAXABLE TERRITORIES O F THE ASSESSEE. THEREFORE, WE ARE INCLINED TO AGREE WITH THE CONCLU SION OF THE CIT(A) AND WE ARE UNABLE TO SEE ANY INFIRMITY, PERV ERSITY OR ANY OTHER VALID REASON TO INTERFERE WITH THE SAME. ACCO RDINGLY, ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 14 OF 16 GROUND NO. 1 AND 2 OF THE REVENUE BEING DEVOID OR M ERITS ARE DISMISSED. 24. IN THE LIGHT OF THE AFORESAID DECISION OF THE T RIBUNAL WHICH WAS CONFIRMED BY THE HONBLE DELHI HIGH COURT, WE ARE O F THE VIEW THAT THE EXPENSES INCURRED IN FOREIGN CURRENCY HAS TO BE CON SIDERED AS APPLICATION FOR CHARITABLE PURPOSE AND INCURRED FOR THE CHARITA BLE PURPOSES IN INDIA. WE HOLD ACCORDINGLY. 25. AS FAR AS THE NEXT COMMON ISSUE RAISED BY THE A SSESSEE IN THE GROUNDS OF APPEAL IS CONCERNED, THE SAME IS WITH RE GARD TO NOT CONSIDERING THE EXPENDITURE INCURRED IN SUBSEQUENT YEAR BEFORE FILING OF RETURN OF INCOME AS APPLICATION FOR ACCUMULATION OF INCOME. ON THIS ASPECT, THE CONCLUSION OF THE CIT(APPEALS) WAS AS FOLLOWS:- 8. THE APPELLANT HAS SUBMITTED BEFORE ME THAT ELA BORATE CLAIMS WERE MADE BEFORE THE AO FOR ALLOWING ACCUMUL ATION OF INCOME BY FILING REVISED FORM 10 FOR AY 2011-12 BEF ORE COMPLETION OF ASSESSMENT. THE SAME WAS NOT CONSIDER ED BY THE AO WHO REFERRED TO THE ORIGINAL FORM 10 FILED WITH THE RETURN OF INCOME FOR RS.9,58,712 AND A LATER FORM 10 FILED FO R RS.68,01,632. THE AO DID NOT ALLOW THE CLAIM SINCE THE AMOUNTS IN QUESTION WERE ALREADY SPENT AND THE APPELLANT WA S REQUESTING FOR ACCUMULATION IN THE EVENTUALITY OF THE AO NOT A CCEPTING THE FOREIGN CURRENCY EXPENDITURE AS APPLICATION OF INCO ME. I AM IN AGREEMENT WITH THE AO SINCE THE APPELLANT HAS SHOWN EXCESS OF EXPENDITURE OVER AVAILABLE INCOME WITH A REQUEST FO R CARRY FORWARD AND CANNOT AT THE SAME TIME APPLY FOR ACCUM ULATION OF NON-EXISTENT FUNDS. IN ANY CASE, THE APPLICABILITY OF SEC.11(2) IS NOT A CONTINGENT PROVISION DEPENDENT ON THE AO'S TR EATMENT OF OTHER APPLICATIONS CLAIMED. 8.1 FOR AY 2012-13, THE FORM 10 FILED WITH THE RETU RN WAS FOR ACCUMULATION U/S.11(2) OF RS.80,00,000. THE AO REJE CTED THE SAME STATING THAT NO FUNDS ARE AVAILABLE WITH THE A SSESSEE TO ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 15 OF 16 ACCUMULATE AND THAT MAJOR PORTION OF THE YEAR'S REC EIPTS WERE GIVEN TO SISTER CONCERNS. I AM IN AGREEMENT WITH TH E AO THAT THE ACCUMULATION SOUGHT WAS MORE THAN THE GROSS RECEIPT S OF RS. 71,56,270 AND THE SAME HAD NOT BEEN INVESTED IN SPE CIFIED MODES AS REQUIRED U/S.11(5), EVEN INCLUDING THE BANK BALA NCES (PARA 17, AO'S ORDER). 26. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE ARE O F THE VIEW THAT IT WOULD BE JUST AND APPROPRIATE TO SET ASIDE THE ORDER OF C IT(A) ON THIS ISSUE AND REMAND FOR FRESH CONSIDERATION BY THE AO THE REQUES T FOR ACCUMULATION, IN THE LIGHT OF OUR DECISION UPHOLDING THE DIRECTIONS OF CIT(A) TO CONSIDER EXCESS EXPENDITURE/APPLICATION/DEFICIT/LOSS OF EARL IER YEARS AGAINST INCOME OF THE CURRENT YEAR AND IN THE LIGHT OF THE LAW LAI D DOWN BY HONBLE SUPREME COURT IN THE CASE OF NAGPUR HOTEL OWNERS ASSOCIATI ON CASE 247 ITR 201 (SC). WE HOLD AND DIRECT ACCORDINGLY. THE AO IS A LSO DIRECTED TO CONSIDER THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ON TH IS ISSUE. 27. IN THE RESULT, THE APPEALS BY THE REVENUE ARE DISMISSED AND THAT OF THE ASSESSEE ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF JANUARY, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V . VASU DEVAN ) ACCOUNTANT MEMBER V ICE PRESIDENT BANGALORE, DATED, THE 25 TH JANUARY, 2019. / D ESAI S MURTHY / ITA NOS.1665 & 1666 AND 1710 & 1711/BANG/2017 PAGE 16 OF 16 COPY TO: 1. THE APP ELLANT 2. THE R ESP ONDENT 3. THE CIT 4. THE CIT(A) 5. T HE DR, IT AT, BANGALORE. 6. G UARD F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.