The Dy. Commissioner of Income Tax (Exemptions), Circle-1, Ahmedabad V. The Kantilal Jaikishandas Choksi Charitable Trust, Ahmedabad

ITA 1909/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8345 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 19-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH SINGH
• Assessee Lawyers: P M MEHTA
• Keywords: Charitable institution; Capital expenditure
• Section: 80G; 12; 11

Judgement Text

, , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ IZEKSN DQEKJ , ./ ITA NO. 1909/AHD/2016 / ASSESSMENT YEAR: 2012-13 DCIT(EXEMPTIONS), CIRCLE-1, AHMEDBAD. VS KANTILAL JAIKISHANDAS CHOKSI CHARITABLE TRUST, MADHUBAN, OPP. GUJARAT COLLEGE, MADALPUR, ELLISBRIDGE, AHMEDABAD. ./ ./ PAN/GIR NO. : AAATK 1759 N !' / (APPELLANT) #$ !' / (RESPONDENT) REVENUE BY : SHRI SAURABH SINGH, SR.D.R. ASSESSEE BY : SHRI P. M. MEHTA, A.R. ! '# / DATE OF HEARING : 14/03/2018 $%&' ! '# /DATE OF PRONOUNCEMENT : 16/05/2018 PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-9, AHMEDABAD DATED 20.05.2016 PASSED FOR ASSESSMENT YEAR 2012-13 . 2. IN THE FIRST GROUND OF APPEAL, REVENUE HAS PLEAD ED THAT LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO ALL OW CARRY FORWARD OF DEFICIT AMOUNTING TO RS.2,51,34,291/- TO SUBSEQUENT YEARS. ITA NO.1909/AHD/2016 DCIT VS. KANTILAL JAIKISHANDAS CHOKSI A.Y. 2012-13 - 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE TRUST I S A REGISTERED SOCIETY RUNNING A DISPENSARY IN THE NAME OF ANUBHUTI HOMEO CLINIC. IT IS ALSO RUNNING EDUCATIONAL INSTITUTIONS IN THE NAME OF UD GAM SCHOOL OF CHILDREN AND A PUBLIC LIBRARY IN THE NAME OF KANT ILAL JAIKISHANDAS PUBLIC LIBRARY. IT IS ENJOYING REGISTRATION U/S 12 A OF THE INCOME TAX ACT AS WELL AS APPROVAL U/S 80G (5) OF THE INCOME T AX ACT. THE TRUST HAS FILED ITS RETURN OF INCOME ON 30.09.2012 DECLARING ITS INCOME AT LOSS (DEFICIT OF RS.2,51,34,291). THE CASE OF THE ASSESS EE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) WAS ISSUE D AND SERVED UPON THE ASSESSEE. THE LD. ASSESSING OFFICER HAS CONFRON TED THE ASSESSEE AS TO WHY THE CLAIM OF CARRY FORWARD OF DEFICIT TO SUBSEQ UENT ASSESSMENT YEARS BE NOTE DISALLOWED. IN RESPONSE TO THE NOTICE, ASSE SSEE HAS FILED A REPLY VIDE LETTER DT. 25.02.2015, WHICH HAS BEEN REPRODUC ED BY THE ASSESSING OFFICER ON PAGE NOS. 2 TO 5. THE ASSESSEE HAS CONTE NDED THAT AS PER JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL REPORTED IN 211 I TR 293, IT IS ENTITLED FOR CARRY FORWARD OF DEFICIT TO THE SUBSEQ UENT YEARS. LD. ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE AND HE DISALLOWED THE CLAIM AND DETERMINED THE TAXABLE INC OME AT NIL. 4. DISSATISFACTION WITH THE ACTION OF THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A). LD. CIT(A ) GONE THROUGH THE RECORD AND DECISION OF JURISDICTIONAL HIGH COURT, A LLOWED THE CLAIM OF THE ASSESSEE. THE FINDINGS RECORDED BY THE LD. CIT( A) READ AS UNDER: ITA NO.1909/AHD/2016 DCIT VS. KANTILAL JAIKISHANDAS CHOKSI A.Y. 2012-13 - 3 5.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ON AS WELL AS THE OBSERVATION OF THE A.O. IT IS OBSERVED THAT THE A.O HAS NOT ALLOWED THE SET OFF OF EXCESS EXPENDITURE INCURRED IN EARLIER YEAR S AGAINST THE INCOME OF THE RELEVANT ASSESSMENT YEARS. IN THIS RESPECT THE A.O H AS RELIED ON THE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER, RENAL & DIGESTIVE DISEASES VS. DEPUTY DIRECTOR OF INCOME TAX (EXEMPTI ON) [2009] 29 SOT 316 (DELHI) WHEREIN IT WAS HELD THAT WHEN INCOME ACCUMULATED IN EARLIER YEARS CANNOT QUALIFY FOR EXEMPTION. U/S.11(2) TH E EXCESS INCOME APPLIED FOR EARLIER ASSESSMENT YEARS WOULD ALSO NOT QUALIFY FOR EXEMPTION. THE APPELLANT IN ITS RETURN FOR A.Y.2012-13 HAD REFLECTED A DEFICIT O F RS.2,51,34,291/- AS PER THE COMPUTATION OF TOTAL INCOME. THE APPELLANT HAS RELI ED UPON THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SHR I PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL 211 ITR 293(GUJ.), CIT MAHAR ANA OF MEWAR CHARITABLE FOUNDATION 29 TAXMAN 476 (RAJ) AND GOVIND U NAICKER ESTATE V. ASSTT.DIT [2001] 248 ITR 368 (MAD). HON'BLE GUJARAT H IGH COURT IN THE CASE OF SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL HAS H ELD AS FOLLOWS :- 'A BARE PERUSAL OF SECTION 11 OF THE INCOME-TAX ACT, 1961, SHOWS THAT 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. THERE ARE NO WORDS 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 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'. HAVING REGARD THE PROVISIONS OF SECTION 11 OF THE ACT, IT IS CLEAR TH AT WHEN THE INCOME OF A 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 RELIGIO US PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO 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 THE 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 AMOUNT TO SUCH ITA NO.1909/AHD/2016 DCIT VS. KANTILAL JAIKISHANDAS CHOKSI A.Y. 2012-13 - 4 INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PU RPOSES. INCOME DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES FOR DETERMI NING THE INCOME ARE APPLIED, IT IS BUT NATURAL THAT THE ADJUSTMENT OF T HE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR W ILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUS TMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CON TAINED IN SECTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INC OME OF THE TRUST UNDER SECTION 11 (1)(A). I AGREE WITH THE CONTENTION OF THE APPELLANT AS WEL L AS THE RELIANCE PLACED ON THE DECISION OF JURISDICTIONAL GUJARAT HIGH COUR T AND HEREBY DIRECT THE A.O TO ALLOW THE BENEFIT OF THE DEFICIT OF EARLIER YEAR S AGAINST THE FUTURE INCOMES. ACCORDINGLY, GROUND OF APPEAL NOS.1 AND 2 ARE HEREBY ALLOWED. SIMILARLY, THE A.O IS DIRECTED TO GRANT THE APPELLAN T THE CLAIM OF CAPITAL EXPENDITURE OF RS. 4,23,64,625/- INCURRED DURING TH E YEAR UNDER CONSIDERATION FOR BEING SET OFF AGAINST THE APPELLANTS INCOME OF SUBSEQUENT ASSESSMENT YEARS. A.O IS DIRECTED TO ALLOW THE CARRY FORWARD OF CAPITA L EXPENDITURE OF RS.4,23,64,625/- ACCORDINGLY. THUS, GROUND OF APPEA L NO.3 IS ALLOWED. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE CIT( A)S ORDER WOULD INDICATED THAT LEARNED FIRST APPELLATE HAS BASED IT S FINDING ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. THE H ONBLE GUJARAT HIGH COURT HAS SPECIFICALLY HELD THAT ADJUSTMENT OF THE EXPENDITURE INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSE I N THE EARLIER YEARS AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUEN T YEARS WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST F OR CHARITABLE AND RELIGIOUS PURPOSE IN THE SUBSEQUENT YEARS, IN WHICH SUCH ADJUSTMENT HAS BEEN MADE. THIS OBSERVATION OF THE HONBLE HIGH COU RT WOULD INDICATE THAT IF THERE IS A DEFICIT IN EARLIER YEARS THEN TH AT CAN BE CARRIED FORWARD ITA NO.1909/AHD/2016 DCIT VS. KANTILAL JAIKISHANDAS CHOKSI A.Y. 2012-13 - 5 FOR CLAIM OF SET OFF IN THE SUBSEQUENT YEARS INCOM E. THEREFORE, WE ARE OF THE VIEW THAT LEARNED FIRST APPELLATE AUTHORITY HAS RIGHTLY FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A). FIRST GROUND OF APPEAL IS REJECTED. 6. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE R EVENUE IS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT(A) IS JUSTIFIED IN ALLOWING THE ASSESSEES APPEA L NEGLECTING THE FINDING OF ASSESSING OFFICER REGARDING ADDITION OF R S.4,23,64,625/- BEING CAPITAL EXPENDITURE CLAIMED U/S 11 OF THE ACT. 7. WHILE TAKING COGNIZANCE OF THE FINDING OF LD. CI T(A), WE HAVE NOTICED FINDINGS OF THE CIT(A) ON THIS ISSUE ALSO. A PERUSAL OF THE ORDER OF LD.CIT(A) ON THIS ISSUE WOULD INDICATE THAT LD.C IT(A) HAS DIRECTED THE ASSESSING OFFICER TO GRANT SET OFF CAPITAL EXPE NDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION AGAINST INCOME OF THE ASSESSEE OF SUBSEQUENT YEARS. IN OTHER WORDS, IT IS ALSO CARRY FORWARD OF CAPITAL EXPENDITURE FOR SETTING OF AGAINST APPLICATION OF I NCOME OF SUBSEQUENT YEARS. THIS IS IDENTICAL TO THE ISSUE INVOLVED IN G ROUNDS NO.1. IF INCOME OF THE ASSESSEE IS TO BE COMPUTED AS PER COMMERCIAL PRINCIPLES CONSIDERED BY THE HONBLE GUJARAT HIGH COURT THEN T HIS EXPENDITURE HAS TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS AND LD. CIT(A) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO PERMI T THE ASSESSEE FOR SET OFF CAPITAL EXPENDITURE INCURRED IN THIS YEAR AGAIN ST THE INCOME OF THE ASSESSEE OF SUBSEQUENT YEARS. IN OTHER WORDS, THE D IRECTION OF THE CIT(A) IS TO THE EFFECT THAT THE ASSESSEE IS ENTITLED TO C ARRY FORWARD OF DEFICIT IN THE CAPITAL EXPENDITURE FOR SET OFF TO THE SUBSEQUE NT YEARS. WE DO NOT ITA NO.1909/AHD/2016 DCIT VS. KANTILAL JAIKISHANDAS CHOKSI A.Y. 2012-13 - 6 FIND ANY ERROR IN THE ORDER OF THE CIT(A). THIS GRO UND OF APPEAL IS ALSO REJECTED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 16 TH MAY 2018 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 16/05/2018 PRITI YADAV, SR.PS %& ' #()* +%* ( / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+ ) / THE RESPONDENT. 3. ,-.' /' / CONCERNED CIT 4. /' (() / THE CIT(A) 5. 234 *'-. , (# (-.' , / DR, ITAT, AHMEDABAD. 6. 45 6 / GUARD FILE. %& , / BY ORDER, -/ . (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD. TRUE COPY