The ITO, (Exemptions), Ward-1, Ahmedabad V. National Innovation Foundation India, Ahmedabad

ITA 2205/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8347 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 20 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: 26-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA
• Assessee Lawyers: CHANDRESH S SHAH
• Keywords: Charitable institution
• Section: 143(3); 12AA; 154; 11

Judgement Text

, MH MHMH MH IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER VEJTH VEJTH VEJTH VEJTHR FLAG R FLAG R FLAG R FLAG , ./ ITA NO. 2205/AHD/2016 / ASSESSMENT YEAR: 2012-13 ITO (EXEMPTIONS), WARD -1, AHMEDABAD. VS NATIONAL INNOVATION FOUNDATION INDIA, BUNGLOW NO.-1, SATTELLITE COMPLEX, JODHPURA TEKRA, SATELLITE, AHMEDABAD. ./ ./ PAN/GIR NO. : AAATN 3637 Q ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SHRI R. P. MAURYA, SR.D.R. ASSESSEE BY : SHRI CHANDRESH S. SHAH, A.R. ! ' #$ / DATE OF HEARING : 23/03/2018 %&'( ' #$ /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 28.06.2016 PASSED FOR ASSESSMENT YEAR 2012-13 . 2. THE ISSUE AGITATED BY REVENUE IS, WHETHER CIT(A) IS JUSTIFIED FOR PERMITTING THE ASSESSEE TO CARRY FORWARD OF UNABSOR BED DEFICIT AMOUNTING TO RS.1,00,97,909/- AGAINST FUTURE INCOME . ITA NO.2205/AHD/2016 ITO VS. NATIONAL INNOVATION FOUNDATION INDIA A.Y. 2012-13 - 2 3. THE ASSESSEE TRUST HAS FILED ITS RETURN OF INCOM E ON 26.09.2012 DECLARING NIL INCOME. THE ASSESSEE HAS CLAIMED CARR Y FORWARD OF LOSS OF RS.1,00,97,909/- THIS LOSS PERTAINS TO A.Y. 2010-11 . THE LD. AO WITHOUT MAKING ANY DISCUSSION DISALLOWED THE CLAIM OF THE A SSESSEE. THE BRIEF FINDING RECORDED BY THE ASSESSING OFFICER READ AS U NDER: THE TRUST IS ENGAGED IN VARIOUS PROJECTS INVOLVING STRENGTHENING GRASS-ROOT TECHNOLOGICAL INNOVATIONS BY DOCUMENTING, SCREENING AND PROVIDING SUPPORT AT GRASSROOTS LEVEL ETC. THE TRUST HAS RECEIVED GRANT INCOME, PROJECT INCOME AND OTHER INCOMES WHICH HAVE BEEN APPLIED TO THE ACTIVI TIES OF THE TRUST. THE ASSESSEE TRUST HAS BEEN REGISTERED WITH THE CHARITY COMMISSIONER AND HAS CLAIMED REGISTRATION U/S 12AA OF IT ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS NOTED THAT THE TRUST HAS CLAIMED C/F LOSS OF RS.1,00,97,909/- FOR A.Y. 2010-1 1 IN TERMS OF UNABSORBED DEFICIT IN COMPUTATION OF INCCME. SINCE THE DEFICIT IS MET OUT OF ACCUMULATIONS OF THE TRUST FUND, THE CLAIM OF DEFICIT C/F IS NOT ACCEPTABLE AND ACCORDINGLY NOT ALLOWED. THE STAND IS IN LINE WITH ORDER PASSED IN CASE OF THE ASSESSEE FOR A.Y. 2011-12. 4. DISSATISFIED WITH THE ORDER OF THE ASSESSING OFF ICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ACCEPTED THE CLAIM OF THE ASSESSEE AFTER PUTTING RE LIANCE UPON THE DECISION OF JURISDICTIONAL HIGH COURT RENDERED IN T HE CASE OF CIT VS SHRI PLOT SWETAMBAR MURTI PUJAK JAIN MANDAL 211 ITR 293, FINDINGS RECORDED BY THE LD. CIT(A) READ AS UNDER: 4.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ON, OBSERVATION OF THE A.O AS WELL AS THE CASE LAW RELIED UPON BY THE APPELLANT. IT IS OBSERVED THAT THE A.O HAS DENIED THE CARRY FORWARD OF LOSS OF RS. 1,00,97 ,909/-. THE A.O HAS MENTIONED IN THE ORDER OF ASSESSMENT THAT THE SAID DEFICIT PERTAINS TO A.Y.2011- 12 AND AS PER THE STAND TAKEN FOR A.Y.2011-12 THE CL AIM OF CARRY FORWARD OF DEFICIT IS NOT ACCEPTABLE AND ACCORDINGLY NOT ALLOW ED. DURING THE APPELLATE PROCEEDINGS THE APPELLANT HAS SUBMITTED THE ORDER P ASSED U/S. 143(3) FOR A.Y.2010-11 AND FURTHER SUBMITTED THAT THE APPELLANT 'S CASE WAS NOT SELECTED ITA NO.2205/AHD/2016 ITO VS. NATIONAL INNOVATION FOUNDATION INDIA A.Y. 2012-13 - 3 FOR SCRUTINY FOR A.Y.2011-12. IT HAS NOT RECEIVED AN Y INTIMATION U/S.143(1) OF THE ACT FOR A.Y.2011-12 AS WELL. THE APPELLANT INFORM ED THAT ON 24/3/2015 IT HAD FILED A RECTIFICATION APPLICATION U/S. 154 OF T HE ACT ON THE ISSUE OF THE OBSERVATION OF A.O THAT THE CARRY FORWARD OF DEFICIT IS NOT ACCEPTABLE AND NOT ALLOWED AS PER THE ORDER PASSED IN THE CASE OF APPE LLANT FOR A.Y.2011-12. FOR THE SAID RECTIFICATION APPLICATION THE APPELLANT HA S INFORMED THE A.O THAT THE APPELLANT'S CASE WAS NOT SELECTED FOR SCRUTINY FOR A.Y.2011-12. THE APPELLANT HAS ALSO SUBMITTED THE COMPUTATION OF INCOME FOR A.Y .2010-11 I.E. F.Y 2009- 10. IN THE STATEMENT OF INCOME IT IS OBSERVED THAT THE APPELLANT HAS CARRIED FORWARD LOSS/DEFICIT AMOUNTING TO RS.1,00,97,909/- AND IN THE SAID STATEMENT OF INCOME ITSELF IT HAS RELIED UPON THE JUDGMENTS OF C IT VS MAHARANA OF MEWAR CHARITABLE FOUNDATION 164 ITR 439 (RAJ), CIT VS SHR I PLOT SWETAMBAR MURTI PUJAK JAM MANDAL 211 ITR 293 (GUJ), CIT VS MATRISEVA TRUST 242 ITR 20 (MAD) AND GOVINDU NAICKER ESTATE VS ADI 248 ITR 368 ( MAD). THE APPELLANT ALSO SUBMITTED THE ORDER PASSED U/S.143(3) OF THE ACT FOR A.Y 2010-11. IT IS APPARENT FROM THIS ORDER THAT THE THEN A.O HAS ACCEP TED THE TOTAL INCOME AS PER RETURN AT RS. NIL. HOWEVER, THE A.O IS SILENT OR HAS NOT REFERRED TO THE CARRY FORWARD OF DEFICIT OF RS.1,00,97,909/- FOR THE A.Y.2 010-11. AS MENTIONED EARLIER THE APPELLANT HAS INFORMED THAT NO SCRUTINY ASSESSMENT WAS UNDERTAKEN FOR AY 2011-12 AND IT IS NOT IN RECEIPT OF ANY INTIMATION U/S.143(1) OF THE ACT. BASED ON THESE FACTS AND CIRCUMSTANCES, I AM O F THE CONSIDERED OPINION THAT THE A.O WAS NOT JUSTIFIED IN MENTIONING OF ASSE SSMENT THAT NON ACCEPTANCE OF CARRY FORWARD OF DEFICIT OF A.Y. 2010-11 IS IN LI NE WITH THE ORDER PASSED IN CASE OF THE APPELLANT WITH A.Y.2011-12. SO FAR AS TH E CLAIM OF THE APPELLANT FOR CARRY FORWARD OF DEFICIT OF A.Y. 2010-11 IS CONCERNED, THE ORDER FOR A.Y.2010-11 U/S.143(3) OF THE ACT IS SILENT ON NOT ALL OWING THE CARRY FORWARD OF THE SAID DEFICIT. THE APPELLANT HAS ALSO RELIED ON THE CASE LAW OF JURISDICTIONAL HIGH COURT IN THE CASE OF SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL(SUPRA). HON'BLE GUJARAT HIGH COURT IN THE CAS E OF SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL WHEREIN IT WAS HEL D AS FOLLOWS:- A BARE PERUSAL OF SECTION 11 OF THE INCOME-TAX ACT, 1961, SHOWS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH I NCOME IS APPLIED TO SUCH PURPOSES IN INDIA IS TO BE EXCLUDED FOR THE PU RPOSES OF COMPUTING THE INCOME OF THE TRUST FOR THE PURPOSE OF ASSESSME NT. THERE ARE NO WORDS OF LIMITATION IN THIS SECTION PROVIDING THAT THE IN COME 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 T PRACTICAL USE '. HAVING REGARD TO THE PROVISIONS OF SECTION 11 OF THE ACT. IT IS CLEAR THAT WHEN THE INCOME ITA NO.2205/AHD/2016 ITO VS. NATIONAL INNOVATION FOUNDATION INDIA A.Y. 2012-13 - 4 OF A TRUST IS USED OR PUT TO USE TO MEET THE EXPENS ES INCURRED FOR RELIGIOUS OR CHARITABLE PURPOSES, IT IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE APPLICATION OF THE INCOME FOR CHARITA BLE OR RELIGIOUS PURPOSES TAKE PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS P URPOSES. IN OTHER WORDS, EVEN IF EXPENSES CHARITABLE AND RELIGIOUS PU RPOSES HAVE BEEN INCURRED FOR THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THA T YEAR CAN BE SAID TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURP OSES IN THE YEAR IN WHICH THE EXPENSES INCURRED FOR CHARITABLE AND RELI GIOUS 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 THE SUBSEQUENT YEAR AND UT ILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER Y EAR, WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. INCOME DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES FOR DETERMINING THE INCOME ARE APPLIED, IT IS BUT NATURAL THAT THE ADJU STMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST INCOME EARNED BY THE TRUST IN THE SUBS EQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUS T FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISION S CONTAINED IN SECTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED F ROM THE INCOME OF THE TRUST UNDER SECT/ON 11(1)(A). 4.3 I AGREE WITH THE CONTENTION OF THE APPELLANT A S WELL AS THE RELIANCE PLACED ON THE DECISION OF JURISDICTIONAL GUJARAT HIGH COURT AS ABOVE AND HEREBY DIRECT THE A.O TO ALLOW THE TO CARRY FORWARD OF UNABSORBED DEFICIT AMOUNTING TO RS.1,00,97,909/- AGAINST FUTURE INCOME, IF ANY. ACCO RDINGLY, GROUND OF APPEAL NO.1 IS ALLOWED. 5. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE LD. CIT(A)S ORDER WOULD INDICATE THAT LEARNED FIRST APPELLATE AUTHORITY HAS BASED ITS FINDINGS ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. THE HONBLE HIGH COURT HAS HELD THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST ITA NO.2205/AHD/2016 ITO VS. NATIONAL INNOVATION FOUNDATION INDIA A.Y. 2012-13 - 5 FOR CHARITABLE AND RELIGIOUS PURPOSE IN THE EARLIER YEARS AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEARS WILL HA VE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE A ND RELIGIOUS PURPOSE IN SUBSEQUENT YEARS, IN WHICH ADJUSTMENT HAS BEEN MADE . THIS FINDING WOULD INDICATE THAT ASSESSEE WOULD BE ENTITLED TO C ARRY FORWARD OF THE DEFICIT FOR MAKING ADJUSTMENT AGAINST THE INCOME OF THE TRUST IN SUBSEQUENT YEARS. THEREFORE, WE DO NOT FIND ANY ERR OR IN THE ORDER OF THE LD. CIT(A). THIS GROUND OF APPEAL IS REJECTED AND A PPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 16 TH MAY 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) 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. -./# 0# / CONCERNED CIT 4. 0# () ) / THE CIT(A) 5. 345 +# ./ , ) $ )./( , / DR, ITAT, AHMEDABAD. 6. 56 7! / GUARD FILE. $% + / BY ORDER, ,/ - (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY