DCIT(Exemption), Bhopal V. Vanashpati Smriti Shiksha Samiti, Bhopal, Bhopal

ITA 25/Ind/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 2549 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 07-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation
• Section: 11; 12AA; 143(1)

Judgement Text

अपील य अ धकरण, इ दौर यायपीठ, इ दौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER (Virtual Hearing) ITA No.25/Ind/2021 And C.O. No.34/Ind/2021 Assessment Year: 2017-18 DCIT (Exemption) Bhopal बनाम/ Vs. Vanashpati Smriti Shiksha Samiti, Bhopal (Appellant / Revenue) (Respondent / Assessee) P.A. No. AADTS0547H Appellant by Shri P.K. Mitra Sr. DR Respondent by Shri Pavan Ved, AR Date of Hearing: 03.03.2022 Date of Pronouncement: 11.05.2022 आदेश / O R D E R PER BHAGIRATH MAL BIYANI, A.M.: 1. This appeal filed by the Revenue is directed against the order dated 24.08.2020 of the learned CIT(A)-2, Bhopal [“Ld. CIT(A)”] in Appeal No. CIT(A)-2/BPL/IT-10615/19-20, which in turn arises out of the intimation of assessment dated 30.07.2019 passed by the learned CPC, Bangalore [“Ld. AO”] u/s 143(1) of the Income-tax Act, 1961 [“the Act”] for the assessment-year 2017-18. The assessee has also submitted Cross- Objection No. CO/34/Ind/2021 which is admitted and being disposed of. Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 2 2. The registry has informed that that the present appeal was required to be filed by 07.11.2020 but the same was actually filed on 08.02.2021, after a delay of 93 days. The Ld. AR prayed that the delay has occurred due to Covid-19 Pandemic. The Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted the Ld. DR who agreed to the submission of Ld. AR. In view of this, the appeal is proceeded with for hearing, there being no delay. 3. Briefly stated the facts are such that the assessee is a Society registered u/s 12AA and entitled to the exemption u/s 11 of the Act. The assessee submitted return which was processed by Ld. AO u/s 143(1). While filing Return of Income, the assessee declared the Gross Income (before exemption u/s 11) of Rs. 30,30,43,882/- which the Ld. AO increased to Rs. 30,53,45,585/-. Further, the assessee claimed exemption u/s 11 of Rs. 1,14,42,44,565/- which the Ld. AO restricted to Rs. 30,53,45,585/- to the extent of Gross Income. Being aggrieved by the action of Ld. AO, the aggrieved-assessee preferred appeal to the Ld. CIT(A). The Ld. CIT(A) allowed part-relief. Against the order of Ld. CIT(A), the Revenue has filed this appeal and the assessee has filed Cross-Objection and both sides are before us. We proceed to decide first the Appeal of Revenue and thereafter the Cross-Objection of assessee. 4. The summarized figures culled out from the Return of Income, Intimation u/s 143(1) and final figures after Appeal-Order of Ld. CIT(A) are given in the following “TABLE” for a quick understanding: Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 3 As per Return of Income As per Intimation u/s 143(1) Final figures after appeal- order of Ld. CIT(A) Gross Income (before exemption u/s 11) 30,30,43,882 30,53,45,585 30,35,00,648 Exemption u/s 11 Revenue expenses 22,37,39,497 22,37,39,497 22,37,39,497 Brought forward excess application from earlier years 87,89,14,021 87,89,14,021 52,81,18,951 Sub-total 1,10,26,53,518 1,10,26,53,51 75,18,58,448 Capital expenses 1,58,45,907 1,58,45,907 1,58,45,907 Repayment of loan 2,57,45,140 2,57,45,140 Nil Total exemption 1,14,42,44,565 30,53,45,585 76,77,04,355 Total Income Nil Nil Nil REVENUE’S APPEAL: 5. The solitary Ground raised by the assessee is as under: “1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in allowing the excess amounts spent in the earlier years against the income of the subsequent subject year even if it is not claimed in ITR nor before the AO, violating the principles laid down by the Hon’ble Supreme Court of India in Goetze (India) Ltd. Vs. CIT (284) ITR 323 SC. Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 4 6. Precisely stated the facts relevant to the controversy involved in the Ground raised by the Revenue, as can be discerned from the “TABLE” of summarized figures given above, are such that while filing Return of Income the assessee claimed a total exemption of Rs. 1,14,42,44,565/- u/s 11 which included the “Brought forward excess application from earlier years” amounting to Rs. 87,89,14,021/-. The Ld. CPC, while passing intimation u/s 143(1) allowed all components, as claimed by the assessee in the Return of Income, aggregating to the total exemption of Rs. 1,14,42,44,565/- (which includes the “Brought forward excess application from earlier years” amounting to Rs. 87,89,14,021/- as well) but restricted the amount of total exemption to the available Gross Income of Rs. 30,53,45,585/-. The assessee contested matter before the Ld. CIT(A). The Ld. CIT(A) allowed total exemption of Rs. 76,77,04,355/- which again is inclusive of the “Brought forward excess application from earlier years”, though the Ld. CIT(A) agreed to Rs. 52,81,18,951/- in place of Rs. 87,89,14,021/-. Thus, the “Brought forward excess application from earlier years” is claimed in the Return of Income, allowed in the Intimation u/s 143(1) and finally accepted by Ld. CIT(A) too with a varied figure. The assessee has not raised any dispute against Rs. 52,81,18,951/- computed by Ld. CIT(A) on account of “Brought forward excess application from earlier years” by way of cross-appeal or even in cross-objection. However, it is the Revenue which is now contesting in its appeal that the Ld. CIT(A) was not justified in allowing the “Brought forward excess application from earlier years” on the ground that it was neither claimed in the Return of Income nor before the Ld. AO, violating the principles laid down by the Hon’ble Supreme Court in Goetze (India) Ltd. Vs. CIT (284) ITR 323 SC. 7. On perusal of Para No. 6 of the order of Ld. CIT(A), we find the following finding of fact recorded by Ld. Ld. CIT(A): Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 5 “6. In this ground, the appellant has objected against the action of CPC in disallowing carry forward of brought forward excess expenditure/ application of earlier years to be set off in the current year or for not being treated as application for the year. The appellant has also objected against the action of CPC in restricting the total expenditure incurred (including revenue, capital and repayment of loan for acquiring capital assets) to the extent of Income and further in not allowing carry forward of the residual excess amount for next years. In the written submissions, the appellant submitted that it claimed followings in the IT return as application of income: Revenue Expenses: All Revenue Expenses (Excluding Depreciation) 22,37,39,497/- Brought forward Excess Expenses of earlier years 87,89,14,021/- 1,10,26,53,518/- Capital Expenses (Acquisition of assets) 1,58,45,907/- Repayment of Loan 2,57,45,140/- It has been submitted that, the CPC restricted the same to the extent of total income i.e. Rs. 30,53,45,585/- only (Rs. 30,30,43,882/- shown by assessee + Rs. 23,01,703/- added by CPC). It has been argued by the Ld. AR that the action of the CPC is unlawful and unwarranted. It has been further submitted that as per the decision of Hon'ble Supreme Court in CIT (E) V. Subros Educational Society (2018) 303 CTR 1 (SC), excess expenditure/application of earlier years amounting to Rs. 87,89,14,021/- also need to be set off in current year or to be treated as application of current year. The Ld. AR also submitted that the relevant ITR Form No.7 does not contain any column or space for brought forward, set-off and carry forward of such excess expenditure of earlier year in tune with the dictate of Hon'ble Supreme Court in the case of Subros ( Supra). Hence, the same was shown separately as an item of application in the Return Form. Copy of Return of Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 6 Income has also been furnished. It has also been contended that the action of CPC in restricting the allowance of application to the extent of income is without jurisdiction and incorrect. Therefore, all these expenses, as claimed by the appellant, deserve to be allowed as application and the excess amount over and above the income has to be carried forward to the next years as per the decision of Hon'ble Supreme Court in the case of CIT(E) v. Subros Educational Society (2018) 303 CTR 1 (SC).” This para recorded in the order of Ld. CIT(A) makes it abundantly clear that the assessee has claimed “Brought forward excess application from earlier years” amounting to Rs. 87,89,14,021/- as an “item of application” in the Return Form No. 7 because the said form, prescribed in Income-tax Rules, 1962, does not contain any separate column or space to specify “Brought forward excess application from earlier years” although such a claim is very much allowable to the assessee based on the decision of Hon’ble Supreme Court in CIT(E) v. Subros Educational Society (2018) 303 CTR 1 (SC). We further observe that while passing Intimation u/s 143(1), the Ld. AO has also allowed the exemption of Rs. 87,89,14,021/- alongwith other components of exemption, though the total exemption was restricted to Rs. 30,53,45,585/-. These figures are also clearly mentioned in the Intimation u/s 143(1) passed by Ld. AO, culled out by us in the “TABLE” mentioned in earlier paragraph. Therefore, we observe that the assessee has claimed “Brought forward excess application of earlier years” in the Return of Income and the same was very much allowed and assessed by the Ld. AO in the Intimation u/s 143(1). If it is so, the Ground of the Revenue that the Ld. CIT(A) has allowed claim of “Brought forward excess application from earlier years” for the first time without any claim from the assessee in the Return of Income or before Ld. AO, is factually wrong and devoid of merit. Hence this Ground of Revenue deserves to be dismissed. Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 7 8. However, even assuming but not accepting that the declaration of the claim of Rs. 87,89,14,021/- as an “item of application” in the Return Form No. 7 as done by the assessee does not amount to making claim in the Return of Income or before the Ld. AO, the issue is still covered in favour of assessee by our decision in ITA No. 24/Ind/2021 for the immediately preceding Assessment-Year 2016-17 decided by us in a separate order. In that assessment-year 2016-17, unlike the assessment- year 2017-18 under consideration, the assessee neither claimed “Brought forward excess application from earlier years” in the Return of Income nor before Ld. AO and the claim was made for the first time before Ld. CIT(A). The Ld. CIT(A) allowed the claim of assessee. Against the action of Ld. CIT(A), the Revenue filed appeal before us and raised exactly same Ground as raised in the present assessment-year 2017-18 under consideration cited above. While deciding appeal of the assessment-year 2016-17, we have dismissed the Ground of Revenue by holding as under “10. We have considered the rival contentions of the both sides and perused the material held on record. We have also given our due consideration to the decision of Hon’ble Supreme Court in Goetze India (supra). We observe that the Ld. AR is correct in his submission that the Hon’ble Apex Court has held in Goetze India (supra) that a legitimate claim of assessee can be entertained by the appellate authorities for the first time. Even numerous decisions of various High Courts and Benches of ITAT have analysed the decision of Goetze India (supra) and conclusively interpreted that the appellate authorities can very well entertain and allow a new claim of assessee. Being so, we are inclined to hold that the Ld. CIT(A) has validly accepted the claim of assessee. Therefore, the revenue does not succeed in this Ground. Accordingly, we dismiss this Ground of Revenue.” Following this, the Ground in present appeal is also liable to be dismissed. 9. In view of our foregoing discussion, the Ground of Revenue is liable to be dismissed. Therefore, we dismiss the Appeal of Revenue. Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 8 ASSESSEE’S CROSS-OBJECTION: 10. The solitary Ground raised by the assessee reads as under: “1. The Ld. CIT(A) erred in not allowing repayment of loan as application of income vide Page 02 onwards of his order and para 6.” 11. We have already decided Cross-Objection No. 33/Ind/2021 of the assessee for immediately preceding Assessment-Year 2016-17 wherein an identical claim was raised by the assessee and the same was allowed by us. For a ready reference, we are reporting the concluding para of our order: “39. We have considered the rival submissions of both sides and perused the record. We have also gone through the judgements cited before us as also the amendment made in section 11(1) through Finance Act, 2021 from assessment-year 2022-23. At the outset, we find that the Hon’ble Apex Court, in CIT, Pune Vs. Rajasthan & Gujrati Charitable Foundation Poona (supra), has allowed deduction of depreciation on assets even when the assessee had already claimed the cost of those assets as “application of income”. It is also noteworthy that in the said judgement, the Hon’ble Apex Court also took note of the amendment made by Parliament in section 11(6) vide Finance Act (No. 2), 2014 by which the claim of depreciation was denied if the cost of asset had already been taken as “application of income”. While interpreting the amendment, the Hon’ble Court held as under: “It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature.” Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 9 Now we revert back to the exact controversy before us i.e. whether or not the repayment of loan / borrowing is an “application of income” in the year in which such repayment is made? The Ld. AR has made forceful submission in the light of the decision of Hon’ble Apex Court to demonstrate that such repayment is an “application of income” in the year in which repayment is made. Without repeating the detailed submission of Ld. AR which we have already noted in the foregoing discussion, we find sufficient weightage in the submissions of Ld. AR. At this stage we also observe that even according to the commercial principles, the de facto “application of income” took place at the time when the assessee utilized its income for repayment of loan / borrowing and in the present case, it has precisely happened in the assessment-year 2016- 17 under consideration. Being so the repayment of loan / borrowing is an “application of income” in the assessment- year 2016-17 irrespective of whether or not the original cost of acquisition was allowed in the earlier year. Moreover, realizing that there was no specific provision to restrict the double deduction, as perceived by the lower authorities, the legislature amended section 11(1) through Finance Act, 2021 but the amendment is prospective in application from assessment-year 2022-23 and does not have retrospective application. This interpretation gets support from the decision of Hon’ble Apex Court in the matter of section 11(6) narrated earlier. Hence we are persuaded to hold that the repayment of loan claimed by the assessee as an “application of Income” is a valid claim and deserves to be allowed. We, therefore, allow the Ground raised by assessee in the Cross-Objection.” 12. Since the issue is squarely covered in assessee’s own case for the preceding assessment-year 2016-17, we follow the same. Accordingly, the Ground raised by assessee in Cross-Objection is allowed. Vanshpati Smriti Shiksha Samiti ITA No.25/Ind/2021 & CO No. 34/Ind/2021 – AY 2017-18 10 13. In the result the appeal of Revenue is dismissed and the cross- objection of the assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 11.05.2022. Sd/- (MAHAVIR PRASAD) Sd/- (BHAGIRATH MAL BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore; दनांक Dated : 11 /05/2022 Patel/Sr. PS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order Sr. Private Secretary, Indore