VIPASSANA RESEARCH INSTITUTE, MUMBAI V. ITO (EXEMPTION) - 2(4), MUMBAI

ITA 2532/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2129 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 25-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Assessee Lawyers: RAJNIKANT V CHANIYARI
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Benefit of exemption; Capital Gains
• Section: 11; 12A; 11(1A); 264

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F, BENCH MUM BAI BEFORE SHRI. VIKAS AWASTHY, JUDICIAL MEMBE R & SHRI G. MANJUNATHA, ACCOUNTANT MEMBE R ITA NO.2532/MUM/2018 ( ASSESSMENT YEAR: 2012-13 ) VIPASSANA RESEARCH INSTITUTE 2 ND FLOOR, GREEN HOUSE GREEN STREET, FORT MUMBAI-400 023 VS. ITO(EXEMPTIONS)-2(4) PIRAMAL CHAMBERS LALBAUG, PAREL MUMBAI-400 012 PAN/GIR NO. AA ATV1217E ( APPELLANT ) .. ( RESPONDENT ) REVENUE BY SHRI. SAMATHA MULLAMUDI ASSESSEE BY SHRI. RAJNIKANT V.CHANIYARI DATE OF HEARING 13 /11 /2019 DATE OF PRONOUNCEME NT 15 /1 1 /2019 / O R D E R PER G.MANJUNATHA (A.M) : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)1, MUMB AI, DATED 26/02/2018 AND IT PERTAINS TO ASSESSMENT YEAR 2012- 13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED ASSESSING OFFICER [HEREIN AFTER REFERRED TO AS 'AO'] HAS ERRED IN TAXING PROFIT OF RS.28,91,364/- ARISING ON SALE OF UNITS OF MUTUAL FUNDS UNDER THE HEAD 'INCOME FROM OTHER SOURCES' WITHOUT APPRECIATING THAT THE SAME HAS BEEN TAXED SEPARATELY UNDER THE APPROPRIAT E HEAD 'CAPITAL GAINS' AND THE HON'BLE COMMISSIONER OF INCOME-TAX ( I APPEALS) - 1 (HEREIN AFTER REFERRED TO AS 'CIT(A)] HAS ERRED IN UPHOLDING THE DECISION OF LEARNED AO. ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 2 THE APPELLANT TRUST PRAYS THAT THE LEARNED AO BE DI RECTED TO REDUCE THE PROFIT OF RS.28,91,364/- ARISING ON SALE OF UNITS O F MUTUAL FUNDS FROM THE TOTAL RECEIPTS UNDER THE HEAD 'INCOME FROM OTHER SO URCES', TAX THE SAME UNDER THE HEAD 'CAPITAL GAINS AND CONSEQUENTLY, AL LOW CARRY FORWARD OF LONG TERM CAPITAL LOSS OF RS.60,75,739/- (DETERMINE D AFTER ALLOWING INDEXATION BENEFIT U/S. 43). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND. IN LAW, THE LEARNED AO HAS ERRED IN DISALLOWING THE CLAIM OF 15 % AS ACCUMULATION OF INCOME U/S. 11(1)(A) OF THE ACT OF RS. 33,18,282 AN D THE HON'BLE CLT(A) HAS ERRED IN UPHOLDING THE DECISION OF LEARNED AO. THE LEARNED AO BE DIRECTED TO ALLOW THE ACCUMULATION OF INCOME OF RS. 33,13,271 AND INCREASE THE DEFICIT ACCORDINGLY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E TRUST IS REGISTERED WITH CIT(EXEMPTION), MUMBAI U/S 12A OF T HE I.T.ACT 1961. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR AY 2012-13 ON 30/09/2012, DECLARING TOTAL DEFICIT AT RS. 97,47,02 1/-. THE CASE WAS SELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE LD. AO NOTICED THAT THE ASSESSE HA S CLAIMED DEPRECIATION ON ASSETS, WHICH HAVE BEEN CLAIMED AS APPLICATION OF INCOME U/S 11(1)(A) OF THE I.T.ACT 1961. ACCORDINGL Y, HE OPINED THAT IF DEPRECIATION IS ALLOWED ON SAID FIXED RECEIPTS, IT AMOUNT TO DOUBLE DEDUCTIONS AND ACCORDINGLY, REJECTED THE CLAIM OF D EPRECIATION ON FIXED ASSETS. SIMILARLY, THE LD. AO HAS REJECTED TH E CLAIM OF DEFICIT CLAIM OF THE ASSESEE TO SUBSEQUENT YEARS, ON THE GR OUND THAT WHEN, APPLICATION OF INCOME FOR OBJECTS OF THE TRUST IS OVER AND ABOVE, THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, THE N THE QUESTION OF ALLOWING 15% SET OFF U/S 11(1A) (A) OF THE I.T.ACT , 1961 DOES NOT ARISE AND ACCORDINGLY, REJECTED DEFICIT CLAIM OF TH E ASSESEE. SIMILARLY, THE LD. AO HAS RECOMPUTED LONG TERM CAPITAL GAIN DE RIVED FROM SALE OF MUTUAL FUNDS WITHOUT ALLOWING THE BENEFIT OF IND EXATION AND ALSO, CONSIDERED NET CAPITAL GAIN EARNED FROM TRANSFER OF CAPITAL ASSET UNDER THE HEAD INCOME FROM OTHER SOURCES AND TREATE D AS PART OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST AND, ACCORDINGLY, ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 3 COMPUTED INCOME UNDER THE PROVISION OF SECTION 11 O F THE I.T.ACT 1961. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESEE P REFERRED AN APPEAL BEFORE THE LD.CIT(A). BEFORE THE LD.CIT(A), THE ASSESEE HAS CHALLENGED ADDITIONS MADE BY THE AO TOWARDS DEPRECI ATION ON FIXED RECEIPTS, CARRY FORWARD OF DEFICIT, DIVIDEND INCO ME EXEMPT U/S 10(35), TAXABILITY OF GAINS ARISING ON SALE OF UNI TS OF MUTUAL FUNDS AND ACCUMULATION OF INCOME U/S 11(1A)(A) OF THE I.T .ACT, 1961 ALONG WITH CERTAIN JUDICIAL PRECEDENTS. THE LD.CIT(A), FO R THE DETAILED REASONS RECODED IN HIS APPELLATE ORDER PARTLY ALLOW ED, APPEAL FILED BY THE ASSESSEE, WHERE HE HAD ALLOWED RELIEF TOWARDS D EPRECIATION ON FIXED ASSETS BY FOLLOWING DECISION OF HONBLE BOMB AY HIGH COURT, IN THE CASE OF CIT VS INSTITUTE OF BANKING AND PERSON NEL SELECTION (IBPS) (2003) 264 ITR 110. HE HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE TO CARRY FORWARD DEFICIT OF THE YEAR TO S UBSEQUENT YEAR BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT , IN THE CASE OF CIT VS IBPS (SUPRA). SIMILARLY, HE HAD ALLOWED RELI EF TO THE ASSESSEE, IN RESPECT OF DIVIDEND INCOME EXEMPT U/S 10(34) OF THE I.T.ACT 1961. HOWEVER, CONFIRMED THE FINDINGS OF TH E AO, INSOFAR COMPUTATION OF CAPITAL GAIN ON SALE OF UNITS OF MUT UAL FUNDS, ON THE GROUND THAT INCOME OF TRUST /INSTITUTIONS SHALL BE COMPUTED ON COMMERCIAL PRINCIPLES OF INCOME COMPUTATION WITHOUT RESORTING TO ANY HEAD OF INCOME AND ALSO, OTHER DEDUCTIONS AS PE RMISSIBLE UNDER THOSE HEADS OF INCOME. SIMILARLY, THE LD.CIT(A) HAS REJECTED THE CLAIM OF THE ASSESSEE TOWARDS APPLICATION OF INCOME FOR REINVESTMENT OF NET CONSIDERATION FROM SALE OF UNIT S OF MUTUAL FUNDS IN FIXED DEPOSITS, ON THE GROUND THAT IN ORDER TO GET THE BENEFIT OF SECTION 11(1)(A) ,THE NET CONSIDERATION SHALL BE IN VESTED IN ANY OTHER ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 4 CAPITAL ASSETS. SINCE, THE ASSESSE HAS NOT INVESTED NET CONSIDERATION IN ANOTHER CAPITAL ASSET, THE SURPLUS DERIVED FROM SALE OF UNITS OF MUTUAL FUNDS CANNOT BE CONSIDERED AS APPLICATION OF INCOME. AS REGARDS, ACCUMULATION OF INCOME @15% U/S 11(1)(A), THE LD.CIT(A) HELD THAT WHEN INCOME OF TRUST IS FULLY APPLIED FOR CHARITABLE PURPOSE AND DEFICIT HAS BEEN CARRY FORWARD FOR SUBSEQUENT YEARS, THEN THE QUESTION OF FURTHER ALLOWANCE FOR ACCUMULATION OF I NCOME @15% ON NOTIONAL BASIS DOES NOT ARISE. AGGRIEVED BY THE LD .CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5 THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATIO N FROM GROUND NO. 1 OF ASSESSE APPEAL IS COMPUTATION OF CAPITAL G AIN ON SALE OF UNITS OF MUTUAL FUNDS AND TAXING THE PROFIT UNDER T HE HEAD INCOME FROM OTHER SOURCES WITHOUT ALLOWING THE BENEFIT OF INDEXATION TO COST OF ACQUISITION OF ASSETS. THE FACTS BORNE OUT FROM RECORDS, ON THIS ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE TRUST HAD EARNED PROFIT OF RS. 28,91,364/- ON SALE OF UNITS OF MUTUAL FUNDS. THE ASSESSEE, WHILE COMPUTING INCOME OF TRUS T U/S 11 OF THE I.T.ACT, 1961, HAS EXCLUDED PROFIT FROM SALE OF UNI TS OF MUTUAL FUNDS AND COMPUTED CAPITAL GAINS ON SUCH SALE OF UNITS OF MUTUAL FUNDS, IN ACCORDANCE WITH THE PROVISION OF SECTION 45 R.W.S.4 8 OF THE I.T.ACT, 1961 AND DETERMINED LONG TERM CAPITAL LOSS OF RS.60 ,79,739/- AFTER CLAIMING INDEXATION BENEFIT. THE ASSESSEE TRUST CLA IMED SUCH LONG TERM CAPITAL LOSS BE ALLOWED TO BE CARRY FORWARD A ND SET OFF AGAINST ANY LONG TERM CAPITAL GAINS IN SUBSEQUENT YEARS. THE LD. AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE, ON THE GROUND THAT AS PER SECTION 11(1A)(A), WHEN A CAPITAL ASSET BEING PROP ERTY HELD UNDER TRUST IS TRANSFERRED AND ANY PART OF NET CONSIDERA TION IS UTILIZED FOR ACQUIRING ANOTHER CAPITAL ASSET TO BE SO HELD, THEN THE CAPITAL GAIN ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 5 ARISING FROM THE TRANSFER SHALL BE DEEMED TO HAVE B EEN APPLIED TO CHARITABLE PURPOSES TO THAT EXTENT UTILIZED. THE LD . AO FURTHER OBSERVED THAT IN THIS CASE, THE ASSESSEE HAS COMPUT ED CAPITAL GAIN UNDER THE NORMAL PROVISION OF SECTION 45 R.W.S. 48 OF THE I.T.ACT, 1961, WITHOUT CONSIDERING THE PROVISION OF SECTION 11(1A)(A) OF THE ACT, AND DETERMINED LONG TERM CAPITAL LOSS AFTER CL AIMING THE BENEFIT OF INDEXATION, THEREFORE, HE OPINED THAT LONG TERM CAPITAL LOSS COMPUTED BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE SCHEME TAXATION OF TRUST CLAIMING EXEMPTION U/S 11 AND ACC ORDINGLY, RECOMPUTED CAPITAL GAIN ON SALE OF UNITS OF MUTUAL FUNDS AND DETERMINED CAPITAL GAIN AT RS. 28,91,363/- AND ADDE D TO INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. HOWEVER, TH E LD. AO DENIED THE BENEFIT OF APPLICATION OF INCOME U/S 11(1)(A) O N THE GROUND THAT IN ORDER TO GET THE BENEFIT OF APPLICATION OF INCOME, THE ASSESSEE SHALL INVEST NET CONSIDERATION FOR ACQUIRING ANOTHER CAP ITAL ASSET TO BE SO HELD, SINCE THE ASSESEE HAS NOT ACQUIRED ANY CAPIT AL ASSET, THE BENEFIT OF APPLICATION OF INCOME CANNOT BE GIVEN. 6. THE LD. AR FOR THE ASSESSEE, AT THE TIME OF HEAR ING SUBMITTED THAT THE LD.AO, AS WELL AS THE LD.CIT(A) WERE ERRED IN CONSIDERING PROFIT EARNED FROM SALE OF UNITS OF MUTUAL FUNDS U NDER THE HEAD INCOME FROM OTHER SOURCES WITHOUT APPRECIATING FACT THAT SAME NEEDS TO BE TAXED SEPARATELY UNDER APPROPRIATE HEA D OF INCOME AFTER APPLYING NECESSARY PROVISIONS OF THE ACT, WHI CH IS APPLICABLE TO COMPUTATION OF CAPITAL GAIN FROM TRANSFER OF CAPITA L ASSETS. THE LD. AR, FURTHER, SUBMITTED THAT WHEN, THE CAPITAL ASSET HAS BEEN SOLD, AND RESULTANT GAIN OR LOSS SHALL BE COMPUTED IN ACC ORDANCE WITH PROVISION OF SECTION 45 R.W.S. 48 OF THE I.T.ACT, 1 961. THE ASSESSEE HAS APPLIED SAID PROVISIONS AND DETERMINED LONG TER M CAPITAL LOSS OF ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 6 RS.60,75,739/- AFTER CLAIMING INDEXATION BENEFIT. HOWEVER, THE ASSESSEE HAS EXCLUDED PROFIT EARNED FROM SALE OF UN ITS OF MUTUAL FUNDS FROM INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR THE PURPOSE OF COMPUTATION OF INCOME U/S 11 OF THE I.T. ACT, 1961. THE LD. AO WITHOUT APPRECIATING THESE FACTS HAS CONSIDE RED SURPLUS UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LD. A R, FURTHER SUBMITTED THAT THE LD. AO, AS WELL AS THE LD. CIT(A ) WERE ALSO ERRED IN NOT CONSIDERING PROFIT OF RS. 28,91,364/- AS APP LICATION OF INCOME U/S 11 OF THE I.T.ACT, 1961, EVEN THOUGH THE ASSESS EE HAS REINVESTED NET CONSIDERATION IN FIXED DEPOSITS WITH BANKS. 7. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORTI NG ORDER OF THE AO AS WELL AS LD.CIT(A) SUBMITTED THAT INCOME OF TR UST CLAIMING EXEMPT U/S 11 SHALL BE COMPUTED IN ACCORDANCE WITH NORMAL COMMERCIAL PRINCIPLES WITHOUT RESORTING TO ANY HEAD OF INCOME TO CLAIM THE BENEFIT OF NOTIONAL DEDUCTION PROVIDED TH ERE UNDER . THE LD. DR, FURTHER SUBMITTED THAT THE LD. CIT(A) HAS C ATEGORICALLY EXPLAINED THE POSITION OF LAW AS ENUMARAED U/S 11, TO DENY THE BENEFIT OF COMPUTATION OF LONG TERM CAPITAL GAIN AN D CONSEQUENT APPLICATION OF INCOME AND ITS ORDER SHOULD BE UPHEL D. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW ALONG WITH CASE LAWS CITED BY BOTH PARTIES. IT IS AN ADMI TTED FACT THAT THE PROVISION OF SECTION 11 TO 13 OF THE I.T.ACT, 1961 IS APPLICABLE TO ANY TRUST/INSTITUTIONS CLAIMING THE BENEFIT OF EXEMPTIO N FROM TAX, IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. THE PROVISION OF SECTION 11 TO 13 ARE SELF CONTENDED CO DE AND THUS, THE COMPUTATION OF INCOME OF CHARITABLE TRUST CLAIMING THE BENEFIT OF ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 7 EXEMPTION IS GOVERNED BY THE COMMERCIAL PRINCIPLES OF INCOME COMPUTATION. IN OTHER WORDS, ANY TRUST/INSTITUTIONS CLAIMING THE BENEFIT OF EXEMPTION U/S 11, THEN THEY NEED TO COMP UTE THEIR INCOME IN ACCORDANCE WITH NORMAL COMMERCIAL PRINCIPLES WIT HOUT RESORTING TO ANY PARTICULAR HEAD OF INCOME TO GET THE BENEFIT OF DEDUCTION /EXEMPTIONS PROVIDED THEREIN. THEREFORE, THE CLAIM OF THE ASSESSEE TRUST TO TREAT CAPITAL GAIN/LOSS UNDER THE HEAD CAP ITAL GAIN AND TO TREAT SUCH INCOME UNDER THE SCHEME OF 11 TO 13 OF THE I.T .ACT, 1961 NOT CORRECT, BECAUSE, UNLIKE THE PROVISION OF SECTION 7 2, THAT PROVIDES FOR CARRY FORWARD AND SET OF CAPITAL LOSS, THERE IS NO SUCH ENABLING PROVISION IN THE CASE OF TRUST TO ALLOW CAPITAL LOS S TO BE CARRY FORWARD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE THAT INCOME DERIVED FROM SALE OF UNITS OF MUTUAL FUNDS SHALL BE COMPUTED UNDER THE PROVISION OF SECTION 45 R.W.S.48 OF THE I.T.ACT, 1961. THIS VIEW IS FORTIFI ED BY THE DECISION OF HONBLE KOLKATA HIGH COURT IN THE CASE OF DIT (E) V S GIRDHARILAL SHEWNARAIN TANTIA TRUST (1993) 199 ITR 2015, WHERE IT WAS HELD THAT THE HEADS OF INCOME U/S 14 HAVE NO RELEVANCE A ND QUESTION OF ALLOWING THE STATUTORY DEDUCTIONS WILL NOT ARISE. FOR THIS REASONS, THE TERM USED IN SECTION 11(1A) IS NET CONSIDERATIO N I.E, FULL VALUE OF CONSIDERATION RECEIVED AS A RESULT OF TRANSFER OF C APITAL ASSET LESS ANY EXPENDITURE INCURRED ON SUCH TRANSFER TO QUALIF Y THE CAPITAL GAIN ON TRANSFER OF CAPITAL ASSETS OF A TRUST TO BE ELIG IBLE FOR APPLICATION OF INCOME, IF, NET CONSIDERATION IS INVESTED IN ANOTHE R CAPITAL ASSET. SINCE, THE ASSESSEE HAS NOT INVESTED NET CONSIDERAT ION IN ANY OTHER CAPITAL ASSET, AND ALSO INVESTMENT IN FIXED DEPOSIT S DOES NOT COME UNDER THE MEANING OF CAPITAL ASSET, THE BENEFIT OF APPLICATION OF INCOME CANNOT BE GIVEN. HENCE, WE REJECT THE CLAIM OF THE ASSESEE. ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 8 9. HAVING HELD SO, LET US EXAMINE THE CLAIM OF THE ASSESSEE WITH REGARD TO APPLICATION OF INCOME IN RESPECT OF PROFI T DERIVED FROM SALE OF UNITS OF MUTUAL FUNDS U/S 11 OF THE I.T.ACT, 196 1. THE PROVISION OF SECTION 11(1)(A) IS VERY CLEAR, AS MUCH AS, IF NET CONSIDERATION IS INVESTED ON TRANSFER OF CAPITAL ASSETS FOR ACQUIRI NG ANOTHER CAPITAL ASSETS TO BE SO HELD, THEN THE CAPITAL GAIN ARISING FROM THE TRANSFER SHALL BE DEEMED TO HAVE BEEN APPLY TO CHARITABLE PU RPOSE TO THAT EXTENT UTILIZED. IN THIS CASE, LOWER AUTHORITIES HA VE BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THE ASSESSEE HAS NOT UTILI ZED NET CONSIDERATION FOR ACQUIRING ANOTHER CAPITAL ASSET T O BE SO HELD. EVEN THOUGH, THE ASSESSE CLAIM THAT IT HAS INVESTED NET CONSIDERATION IN FIXED DEPOSITS WITH BANKS, BUT FIXED DEPOSITS WITH BANKS DOES NOT COME WITHIN THE MEANING OF DEFINITION OF CAPITAL AS SETS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO MERI T IN THE ARGUMENTS OF THE ASSESSEE THAT THE BENEFIT OF APPLICATION OF INCOME TO THE EXTENT OF NET CONSIDERATION TO BE GIVEN IS INCORRECT. ACCO RDINGLY, WE REJECT THE CLAIM OF THE ASSESSEE. 10. THE NEXT ISSUE THAT CAME UP OF OUR CONSIDERATIO N FROM GROUND NO.2 OF ASSESSEE APPEAL IS ACCUMULATION OF 15% OF I NCOME U/S 11(1)(A) OF THE I.T.ACT, 1961 TO THE EXTENT OF RS.3 2,18,282/-. THE FACTS WITH REGARD TO THE IMPUGNED DISPUTED ARE THA T DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS COMPUTED INC OME FROM OTHER SOURCES BEING INCOME DERIVED FROM PROPERTY HELD U NDER TRUST AT RS.3,10,62,980/-. THE ASSESEE HAS EXCLUDED DIVIDEND INCOME BEING EXEMPT U/S. 10(34)/10(35), LONG TERM CAPITAL GAIN D ERIVED FROM SALE OF UNITS OF MUTUAL FUNDS AND CORPUS DONATION FROM G ROSS INCOME AND ARRIVED AT NET INCOME FROM PROPERTY HELD UNDER TR UST RS. 1,85,63,548/-. AS AGAINST THIS, THE ASSESSEE HAS CL AIMED AMOUNT ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 9 APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSE IN IND IA DURING THE PREVIOUS YEAR U/S 11 OF THE I.T.ACT, 1961 AT RS. 2, 49,97,599/-. THE ASSESSEE HAS ALSO CLAIMED ACCUMULATION OF INCOME FO R CHARITABLE PURPOSE TO THE EXTENT OF15% OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST U/S 11(1)(A) AMOUNTING TO RS.33,13,271/ - AND CLAIMED NET DEFICIT OF RS. 97,47,021/- TO BE CARRY FORWARD FOR SUBSEQUENT YEARS. THE LD. AO HAS DENIED THE BENEFIT OF CARRY FORWARD OF DEFICIT TO SUBSEQUENT YEARS, ON THE GROUND THAT IF APPLICATION OF INCOME FOR CHARITABLE PURPOSE IS OVER AND ABOVE, THE INCOME D ERIVED FROM PROPERTY HELD UNDER TRUST, THEN FURTHER DEDUCTION T OWARDS 15% ACCUMULATION OF INCOME U/S 11 (1)(A) OF THE I.T.ACT , 1961 DOES NOT ARISE. THE ASSESEE CLAIMS THAT WHEN, INCOME IS COMP UTED U/S 11 OF THE I.T.ACT, 1961, PERMISSIBLE DEDUCTION, INCLUDING NOTIONAL DEDUCTION AS PROVIDED U/S 11(1)(A), @15% TOWARDS ACCUMULATIO N OF INCOME FOR CHARITABLE PURPOSE SHOULD BE ALLOWED, WHETHER OR NO T ANY SURPLUS IS DERIVED FOR THE YEAR UNDER CONSIDERATION. IN THIS R EGARD, THE ASSESEE HAS RELIED UPON THE DECISION OF ITAT, MUMBAI, IN TH E CASE OF ADIT (EXEMPTION) VS SAYAJI-U-BA KHIN MEMORIAL TRUST IN ITA O. 5883 & 5646/MUM/2011. 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORITIE S BELOW. THE PROVISIONS OF SECTION 11 TO 13 OF THE ACT, GOVERNS COMPUTATION OF INCOME OF ANY TRUST/INSTITUTIONS CLAIMING THE BENEF IT OF EXEMPTION. AS PER THE SAID PROVISION, THE INCOME OF A TRUST CLAIM ING THE BENEFIT OF EXEMPTIONS SHALL BE COMPUTED IN ACCORDANCE WITH NOR MAL COMMERCIAL PRINCIPLES. THE SAID PROVISIONS FURTHER PROVIDES FOR ACCUMULATION OF INCOME TO THE EXTENT OF 15% OF GROS S INCOME DERIVED FROM PROPERTY HELD UNDER TRUST TO BE ACCUMU LATED FOR ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 10 SUBSEQUENT YEARS FOR APPLICATION OF SAID INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES, IF THE TRUST DERIVES SURPLUS FR OM ITS OPERATIONS FOR THE YEAR UNDER CONSIDERATION BEFORE TAXING ANY INCO ME OF A TRUST UNDER THE PROVISION OF SECTION 11 OF THE I.T.ACT, 1 961. IN OTHER WORDS, IF THE ASSESEE WANTS TO CLAIM THE BENEFIT OF ACCUMU LATION OF INCOME TO THE EXTENT OF 15% OF GROSS INCOME U/S 11(1)(A), THEN THERE SHOULD BE A SURPLUS FOR THE YEAR UNDER CONSIDERATION. IN C ASE, THE ASSESSEE HAS SPENT AMOUNT TOWARDS CHARITABLE PURPOSE OVER A ND ABOVE THE AMOUNT OF INCOME DERIVED FROM PROPERTY HELD UNDER T RUST, THEN THE DEFICIT SO ARRIVED SHALL BE CARRY FORWARD TO SUBSEQ UENT YEARS TO BE APPLIED OUT OF INCOME OF SUBSEQUENT YEARS. IN THIS LEGAL POSITION, IF YOU CONSIDER THE CASE OF THE ASSESSE, WHETHER THE A SSESSEE IS ENTITLED FOR ACCUMULATION OF INCOME TO THE EXTENT O F 15% OF GROSS INCOME U/S 11(1)(A) HAS TO BE EXAMINED, IN LIGHT OF THE FACTS BROUGHT OUT BY THE AO. IN THIS CASE, IT IS AN ADMITTED FACT THAT THE AMOUNTS SPENT FOR CHARITABLE PURPOSE U/S 11 OF THE I.T.ACT, 1961 IS OVER AND ABOVE THE AMOUNT OF INCOME DERIVED FROM PROPERTY HE LD UNDER TRUST. IN OTHER WORDS, FOR THE YEAR UNDER CONSIDERATION, T HERE IS NO SURPLUS INCOME FOR THE ASSESSEE OUT OF ITS CHARITABLE ACTIV ITIES. FURTHER, WHEN THERE IS NO SURPLUS FOR THE YEAR UNDER CONSIDERATIO N, THEN THE QUESTION OF ACCUMULATION OF 15% INCOME OUT OF GROSS INCOME FOR SUBSEQUENT YEARS U/S 11(1)(A) DOES NOT ARISE. THIS LEGAL PRINCIPLE HAS BEEN EXPLAINED BY THE HONBLE SUPREME COURT IN THE CASE OF ADDL.CIT VS A.L.N.RAO CHARITABLE TRUST. (1995) 129 CTR 205, WHEREIN, THE PROCEDURE OF COMPUTATION OF INCOME OF CHARITABLE TRUST HAS BEEN EXPLAINED. AS PER THE SAID FINDING OF THE HONBLE SUPREME COURT, THE ASSESSEE IS ENTITLED FOR ACCUMULATION OF INCOME TO THE EXTENT OF 15% ONLY, WHEN THE TRUST DERIVES SURPLUS INCOME OUT OF ITS ACTIVITIES FOR THE YEAR UNDER CONSIDERATION. IF THE RE IS NO SURPLUS ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 11 INCOME FOR THE YEAR UNDER CONSIDERATION, THEN THE Q UESTION OF ACCUMULATION OF INCOME TO THE EXTENT OF 15% OF GROS S INCOME DOES NOT ARISE. IN THIS CASE, NO DOUBT, THE ASSESSEE HAS FILED A COMPUTATION OF TOTAL INCOME, AS PER WHICH THE INCOM E DERIVED FROM PROPERTY HELD UNDER TRUST IS LESS THAN THE AMOUNT O F INCOME APPLIED FOR CHARITABLE PURPOSE IN INDIA DURING THE PREVIOUS YEAR. UNDER THESE CIRCUMSTANCES, FURTHER DEDUCTION TOWARDS 15% INCOME U/S 11(1)(A) IS INCORRECT AND OPPOSED TO THE LAW. ACCORDINGLY, DEDU CTION CLAIMED BY THE ASSESSEE TOWARDS ACCUMULATION OF INCOME TO THE EXTENT OF 15% OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IS HEREBY REJECTED. 12. HAVING SAID SO, LET US EXAMINE, WHETHER THE LOW ER AUTHORITIES WERE RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE T OWARDS CARRY FORWARD OF DEFICIT TO SUBSEQUENT YEARS. IT IS SETTL ED POSITION OF LAW THAT IN ANY YEAR, THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IS LESSER THAN THE AMOUNT OF INCOME APPLIED FOR CHA RITABLE PURPOSE IN INDIA, THEN THE EXCESS APPLICATION OF INCOME SHALL BE CARRY FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME OF S UBSEQUENT YEARS. THIS LEGAL PROPOSITION IS SUPPORTED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS IBPS (SUPRA ). IN THIS CASE, ON PERUSAL OF FACTS, WE FIND THAT BEFORE ACCUMULATI ON OF INCOME TO THE EXTENT OF 15%, THE ASSESSEE HAS SPENT AN AMOUNT OF RS. 2,49,97,599/- FOR CHARITABLE OR RELIGIOUS PURPOSE IN INDIA DURING THE PREVIOUS YEAR. WE, FURTHER, NOTED THAT THE ASSESSEE HAS DERIVED INCOME FROM OTHER SOURCES BEING INCOME DERIVED FROM PROPERTY HELD UNDER TRUST AT RS. 2,14,55,211/-, INCLUDING PROFIT DERIVED FROM SALE OF UNITS OF MUTUAL FUNDS. IF YOU CONSIDER AMOUNT APPLI ED TO CHARITABLE PURPOSE IN INDIA DURING THE PREVIOUS YEAR AMOUNTING TO RS. 2,49,97,599/-, TO THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST ITA NO.2532/MUM/2018 VIPASSANA RESEARCH INSTITUTE 12 AMOUNTING TO RS. 1,85,63,848/-, THEN THE ASSESSEE H AS APPLIED EXCESS AMOUNT OF RS. 64,33,751/-. IN OTHER WORDS, T HE ASSESSE HAS COMPUTED DEFICIT OF RS. 64,33,751/- FOR THE YEAR UN DER CONSIDERATION AND THE SAID DEFICIT NEEDS TO BE ALLOWED TO BE CARR Y FORWARD TO SUBSEQUENT YEARS. THEREFORE, WE ARE OF THE CONSIDER ED VIEW THAT THE LD. AO, AS WELL AS THE LD.CIT(A) WERE INCORRECT IN REJECTING THE CLAIM OF THE ASSESEE IN TOTAL WITHOUT CONSIDERING THE SET TLED POSITION OF LAW. HENCE, WE DIRECT THE AO TO ALLOW CARRY FORWARD OF T HE DEFICIT FOR RS. 64,33,751/- TO SUBSEQUENT YEARS. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15 /11/ 2019 SD/- ( VIKAS AWASTY) SD/- (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 15/11/2019 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//