ITO (E) 2(1), MUMBAI V. MALTI VASANT HEART TRUST, MUMBAI

ITA 2662/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8893 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2015
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Charitable institution
• Section: 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI JASO N P BOAZ , AM & SHRI RAM LAL NEGI , JM ITA NO. 2662 / MUM/20 1 5 ( ASSESSMENT YEAR : 2009 - 1 0 ) ITO (E) 2(1), MUMBAI VS. MALTI VASANT HEART TRUST, RAO SAHEB ACHYUT ROAD, PATWARDAN MA RG, FOUR BUNGLOW, ANDHERI WEST, MUMBAI 400 053 PAN/GIR NO. AAATM4563A APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI RAJAT MITTAL ASSESSEE BY SHRI AMIT KHATIWALA DATE OF HEARING 02/01/2017 DATE OF PRONOUNCEME NT 04 / 01 /201 7 / O R D E R PER JASON P BOAZ (A.M) : THIS APPEAL BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE CIT(A) - 1 , MUMBAI DATED 05/02/2015 FOR A.Y.2009 - 2010 . 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1. THE ASSESSEE TRUST FILED ITS RETURN FOR A.Y.2009 - 10 ON 30/09/2009 DECLARING LOSS OF ( - ) RS.45,85,501/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) VIDE ORDER DATED 31/10/2011; WHEREIN THE INCOME WAS ASSESSED A T NIL, THEREBY DISALLOWING THE CARRY FORWARD OF THE LOSS OF RS.45,85,501/ - AS CLAIMED BUY THE ASSESSEE, BY TREATING THE SAME AS ITA NO. 2662/MUM/2015 M ALTI VASANT HEART TRUST, MUMBAI 2 EXCESS APPLICATION OF LOSS U/S.11 TO THE SUBSEQUENT YEARS AS THERE IS NO PROVISION TO ALLOW THE SAME. 2.2. AGGRIEVED BY THE ORDE R OF ASSESSMENT DATED 31/10/2011 FOR A.Y.2009 - 10 TO THE ASSESSEE PREFERRED AN APPEAL TO THE CIT(A) 1, MUMBAI ON THIS ISSUE. THE LEARNED CIT(A) ALLOWED THE ASSESSEES APPEAL VIDE THE IMPUGNED ORDER DATED 05/02/2015 , FOLLOWING THE DECISION OF THE HONBLE H IGH COURT OF BOMBAY IN THE CASE OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110 (BOMBAY) 3.1. REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CIT(A) - 1, MUMBAI DATED 05/02/2015 FOR A.Y. 2009 - 10, HAS PREFERRED THE APPEAL, RAISING THE FOLLO WING GROUNDS: - 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING IN CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE OF RS.4585501/ - AND DIRECTING THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THIS WOULD HAVE THE EFFECT OF GRANTING DOUBLE BENEFIT TO THE 'ASSESSEE FIRST AS ACCUMULATION OF INCOME U/S.11(1)(A) OR AS CORPUS DONATION U/S.11(1)(D) IN CURRENT YEAR AND THEN AS 'APPLICATION OF INC OME U/S.11(1)(A) IN THE 'SUBSEQUENT YEARS WHICH WAS LEGALLY NOT PERMISSIBLE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE I.T. ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. ' 3.THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIONER OF INCOME -TAX (APPEALS) 1, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 2662/MUM/2015 M ALTI VASANT HEART TRUST, MUMBAI 3 THE LEARNED DR FOR REVENUE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED AND PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER (AO) ON THIS ISSUE. 3.2. PER CONTRA, THE LEARNED AR FOR THE ASSESSEE PLACED STRONG RELIANCE ON THE IMPUGNED ORDER OF THE LEARNED CIT(A). ACCORDING TO THE LEARNED AR, THE ISSUE IN QUESTION, AS RAISED IN REVENUES GROUNDS (SUPRA) IS COVERED SQUARELY IN FAVOUR OF THE ASSESSEE B Y THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V INSTITUTE OF B ANKING PERSONNEL SELECTION (S U P R A) , AND HAS ALSO BEEN FOLLOWED BY DECISION OF THE TRIBUNAL IN THE CASE OF ACIT V MANDKE FOUNDATION (ITA NO.3837/MUM/2015 DT.29/02/2016.) 3.3. 1. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED. THE ISSUE RAISED BY REVENUE IN THIS APPEAL IS WITH REGARD TO THE DECISION OF THE LEARNED CIT(A) IN DIRECTING TH E AO TO ALLOW THE CARRY FORWARD OF EXCESS EXPENDITURE OF EARLIER YEAR S OF RS.45,85,501/ - FOR SET OFF IN THE SUBSEQUENT YEARS. IN OUR CONSIDERED VIEW, WE FIND THAT THE SAID FINDING AND DIRECTIONS OF THE LEARNED CIT(A) IS IN ACCORDANCE WITH THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) WHICH COVERS THE ISSUE SQUARELY IN FAVOUR OF THE ASSESSEE. AT PARA 5 THEREOF THE HONBLE HIGH COURT HAS HELD AS UNDER: - 5. NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARISES FOR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT ITA NO. 2662/MUM/2015 M ALTI VASANT HEART TRUST, MUMBAI 4 YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN SUBSEQUENT YEAR FOR CHARITABLE PURPOS ES? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICA TION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABL E TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF - CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THAT, IN THE CASE OF A CHARITABLE TRU ST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT T O BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HI GH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293 (GUJ). ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 3.3.2. RESPECTFULLY, FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110 (BOM), AND FINDING NO ERROR IN THE FINDING OF THE LEARNED CIT(A) IN THE IMPUGNED ORDER, WE UPHOLD THE DIRECTIONS OF LEARNED CIT(A) TO THE AO TO ALLOW THE ASSESSEE CARRY FORWARD OF EXCESS EXPENDITURE OF EARLIER YEARS ITA NO. 2662/MUM/2015 M ALTI VASANT HEART TRUST, MUMBAI 5 AMOUNTING TO RS.45,85,501/ - . CONSEQUENTLY, FINDING NO MERIT IN THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL, THE SAME ARE D ISMISSED. 4. IN THE RESULT, REVENUES APPEAL FOR A.Y. 2009 - 10 IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 04 / 01 /2017 SD/ - (RAM LAL NEGI ) SD/ - ( JASON P BOAZ ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 04 / 01 /201 7 KARUNA 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//