The DCIT (Exemption), Cir-1., Ahmedabad V. Gujarat State Disaster Management Authority, Gandhinagar

ITA 2691/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6111 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-07-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 01-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: PINAKIN RAWA; TUSHAR HEMANI SHRI P N PARMAR
• Keywords: Charitable institution
• Section: 143(3); 12AA; 201; 264

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND MS MADHUMITA ROY, JUDICIAL MEMBER ./ ITA NO. 2691 /AHD/2017 & / ASSTT. YEAR: 2013 - 201 4 D.C.I.T , (EXEMPTION) CIRCLE 1, AHMEDABAD. VS . GUJARAT STATE DISASTER MANAGEMENT AUTHORITY, 6 TH FLOOR, BLOCK NO.11, UDHYOG BHAVAN, SECTOR - 11, GANDHINAGAR PAN: AAALG0094J (APPLICANT) (RESPONENT) REVENUE BY : SHRI SURENDRA KUMAR , CIT .D.R, ASSESSEE BY : SHRI TUSHAR HEMANI , SHRI P.N. PARMAR & SHRI PINAKIN RAWAL A.R S / DATE OF HEARING : 12 / 07 / 201 9 / DATE OF PRONOUNCEMENT: 06 / 08 /201 9 / O R D E R PER MS MADHUMITA ROY, JUDICIAL MEMBER : THE INSTANT APPEA L PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 11.09 .2017 , PASSED BY THE LEARNED COMMI SSIONER OF INCOME TAX(APPEALS) - 9 , AHMEDABAD ( IN SHORT LD.CIT(A) ) , A RISING OUT OF THE ORDER DATED 23.03 .2016 PASSED BY THE D.C.I.T (EXEMPTION), CIRCLE - 1 , AHMEDABAD UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( HEREIN AFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEAR 2013 - 14. 2. T HE ASSESSEE A TRUST WORKING FOR PROVIDING EFFECTIVE MANAGEMENT OF DISASTER, MITIGATION OF THEIR EFFECTS & FACILITATING EMERGENCY RELIEF DURING AND ITA NO. 2691 /AHD/2017 A.Y. 2013 - 2014 2 AFTER OCCURRENCE OF DISASTERS; AND ALSO FOR IMPLEMENTING, MONITORING & CO - COOR DINATING RECONSTRUCTIONS AND REHABILITATION IN THE AFTERMATH OF DISASTERS & ASSISTANCE TO THE EARTHQUAKE AFFECTED TENANTS OF BHUT & ANJAR CITIES(URBAN AREAS), AND WORKING MANY CHARITABLE ACTIVITIES REGISTERED UNDER SECTION 12AA OF THE ACT, VIDE REGISTRATIO N NO.CIT/GNR/12AA/G N - 11/2005 - 06 DATED 09.08.2015 F ILED ITS RETURNS OF INCOME ON 30.09.2013 DECLARING ITS INCOME AT DEFICIT OF RS.50,70,22,669/ - AFTER CLAIMING THE EXEMPTION OF RS.14,2 1,95,39,029/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE DEFICIT FOR THE A.Y 2009 - 10 OF RS.86.35 CRORES AND RS.1.31 CRORES FOR T HE A.Y 2010 - 11 HAS BEEN CARRY FORWARD ED AGAINST THE TOTAL INCOME. SUCH CLAIM OF CARRY FORW ARD DEFICIT F OR A.Y. 2009 - 10 OF RS.86.35 CRORES AND FOR A.Y 2010 - 11 OF RS.1 , 31 ,30, 917 / - WERE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS AGAINST TOTAL INCOME OF DEFICIT OF RS.50 , 70 , 22 , 669 / - AFTER CLAIMING EXEMPTION OF RS.14 , 21 , 95 , 39 , 029 / - DECLARED BY THE APPELLANT WHICH WAS IN TURN DELETED BY THE ''LD.CIT(A) BY ORDER DATED 11.09.2017 , WITH A FUR THER DIRECTION UPON THE AO TO ALLOW THE SET OF F OF DEFICIT OF EARLIER YEARS TO BE ADJUSTED AGAINST THE INCOME OF THE CURRENT YEAR 3. AT THE VERY OUTSET OF THE HEARING OF THE INSTANT APPEAL THE LD.COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT PASSED BY THE CO - ORDINATE BENCH IN THE MATTER OF DCIT( EXEMPTION) VS. CHARUTAR AROGYA MANDAL I N ITA NO.731/AHD/2017 FOR ASSESSMENT YEAR 2012 - 13. COPY WHEREOF HAS ALSO BEEN SUBMITTED BEFORE US. 4. HOWEVER, LD.DR FAILED TO CONTROVERT SUCH CONTENTION MADE BY THE LD.AR . ITA NO. 2691 /AHD/2017 A.Y. 2013 - 2014 3 5. WE HAVE HEARD THE RESPECTIVE PARTIES AND PERUSED THE RELEVANT MATERIALS AVAILA BLE ON RECORDS. WE FIND THAT WHILE ALLOWING THE APPEAL PREFERRED BY THE ASSESSEE THE ''LD.CIT(A) OBSERVED AS FOLLOWS: 4.4 THEREFORE, RELYING UPO N THE ABOVE REFERRED JUDGMENTS I T IS PRINCIPALLY AGREED THAT APPELLANT WOULD BE ELIGIBLE TO CARRY FORWARD OF DEFICIT OR EXCESS OF EXPENDITURE OVER INCOME OF EARLIER YEARS TO BE ALLOWED TO BE SET OFF AGAINST CURRENT YEAR INCOME. HOWEVER, THE QUESTION REMAINS THAT WHAT QUANT UM OF DEFICIT WOULD BE ALLOWED T O BE CARRIED FORWARD IN RESPECT OF EARLIER YEARS AND HOW TH E APPELLANT HAS COMPUTED THE SAID DEFICIT. AS THE DEFICI T PERTAINS TO A.Y . 2009 - 10 AND A V. 2010 - 11 A.O IS DIRECTED TO VERIFY AND ALL OW THE CORRECT QUANTUM OF DEFICI T TO BE SET OFF AGAINST INCOME OF A.Y . UNDER CONS IDERATION I.E. A.Y. 2013 - 14. A.O IS HEREBY DIRECTED TO COMPUTE THE INCOME AS PER THE FOLLOWING GUIDELINE. 'IF THE APPELLANT HAS APPLIED MORE THAN THE INCOME DURING THE YEAR THEN A.O. IS DIRECTED TO ALLOW CARRY FORWARD OF DEFICIT OF THAT YEAR TO BE SET OFF AGAINST FUTURE INCOME OF THE APPELLANT (R ELIANCE PLACED ON THE JUDGMENT OF HON'BLE GUJA RAT HIGH COURT IN THE CASE OF CIT VS SRI PLOT SWETAMBER MURTIPIJAK JAIN M ARID A I 211 ITR 293). IN THAT YEAR, THE AQ SHALL NOT ALLOW ANY ACCUMULATION U/S.11 (1)(A) OF THE ACT @ 15%. (FOR EXAMPLE: IF APPELLANT E ARNS RS. 1 00 AND APPLIES RS. 110 THEN RS. 10 WOULD BE ALLOWED TO BE CARRIED FORWARD AS DEFICIT AND THERE WILL BE NO ACCUMULATION U/S,11( 1)(A).) IN AN IMMEDIATE SUBSEQUENT YEAR, AO WILL ALLOW, FIRSTLY, ME SET OFF OF THE DEFICIT CARRIED FORWARD FROM EARLIER Y EAR THEN, AO SHALL REDUCE THE AMOUNT APPLI ED DURING THE YEAR IF, AFTER THE ADJUSTMENTS OF CARRIED FORWARD DEFICIT AND APPLICATION OF INCOME, THE APPELLANT HAS ANY SURPLUS OF INCOME OVER THE EXPENDITURE THEN THE APPELLANT WOULD ELIGIBLE TO ACCUMULATE TO THE EXTENT OF 15% U/S.11(1)(A) FROM THE INCOME (FOR EXAMPLE: IF APPELLANT EARNS RS. 100 IN IMMEDIATE SUCCEEDING AND APPLIES RS. 80 THEN RS. 90, I.E. RS. 1 D AS EARLIER YEAR DEFICIT AND RS. 80 BEING CURRENT YEARS APPLICATION, WOULD BE ALLOWED AGAINST INCOME O F RS. 100, THE REMAINING RS. 10 WIN BE ALLOWED TO BE ACCUMULATED U/S 1 L(1)(A),) AND, IF THERE HAPPENS TO BE STILL ANY EXCESS INCOME LEFT OVER, THEN REMAINING AMOUNT SHALL BE ITA NO. 2691 /AHD/2017 A.Y. 2013 - 2014 4 ALLOWED BY THE A.O. TO BE ACCUMULATED U/S. 11(2) OF THE ACT AND ACCORDING TO THE STIPULATIONS MENTIONED THEREIN I.E. FILING OF FORM 10 AND PURPOSE FOR WHICH ACCUMULATION U/S,11(2) HAS BE EN MADE ETC IN SHORT, THE AO WIL L NOT ALLOW ACCUMUL ATION OF INCOME EITHER U/S 11(1)(A) @15% OR U/S 11(2) OF THE ACT ALONG WITH CARRY FORWARD OF DEFICIT . APPLICATION OF INCOME SHALL PRECEDE ACCUMULATION.' BASED ON THE ABOVE REFERRED GUIDELINE A.O. IS HEREBY DIRECTED TO ALLOW THE SET OFF OF DEFICIT OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF CURRENT YEAR. THEREFORE, S UBJECT TO THIS DIRECTION, GROUNDS OF APPEAL NO.1 TO 5 ARE HEREBY A LLOWED FOR STATISTICAL PURPOSE 5.1 WE HAVE ALSO GONE THROUGH THE JUDGMENT PASSED BY THE CO - ORDINATE BENCH IN ITA NO.731/AHD/2017 FOR A.Y. 2012 - 13. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 6. WE HAVE HEARD THE RESPECTIVE PARTIES, WE HAVE ALSO PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. IT APPEARS FROM THE RECORDS THAT THE LEARNED CIT(A) WHILE ALLOWING THE CARRY FORWARD DEFICIT OF RS.6,49,06,986/ - RELIED UPON THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT AS MENTIONED HEREINABOVE. THE RELEVANT PORTION WHEREOF IS AS FOLLOWS: 4.2 I HAVE CAREFULLY CONSIDERED RIVAL CONTENTIONS, CASE LAW RELIED UPON AND THE ORDER PASSED BY THE A.O. U/S.154 OF THE ACT. THE MAIN ISSUE IS ALLOWABILITY OF EXCESS EXPENDITUR E OF RS.6,49,06,986/ - TO BE ALLOWED TO BE SET OFF AGAINST FURTHER INCOME OF THE APPELLANT. THE APPELLANT HAS RELIED UPON THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL 211 ITR 293 (GUJ.) AND CIT VS INSTITUTE OF BANKING PERSONNEL SECTION (IBPS) (2003) 264 ITR 110 (BOM.). HON'BLE GUJARAT HIGH COURT IN THE CASE OF SHRI PLOT SHWETAMBAR MURTIPUJAK MANDAL HAS HELD AS FOLLOWS : - A BARE PERUSAL OF SECTION 11 OF THE - INCOME - TAX ACT, 1961, SHOWS THAT THE IN COME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSE IN INDIA IS TO BE EXCLUDED FOR THE PURPOSES OF COMPUTING THE INCOME OF THE TRUST FOR THE PURPOSE OF ASSESS MENT. THERE ARE NO WORDS OF LIMITATION IN THIS SECTION PROVIDING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAD ARISEN. THE WORD 'APPLY ITA NO. 2691 /AHD/2017 A.Y. 2013 - 2014 5 MEANS 'TO PUT TO USE' OR 'TO TURN TO USE' OR 'TO MAKE USE' OR 'TO PUT TO PRACTICAL USE'. HAVING REGARD THE PROVISIONS OF SECTION 11 OF THE ACT, IT IS CLEAR THAT WHEN THE INCOME OF A TRUST IS USED OR PUT TO USE TO MEET THE EXPENSES INCURRED FOR RELIGIOUS OR CHARITABLE PURPOSES, IT IS APPLIED FOR CHA RITABLE OR RELIGIOUS PURPOSES. THE APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. IN OTHER WORDS, EVEN IF EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED FOR THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN 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 SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER YEAR, WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. INCOME DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PR INCIPLES AND IF COMMERCIAL PRINCIPLES FOR DETERMINING THE INCOME ARE APPLIED, IT IS BUT NATURAL THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST INCOME EARNED BY THE TRUST IN THE SU BSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT A ND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A). 4.3 I AGREE WITH THE CONTENTION OF THE APPELLANT AS WELL AS THE RELIANCE PLACED ON THE DECISION OF JURISDICTIONAL GUJARAT HIGH COURT AND HEREBY DIRECT THE AO TO ALLOW CARRY FORWARD DEFICIT OF RS.6,49,06,986/ - AGAINST ITS FUTURE INCOME. ACCORDINGLY, GROUND OF APPEAL NO.2 IS ALLOWED. THE AO WOULD RECHECK THE QUANTUM OF DEFICIT BEFORE GIVING THE APPEAL EFFECT. 7. THIS IS THE WELL SETTLED POSITION THAT 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 ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YE AR AGAINST 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 SUCH ADJUSTMENT HAS BEEN ITA NO. 2691 /AHD/2017 A.Y. 2013 - 2014 6 MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A). SUCH RATIO HAS BEEN LAID BY THE JURISDICTIONAL HIGH COURT IN THE MATTER OF SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (SUPRA). THE ORDER PASSED BY THE LEARNED CIT(A) APPLYING SUCH RATIO WHILE ALLOWING CARRY FORWARD DEFICIT OF RS.6,49,06,986/ - DOES NOT CALL FOR ANY INTERFERENCE. HENCE, REVENUE S APPEAL IS DISMISSED. WE FIND THAT THE ASSESSEE S CASE IS SQUARELY COVERED BY THE JUDGMENT PASSED BY THE CO - ORD INATE BENCH AS MENTIONED HEREIN ABOVE WHICH HAS BEEN DECIDED IN FAVO UR OF THE ASSESSEE AND RESPECTFULLY RELYING UPON THE RATIO LAID DOWN THEREIN WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE ''LD.CI T(A) IN ALLOWING THE APPEAL PREFERRED BY THE ASSESSEE, BY DIRECTING THE LD.AO TO ALLOW THE SET OFF OF CARRIED FORWARD DEFICIT AGAINST INCOME OF THE YEAR UNDER CONSIDERATION . HENCE, THE REVENUE S APPEAL FAILS AND IS THUS DISMISSED. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE COURT ON 06 /08 /2019 AT AHMEDABAD. - SD - - SD - ( WASEEM AHMED ) ACCOUNTANT MEMBER ( MS MADHUMITA ROY ) JUDICIAL MEMBER (TRUE COPY) AHMEDABAD; DATED 06 / 0 8 /201 9 MANISH