M/s. Devender Kumar Garg Charitable Trust, Meerut V. ACIT, Meerut

ITA 3030/DEL/2015

• Counselvise Citation: 303020114 RSA 2015
• Duration Of Justice: 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 22-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 15-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YATENDRA SINGH
• Assessee Lawyers: S KRISHNAN
• Keywords: Charitable institution; Capital expenditure
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - II , NEW DELHI BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 3030 /DEL/ 2015 ASSESSMENT YEAR : 2010 - 11 ITA NO. 3032 /DEL/ 2015 ASSESSMENT YEAR : 2010 - 11 ITA NO. 3031 /DEL/ 2015 ASSESSMENT YEAR : 2010 - 11 ITA NO. 3028 /DEL/ 2015 ASSESSMENT YEAR : 2010 - 11 DEVENDER KUMAR GARG CHARITABLE TRUST, 61, SHIVAJI ROAD, MEERUT, PAN:AABTD0942R VS. ACIT CIRCLE - 1, MEERUT (APPELLANT) (RESPONDENT) CHAUDHARY NARINDER SINGH MEMORIAL TRUST, 107, BANK STREET, MEERUT, PAN:AAATC0959N VS. ACIT CIRCLE - 1, MEERUT (APPELLANT) (RESPONDENT) MATHUR PT. HAZARI LAL CHARITABLE TRUST, VILL - ROHTA, MEEUT, PAN:AAATM3161A VS. ACIT CIRCLE - 1, MEERUT (APPELLANT) (RESPONDENT) G.T.B. CHARITABLE TRUST, 227, WEST END ROAD, MEERUT, PAN:AAATG1992R VS. ACIT CIRCLE - 1, MEERUT (APPELLANT) (RESPONDENT) PAGE 2 OF 5 APPELLANT BY : SH. S. KRISHNAN, ADV RESPONDENT BY : SH. YATENDRA SINGH, SR,. DR DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 2 7 .07.2015 ORDER TH ESE FOUR APPEAL OF DIFFERENT ASSESSEES ARE DIRECTED AGAINST THE SEPARATE ORDER S OF THE LD CIT(A), MEE R UT DATED 10.03.2015, IN THE CASE OF GTB CHARITABLE TRUST AND M/S. MATHUR PT. HAZARI LAL CHARITABLE TRUST, ORDER DATED 19.03.2015 IN THE CASE OF CHAUDHARY NARINDER SINGH MEMORIAL TRUST AND ORDER DATED 27.03.2015 IN THE CASE OF DEVENDRA KUMAR GARG CHARITABLE TRUST. COMMON ISSUES ARE INVOLVED IN ALL THESE APPEALS WHICH WERE HEARD TOGETHER. SO THESE ARE BEI NG DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST I WILL DEAL WITH THE APPEAL IN ITA NO .3030/DEL/2015. FOLLOWING GROUNDS HAVE BEEN RAISED IN THESE APPEALS: - 1. THE I'D CIT(A) HAS FAILED TO APPRECIATE THE CONTENT AND TENOR OF VARIOUS HIGH COURT AND TRIBUNAL JUDGMENTS CITED BEFORE HIM WHICH ARE A DIRECT AUTHORITY ON THE ISSUE AT HAND AND HAS THEREBY VIOLATED THE PRINCIPLES OF JUDICIAL DISCIPLINE. 2. THAT THE I'D CIT(A) HAS FAILED TO APPRECIATE THAT INCOME HAS TO BE COMPUTED COMMERCIALLY EVEN IN CASES COVERED U/S 11 - 13 OF THE INCOME TAX ACT, 1961 AND RESULTANT LOSS, IF ANY, ARISING DUE TO SURPLUS APPLICATION OF INCOME, HAS TO BE COMPUTED AND CARRIED FORWARD TO NEXT YEAR TO BE SET OFF THEREIN ACCORDINGLY. 3. THE I'D CIT(A) HAS ALSO FAILED TO APPRECIATE THAT NEITHER SECTION 11 NOR SECTION 72 OF THE INCOME TAX ACT, 1961 HAVE A MUTUAL RIDER FOR COMPUTATION OF INCOME OR FOR ITS CARRY FORWARD AND SET OFF AND HENCE THE IMPUGNED ORDER DESERVES TO BE QUASHED. 3. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 15.10.2010 DECLARING NIL INCOME AND CLAIMED BROUGHT FORWARD LOSS ES OF RS. 5,22,62,949/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THE AO WHILE FRAMING THE ASSESSMENT U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO THE ACT IN SHORT ) VIDE ORDER DATED 12.02.2013 DID NOT ACCEPT THE CLAIM FOR BROUGHT FORWARD LOSS ON ACCOUNT OF CAPITAL EXPENSES. PAGE 3 OF 5 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD C IT(A), WHO CONFIRM ED THE ACTION OF THE AO BY OBSERVING IN PARA 3.4 AND 3.5 OF THE IMPUGNED ORDER AS UNDER: - 3.4 THE PROVISIONS OF SECTION 11 ARE VERY SPECIFIC AND ARE GOVERNED BY A SELF - CONTAINED CODE WHERE DEDUCTIONS ARE ALLOWED ONLY AS PROVIDED UNDER, SECTION 11 TO 13 OF THE INCOME TAX ACT. IT IS INCOME OF THE CHARITABLE TRUST AND NOT THAT OF A BUSINESS ENTITY. INCOME OF THE CHARITABLE TRUST IS NOT ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS UNDER SECTION 28 AND HENCE THE PROVISION FOR CARRY FORWARD OF LOSSES IS NOT RELEVANT AND MORE SO THAT OF CAPITAL EXPENDITURE, WHICH CANNOT BE ALLOWED EVEN UNDER SECTION 28. THE AR HAS MADE A CLAIM THAT SECTION 11(4) MANDATES THE ALLOWANCE OF SUCH LOSSES INCURRED BY THE ASSESSEE IN THE PAST YEAR. HOWEVER, FROM A PLAIN READING OF SECTION 11(4), NO SUCH CONCLUSION CAN BE REACHED. 3.5 FURTHER THE PROVISIONS CONTAINED IN SECTION 11 ARE TOWARDS EXEMPTING INCOME OF CHARITABLE ORGANIZATIONS. THIS SECTION DOES NOT PROVIDE FOR ANY DEDUCTION FROM INCOME. INSTEAD IT P RESCRIBES THAT IF CERTAIN CONDITIONS ARE FULFILLED, THE WHOLE OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE PURPOSE BECOMES ELIGIBLE FOR EXEMPTION FROM TAXATION. EXEMPTION MEANS THAT TAX CANNOT BE CHARGED ON SUCH INCOME. THIS DOES NOT MEA N ANY DEDUCTION, THAT TOO FROM FUTURE RECEIPTS. LOSS HAS ONLY BEEN COMPUTED BY CLAIMING DEDUCTION OF VARIOUS EXPENSES OF CAPITAL NATURE. HENCE ASSESSEE'S CLAIM FOR CARRY FORWARD OF EXCESS CAPITAL EXPENDITURE AGAINST FUTURE RECEIPTS IS NOT ALLOWABLE UNDER T HE EXPRESS PROVISION OF SECTION 11 OF INCOME TAX ACT. ON THE BASIS OF THE ABOVE OBSERVATIONS, THE GROUND OF APPEAL NO. 1 IS DISMISSED. 5. NOW THE ASSESSEE IS IN APPEAL. THE LD COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 2 0 .03.2015 IN ITA NO.4118/DEL/2013 FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEE S OWN CASE. COPY OF THE SAID ORDER WAS FURNISHED WHICH IS PLACED ON RECORD. IN HIS RIVAL SUBMISSION THE LD D R ALTHOUGH SUPPORTED THE ORDER OF THE LD CIT(A) BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE. 6. I HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICE D THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS BEEN DECIDED IN ASSESSEES FAVOUR VIDE ORDER DATED 20.03.2015 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008 - 09 IN ITA NO.4118/DEL/2013 BY THE ITAT, B BENCH, NEW DELHI, WHEREIN THE UNDERSIGNED IS PAGE 4 OF 5 CO - SIGNATORY. IN THE SAID ORDER RELEVANT FINDING S HAVE BEEN GIVEN IN PARA 6 AND 7 WHICH READ AS UNDER: - 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUST IFIED IN ALLOWING THE BENEFIT OF CARRIED FORWARD OF LOSS. THE ASSESSING OFFICER HELD THAT THE LOSS SUFFERED WAS ON ACCOUNT OF CAPITAL EXPENDITURE AND AS SUCH SAME CANNOT BE ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS. THIS ISSUE ACCORDING TO US IS NO LONGER RES INTEGRA. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ADDL. CIT VS. M/S CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY (SUPRA) HAD HELD THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE LOSSES AGAINST THE SUBSEQUENT YEAR'S SURPLUS. THE RELEVANT F INDINGS OF THE COORDINATE BENCH ORDER READS AS FOLLOWS: - '5.......THE CIT(A) HAS MADE A REFERENCE IN THOSE ASSESSMENT YEARS TO SECTION 11(4) OF THE INCOME - TAX ACT IN THE CASE OFCIT VS. INSTITUTE OF BANKING REPORTED IN 264 ITR PAGE 110 AN ARGUMENT WAS RAISED BEFORE THE HON'BLE MUMBAI HIGH COURT BY THE REVENUE THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF CONTAINED CODE MENTIONED IN SECTION 11 TO 13 OF INCOME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASS ESSABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS' U/S 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT ACCORDING TO THE REVENUE, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AG AINST THE INCOME OF SUBSEQUENT YEARS. THIS ARGUMENT WAS REJECTED BY THE BOMBAY HIGH COURT AND IT HAS BEEN HELD THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN AD JUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE RELIGIOUS PURPOSE IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF THE INCOME O F THE TRUST FOR CHARITABLE AND RELIGIOUS P URPOSE. THE LEARNED CIT(A) HAS FOLLOWED THIS DECISION APART FROM OTHERS REFERRED ABOVE......' 7. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE HOLD THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE TO CARRY FORWARD THE LOSSES OF THE CURRENT YE AR AGAINST SURPLUS OF THE SUBSEQUENT YEAR. IT IS ORDERED ACCORDINGLY. 7 . SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 20.03.2015 FOR THE ASSESSMENT YEAR 2008 - 09 IN ASSESSEES OWN CASE, THE IMPUGNED ORDER IS SET ASIDE AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE FOR CARR IED FORWARD LOSS TO BE ADJUSTED AGAINST THE CURRENT YEAR AND THE REMAINING AMOUNT TO BE CARRIED FORWAR D TO BE SET OFF AGAINST SURPLUS OF NEXT YEAR S INCOME . PAGE 5 OF 5 8 . IN THE REMAINING ITA NO S .3028, 3031 AND 3032/DEL/2015 THE FACTS ARE IDENTICAL AND THE RIVAL CONTENTIONS WERE ALSO SIMILAR. THEREFORE MY FINDING GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY MU TATIS MUTANDIS FOR THESE APPEALS. 9 . IN THE RESULT APPEALS OF THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 T H JULY, 2015 . - S D / - ( N.K.SAINI ) ACCOUNTANT MEMBER DATED: 2 7 T H JULY, 2015 AKK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR