The Dy. Director of Income Tax (Exemption), Ahmedabad V. Ramanbhai Foundation, Ahmedabad

ITA 3035/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7980 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 30-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Earning of tax free income
• Section: 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NOS: 3035 & 2964/AHD/2015 (ASSESSMENT YEARS: 2011-12 & 2012-13) INCOME TAX OFFICER, WARD (EXEMPTIONS), WARD-2, AHMEDABAD V/S RAMANBHAI FOUNDATION, ZYDUS TOWER, OPP. ISKON TEMPLE, SATELLITE CROSS ROAD, SATELLITE, AHMEDABAD-380015 PAN NO. AAATR4358Q (APPELLANT) (RESPONDENT) ITA. NO: 2965/AHD/2015 (ASSESSMENT YEAR: 2011-12) INCOME TAX OFFICER, WARD (EXEMPTIONS), WARD-2, AHMEDABAD V/S OLIVE INTERNATIONAL EDUCATION FOUNDATION, PLOT NO. 126-127, NEAR AHMEDABAD DENTAL COLLEGE, RANCHHODPURA-BHADAJ ROAD, AHMEDABAD-382115 PAN NO. AAACO8733H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MUDIT NAGPAL, SR. D. R. RESPONDENT BY : SHRI JIGAR PATEL, A.R. ( )/ ORDER ITA NOS. 3035 & 2 964/AHD/2015 & OTHERS . A.YS. 2011-12 & 2 012-13 2 DATE OF HEARING : 05 -12-201 7 DATE OF PRONOUNCEMENT : 18 -12-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. ITA NOS. 3035 & 2964/AHD/2015 ARE APPEALS BY THE RE VENUE PREFERRED AGAINST TWO SEPARATE ORDER OF THE LD. CIT(A)-9, AHMEDABAD D ATED 03.08.2015 PERTAINING TO A.YS. 2011-12 & 2012-13 AND ITA NO. 2 965/AHD/2015 IS APPEAL BY THE REVENUE IN THE CASE OF DIFFERENT ASSESSEE PR EFERRED AGAINST THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 21.08.2015 PERTAI NING TO A.Y. 2011-12. 2. SINCE THE GRIEVANCE OF THE REVENUE IS COMMON IN ALL THESE APPEALS, THOUGH QUANTUM MAY DIFFER, THESE APPEALS WERE HERD TOGETHE R AND ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND B REVITY. 3. THE COMMON GRIEVANCE RELATES TO THE DELETION OF THE ADDITION OF DISALLOWANCE OF THE CARRY FORWARD OF DEFICIT. 4. WHILE COMPLETING THE ASSESSMENT, THE A.O. DENIED TH E CLAIM OF SET OFF OF DEFICIT ARISING OUT OF EXCESS OF EXPENDITURE ON THE GROUND THAT THE SAME HAS NOT BEEN OUT OF EXEMPT INCOME NAMELY CORPUS FUNDS AND ACCUMU LATION. THE A.O. WAS OF THE OPINION THAT THE APPLICATION IS ALLOWED ONLY OUT OF CURRENT INCOME. ANY EXPENDITURE MET OUT OF OPENING FUNDS SHOULD NOT BE ALLOWED AND THEREFORE, THE ASSESSEES DEFICIT IS NOT ALLOWED TO CARRY FORWARD. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W HEREIN STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL 211 ITR 293 IN WHICH IT IS HELD THAT ITA NOS. 3035 & 2 964/AHD/2015 & OTHERS . A.YS. 2011-12 & 2 012-13 3 WHEN THE EXPENSES FOR A CHARITABLE AND RELIGIOUS PU RPOSE HAVE BEEN INCURRED IN EARLIER YEARS AND SUCH EXPENSES ARE ADJUSTED AGAINS T INCOME OF THE SUBSEQUENT YEAR TO THAT EXTENT, IT CAN BE SAID TO HAVE BEEN AP PLIED FOR CHARITABLE PURPOSES IN WHICH SUCH EXPENSES ARE ADJUSTED AND IS PERMISSI BLE. 6. RESPECTFULLY FOLLOWING THE AFOREMENTIONED FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT, THE LD. CIT(A) ALLOWED T HE CLAIM OF SET OFF OF DEFICIT BROUGHT FORWARD FROM EARLIER YEARS. 7. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. AND PLACED RELIANCE ON THE DECISION OF THE TRIBUNAL DELHI BENC H IN THE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER, RENAL & DIG ESTIVE DISEASES 29 SOT 316. IT IS THE SAY OF THE LD. D.R. THAT WHILE DECID ING THE ISSUE IN FAVOUR OF THE REVENUE, THE TRIBUNAL HAS CONSIDERED THE DECISION O F THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SHRI PLOT SWETAMBER MURTI PUJA K JAIN MANDAL RELIED UPON BY THE LD. CIT(A). PER CONTRA, THE LD. COUNSEL RELI ED UPON THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF RAGHUVAN SHI CHARITABLE TRUST 8 TAXMANN.COM 142. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW QUA THE ISSUE. WE HAVE ALSO CAREFULLY CONSIDERED TH E JUDICIAL DECISIONS RELIED UPON BY THE RIVAL PARTIES. IT IS TRUE THAT THE LD. CIT(A) FOLLOWED THE FINDINGS OF THE HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (SUPRA). IT IS EQ UALLY TRUE THAT THE TRIBUNAL DELHI BENCH HAD CONSIDERED THE SAID ORDER OF THE HO NBLE HIGH COURT BUT DECIDED THE ISSUE IN FAVOUR OF THE REVENUE AND AGAI NST THE ASSESSEE. ITA NOS. 3035 & 2 964/AHD/2015 & OTHERS . A.YS. 2011-12 & 2 012-13 4 9. WE FIND THAT THE HONBLE HIGH COURT OF DELHI HAS CO NSIDERED ALL THE DECISIONS WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT OF DELH I IN THE CASE OF RAGHUVANSHI CHARITABLE TRUST (SUPRA) READ AS UNDER: - 6. WE FIND FROM THE ORDER OF THE INCOME TAX APPELLA TE TRIBUNAL (HEREINAFTER REFERRED TO AS THE TRIBUNAL) THAT THE TRIBUNAL HA S DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY PLACING RELIANCE ON THE AFORESAID J UDGMENT OF THE GUJARAT HIGH COURT. WE HAVE GONE THROUGH THE JUDGMENT OF GUJARAT HIGH COURT IN SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (SUPRA). IT COULD NOT BE DISPUTED BY THE LEARNED COUNSEL FOR THE REVENUE THAT THE QUESTION O F LAW RAISED AND ANSWERED IN THE SAID CASE WAS IDENTICAL TO THE ONE RAISED IN TH E PRESENT APPEALS. THIS QUESTION WAS DECIDED IN FAVOUR OF THE ASSESSEE INTERPRETING THE PROVISIONS OF SECTION 11 OF THE ACT. THE RELEVANT DISCUSSION CONTAINED IN THE S AID JUDGMENT IS IN THE FOLLOWING TERMS: '3. THE LEARNED DR SOUGHT TO RELY UPON THE FINDING O F AO. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. WE FIND THAT THE ISSUE IS ANSWERED BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293 (GUJ), WHEREIN THE HIGH COURT OBSERVED AS UNDER: 'WE ARE, THEREFORE, OF THE OPINION THAT THE ADJUSTME NT OF HE (SIC. THE) EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND R ELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WOULD AMOUNT TO APPLYING THE INCOME OF THE TRUST FO R CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN MADE AND WILL HAVE TO BE EXCLUDED FROM THE INC OME OF THE TRUST U/S 11(1)(A) OF THE ACT.' NO CONTRARY DECISION HAS BEEN CITED. FROM THE AFORE SAID JUDGMENT, IT IS CLEAR THAT THERE IS NO BAR IN COMPUTING INCOME OF S UBSEQUENT YEAR AFTER ALLOWING SET OFF OF EXCESS AMOUNT SPENT ON OBJECT O F TRUST, AS THIS ALSO AMOUNTS TO APPLICATION OF INCOME. THUS, THERE IS NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A).' 7. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE RE VENUE, HOWEVER, WAS THAT THE AFORESAID CASE DOES NOT DECIDE THE QUESTION CORRECT LY. SHE SUBMITTED THAT THE GUJARAT HIGH COURT PROCEEDED ON THE PREMISE THAT TH ERE WAS NO LIMITATION IN SECTION 11 , WHICH PROVIDES THAT THE INCOME SHOULD HAVE BEEN A PPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. THIS, ACCORDING TO THE LEARNED COUNSEL, WAS A WRONG PREMISE AND CONTRARY TO THE ITA NOS. 3035 & 2 964/AHD/2015 & OTHERS . A.YS. 2011-12 & 2 012-13 5 EXPRESSION OF PROVISION CONTAINED IN SECTION 11(1)(C) READ WITH EXPLANATION AND SECTION 11(1)(C) CATEGORICALLY SUGGESTS TO THE CONTRARY, VIZ., THE INCOME HAS TO BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ON LY IN THE YEAR IN WHICH IT HAS ARISEN. HOWEVER, WE FIND THAT THE GUJARAT HIGH COUR T HAS DISCUSSED THIS ISSUE IN GREATER DETAIL AND RELYING UPON THE CIRCULAR NO. 10 0 DATED 24.01.1973 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES AND THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MAHARANA OF MEWAR CH ARITABLE FOUNDATION [164 ITR 439 (RAJ.)]. WE MAY ALSO POINT OUT AT THI S STATE THAT THE AFORESAID VIEW OF RAJASTHAN HIGH COURT AND GUJARAT HIGH COURT HAS BEEN CONSISTENTLY FOLLOWED BY OTHER HIGH COURTS IN THE F OLLOWING JUDGMENTS: (I) COMMISSIONER OF INCOME TAX VS. INSTITUTE OF BANKING [264 ITR 110 (BOM.)]; (II) COMMISSIONER OF INCOME TAX VS. SIDDARAMANNA CH ARITIES TRUST [96 ITR 275 (MYS); AND (III) COMMISSIONER OF INCOME TAX VS. MATRISEVA TRUST [242 ITR 20 (MAD.)] 8. IT WOULD BE FRUITFUL TO REFER TO THE DISCUSSIONS CONTAINED IN INSTITUTE OF BANKING (SUPRA), PER. HONBLE MR. JUSTICE S.H. KAPADIA, WHI CH IS ADVANCED BEFORE US BY THE LEARNED COUNSEL FOR THE REVENUE TO REPEL THE SAME I N THE FOLLOWING WORDS: '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 YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUE NT YEAR FOR CHARITABLE PURPOSES? 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 AP PLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESEN T CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS O F EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT TIN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESS ABLE 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 TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE ITA NOS. 3035 & 2 964/AHD/2015 & OTHERS . A.YS. 2011-12 & 2 012-13 6 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 RE GARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE H AVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN THE 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 TH ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293. ACCORDINGLY, WE ANSWER QUESTION NO.3 IN THE AFFIRMATIVE, I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT.' 9. IT IS CLEAR FROM THE ABOVE THAT AS MANY AS FIVE HIGH COURTS HAVE INTERPRETED THE PROVISION IN AN IDENTICAL AND SIMILAR MANNER. LEARN ED COUNSEL FOR THE REVENUE COULD NOT SHOW ANY JUDGMENT WHERE ANY OTHER HIGH CO URT HAS TAKEN CONTRARY VIEW. SINCE WE ARE IN AGREEMENT WITH THE VIEW TAKEN BY THE AFORESAID HIGH COURT, WE ANSWER THESE QUESTIONS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10. RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE HIGH COURT (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). ALL THE APPEALS BY THE REVENUE ARE ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18- 12- 20 17 SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 18/12/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED.