DCIT, Ghaziabad V. M/s. Association of Management Studies, Meerut

ITA 3074/DEL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6457 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Charitable institution; Capital expenditure
• Section: 12A; 12AA; 12; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCHES (CAMP AT MEERUT) BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3074/DEL./2017 (ASSESSMENT YEAR : 2005-06) DCIT, VS. M/S. ASSOCIATION OF MANAGEMENT STUDIES, EXEMPTION CIRCLE, 17, MALL ROAD, GHAZIABAD. MEERUT. (PAN : AAATA7059B) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJIV SINGHAL, ADVOCATE SHRI RAMIT KAKKAR, ADVOCATE REVENUE BY : SHRI S.S. RANA, CIT DR DATE OF HEARING : 08.01.2019 DATE OF ORDER : 16.01.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DCIT, EXEMPTION CIRCLE, GHAZIABAD (HEREINAFTER REFERRED TO AS THE REVENUE) BY FILIN G THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATE D 31.12.2013 PASSED BY LD. CIT (APPEALS), MEERUT QUA THE ASSESS MENT YEAR 2005-06 ON THE GROUNDS INTER ALIA THAT :- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE BENEF IT OF CARRY FORWARD OF SURPLUS OF EXPENDITURE. ITA NO.3074/DEL./2017 2 2. THE LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN LAW ON FACTS IN DELETING LOANS, ADVANCE ET C. TO ASCERTAIN THE EXTENT OF APPLICATION OF INCOME FOR CHARITABLE AND RELIGIOUS PURPOSE WHICH HAS BEEN SOURCED OUT OF INCOME OF THE ASSESSEE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE SOCIETY BEING A SOCIETY REGISTERED UNDER SOCIETIES ACT HAS BEEN GRANTED REG ISTRATION U/S 12A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT ). ASSESSEE FILED RETURN OF INCOME DECLARING LOSS OF RS.56,41,3 20/- FOR THE YEAR UNDER ASSESSMENT WITH BROUGHT FORWARD LOSSES OF RS. 1,41,32,428/-. HOWEVER, THE AO HAS NOT ALLOWED THE BROUGHT FORWARD LOSS / LOSSES OF THE EARLIER YEARS FOR ADJUSTMENT AS EXEMPT INCOM E UNDER SECTIONS 11 & 12 OF THE ACT. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS ALLOWED THE CARRY FORWARD LOSSE S BY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COM E UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.3074/DEL./2017 3 5. LD. AR FOR THE ASSESSEE CONTENDED THAT THE ISSUE IN QUESTION IS DULY COVERED IN ITS FAVOUR IN ITS OWN CASE FOR A Y 2005-06 DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1536/DEL/2014 AND ITA NO.1725/DEL/2014 ORDER DAT ED 27.04.2016 . 6. LD. CIT (A) EXAMINED THE FACTS OF THIS CASE IN T HE LIGHT OF THE DECISIONS RENDERED BY THE HONBLE HIGH COURTS AS WE LL AS THE TRIBUNAL AND RETURNED THE FOLLOWING FINDINGS :- 2.4 A HARMONIOUS INTERPRETATION OF THE RATIO OF TH E DECISIONS QUOTED IN THE PRECEDING PARAGRAPH WOULD IMPLY THAT IF THE EXPENDITURE WITH HAD BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES (INCLUDING CAPITAL EXPENDITURE) IS IN EXCESS OF THE INCOME OF AN ASSES SEE TO WHOM REGISTRATION HAS BEEN GRANTED U/S 12AA OF T HE ACT, SUCH EXCESS EXPENDITURE OR, CONVERSELY, THE DE FICIT OF INCOME IS PERMITTED TO BE CARRY FORWARD TO BE TR EATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEARS. ACCORDINGLY, GROUND NOS.1, 2 & 3 ARE ALLOWED. HOWEVER, WHILE ALLOWING THE BENEFIT OF CARRY FORWAR D OF DEFICIT OF EXPENDITURE, THE AO IS DIRECTED TO AS CERTAIN THE EXTENT OF APPLICATION OF INCOME FOR CHARITABLE AND RELIGIOUS PURPOSES WHICH HAS BEEN SOURCED OUT OF INCOME OF THE ASSESSEE (AND NOT LOANS, ADVANCES OR VOLUNTARY DONATIONS) AND ALLOWS THE BENEFIT OF CARR Y FORWARD ONLY TO THIS EXTENT. 7. THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR AY 2005-06 DECIDED THE IDENTICAL ISSUE IN FAVOU R OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 6. NOW THE DEPARTMENT IS IN APPEAL. DURING COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VER Y OUTSET STATED ITA NO.3074/DEL./2017 4 THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSE E VIDE ORDER DATED 27.07.2015 IN THE CASE OF DEVENDER KUMAR GARG CHARITABLE TRUST & OTHERS VS ACIT, CIRCLE-1, MEERUT IN ITA NO. 3030/DEL/2015 & OTHERS FOR THE ASSESSMENT YEAR 2010 -11 WHEREIN BY FOLLOWING THE EARLIER ORDER DATED 28.03.2015 IN ITA NO.4118/DEL/2013 FOR THE ASSESSMENT YEAR 2008-09 IN THE SAID ASSESSEES OWN CASE, THE AO WAS DIRECTED TO ALLOW T HE CLAIM OF THE ASSESSEE FOR CARRY FORWARDED LOSS TO BE ADJUSTE D AGAINST THE CURRENT YEAR AND THE REMAINING AMOUNT TO BE CARRIED FORWARD TO BE SET OFF AGAINST SURPLUS OF NEXT YEARS INCOME. T HE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 6 & 7 OF THE AFOR ESAID ORDER DATED 27.07.2015 WHICH READ AS UNDER: 6. I HAVE CONSIDERED THE SUBMISSION OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVIN G SIMILAR FACTS HAS BEEN DECIDED IN ASSESSEES FAVOUR VIDE OR DER 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 CO-SIGNATORY. IN THE SAID ORDER RELEVANT FINDINGS H AVE 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 JUSTIFIED 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 FINDINGS 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 OF CIT 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 ITA NO.3074/DEL./2017 5 ASSESSABLE 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 AGAINST 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 ADJUSTMENT 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 OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSE. 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 O F THE CURRENT YEAR AGAINST SURPLUS OF THE SUBSEQUENT YEAR. IT IS ORDERED ACCORDINGLY. 7. SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRE D TO ORDER DATED 20.03.2015 FOR THE ASSESSMENT YEAR 2008 -09 IN ASSESSEES OWN CASE, THE IMPUGNED ORDER IS SET A SIDE AND THE AO IS DIRECTED TO ALLOW THE CLAIM OF THE AS SESSEE FOR CARRIED FORWARD LOSS TO BE ADJUSTED AGAINST THE CURRENT YEAR AND THE REMAINING AMOUNT TO BE CARRIED FORWARD TO BE SET OFF AGAINST SURPLUS OF NEXT YEARS INCOME. 7. SINCE THE FACTS OF THE PRESENT CASE ARE SIMILAR TO THE FACTS OF THE AFORESAID REFERRED TO CASE OF DEVENDER KUMAR GARG VS ACIT, CIRCLE-1, MEERUT IN ITA NO. 3030/DEL/2015 FOR THE ASSESSMENT YEAR 2010-11. SO, RESPECTFULLY FOLLOWING THE SAID ORDER DATED 27.07.2015, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 8. SINCE THE ISSUE IN CONTROVERSY IS SQUARELY COVER ED BY THE DECISION RENDERED IN ASSESSEES OWN CASE BY THE COO RDINATE BENCH ITA NO.3074/DEL./2017 6 OF THE TRIBUNAL IN AY 2005-06 AND BY FOLLOWING THE SAME, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS RIG HTLY ALLOWED THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE LOSS ES TO BE ADJUSTED AGAINST THE CURRENT YEAR AND THE REMAINING AMOUNT T O CARRY FORWARD TO BE SET OFF AGAINST THE SURPLUS INCOME OF THE NEX T YEAR. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), PRESENT APPEAL FILED BY THE REVENU E IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF JANUARY, 2019. SD/- SD/- (N.S. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF JANUARY , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), MEERUT. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.