Medical Trust of Seventh Day Adventist, CHENNAI V. ITO (OSD), CHENNAI

ITA 3076/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8746 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAHADEVAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12AA; 6; 63; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.3076 & 3077/MDS/2014 ( / ASSESSMENT YEARS: 2008-09 & 2009-10) M/S. MEDICAL TRUST OF SEVENTH DAY ADVENTIST, AA 148, III AVENUE, ANNA NAGAR, CHENNAI - 600 040. VS THE INCOME TAX OFFICER (OSD) (EXEMPTIONS)-III, CHENNAI-34. PAN:AAATM5187A ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. SAHADEVAN, JCIT /DATE OF HEARING : 7 TH JUNE,, 2016 /DATE OF PRONOUNCEMENT : 11 TH AUGUST, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGGRIE VED BY THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VII, CHENNAI DATED 13.10.2014 IN ITA NO.186/10-11 & 240/11-12 PASSED UNDER SECTION 143(3 ) R.W.S 250(6) OF THE ACT. SINCE THE ISSUES INVOLVED IN BOT H THE APPEALS ARE IDENTICAL, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS APPEALS, HOWEVER, THE CRUXES OF THE ISSUES ARE AS F OLLOWS:- 2 ITA NOS.3076 & 3077/MDS/2014 I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE LEARNED ASSESSING OFFICER IN DISALLOWING THE DEPRECIATION CLAIMED BY THE ASSESSEE WHICH IS A CHARITABLE TRUST ENGAGED IN HEALTH CARE ACTIVITIES AND REGISTERED UNDER SECTION 12AA OF THE ACT ENJOYING THE BENEFIT OF SECTION 11 OF THE ACT. II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ORDER OF THE LEARNED ASSESSING OFFICER IN DISALLOWING THE CARRY FORWARD OF EXCESS APPLICATION OF INCOME OF THE EARLIER YEARS FOR SET OFF AGAINST THE INCOME OF THE RELEVANT ASSESSMENT YEAR. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED UNDER SECTION 12AA OF THE ACT ON 01.06.1 999 AND IS ENGAGED IN CHARTABLE ACTIVITY RELATED TO HEALTH CARE, FILED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2008-09 & 2009- 10 ON 27.01.2009 & 22.12.2009 ADMITTING INCOME OF ` 11,89,46,491/- AND ` 12,94,29,585/- RESPECTIVELY CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT. THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENTS WERE COMPLETED BY THE LEARNED ASSESSING OFFICER UNDER SECTION 143(3) OF T HE ACT ON 31.12.2010 & 01.11.2011 FOR THE ASSESSMENT YEARS 20 08-09 & 2009-10 RESPECTIVELY WHEREIN THE LEARNED ASSESSIN G OFFICER DISALLOWED THE CLAIM OF DEPRECIATION AND FURTHER DE NIED TO SET 3 ITA NOS.3076 & 3077/MDS/2014 OFF EXCESS APPLICATION OF INCOME DURING THE EARLIER YEARS IN THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION. 4. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) SUSTAINED THE ORDERS OF THE LEARNED ASSES SING OFFICER BY RELYING ON THE DECISIONS OF VARIOUS HIGH ER JUDICIARIES, AGAINST WHICH THE ASSESSEE IS IN APPEA L BEFORE US. 5. AT THE OUTSET, THE LEARNED DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT BOTH THE ISSUES ARE DECIDED AGAINST THE ASSESSEE BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ANJUMAN-E-HIMAYATH-E ISLAM VS. ADIT IN ITA NO.2271/MDS/2014 DATED 02.06.2015. IT WAS THEREFORE PLEADED THAT THE ORDERS OF THE REVENUE MAY BE SUSTA INED. 6. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENTATIVE, THOUGH RELIED UPON VARIOUS DECISION S, COULD NOT CONTROVERT TO THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. 4 ITA NOS.3076 & 3077/MDS/2014 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT I N THE CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE BECAUSE BOTH THE ABOVE ISSUES ARE DECIDED AGAINST T HE ASSESSEE BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ANJUMAN-E-HIMAYATH-E ISLAM VS. ADIT IN ITA NO.2271/MDS/2014 VIDE ORDER DATED 02.06.2015. THE G IST OF THE ORDER IS REPRODUCED HEREIN BELOW FOR REFERENCE: - WITH RESPECT TO DISALLOWANCE OF DEPRECIATION: 5.1 GROUND NO.(II) - DISALLOWANCE OF THE DEPRECIATION W HILE COMPUTING THE INCOME OF THE ASSESSEE TRUST . THE ASSESSEE TRUST HAD CLAIMED DEPRECIATION ON TH E ASSETS AS APPLICATION OF INCOME IN THE RETURN OF IN COME. THE LD. ASSESSING OFFICER OPINED THAT THE CLAIM OF DEPRECIATION BY THE ASSESSEE WOULD AMOUNT TO DOUBLE DEDUCTION BECAUSE THE ENTIRE COST OF ASSET HAS ALRE ADY BEEN CLAIMED AS APPLICATION OF INCOME IN THE YEAR I N WHICH THE ASSETS WERE PURCHASED. THEREAFTER, THE LD. ASSE SSING OFFICER CITING CERTAIN DECISIONS HELD THAT THE CLAI M OF DEPRECIATION CANNOT BE CONSIDERED AS APPLICATION OF INCOME. ON APPEAL, THE LD. CIT (A) WAS ALSO OF THE VIEW OF THE LD. ASSESSING OFFICER AND THEREFORE CONFIRME D LD. ASSESSING OFFICERS ORDER. 5.2 WE FIND THIS ISSUE IS ELABORATELY DISCUSSED IN THE CASE OF LISSIE MEDICAL INSTITUTION VS. CIT REPORTED IN [201 2] 348 ITR 344(KER.) AND HELD THE ISSUE AGAINST THE ASSESSEE. WHILE DOING SO, THE HONBLE KERALA HIGH COURT HAD CONSIDERED THE CIRCULAR NO.5P(LLX-6) DATED 19.06.1968 WHICH HAS NOT BEEN CONSIDERED BY THE OTHER DECISION S. THE CIRCULAR NO. 5P(LLX-6) IS REPRODUCED HEREIN BEL OW FOR REFERENCE:- 1. CIRCULAR NO. 5-P (LXX-6) OF 1968, DATED 19-6-196 8. 5 ITA NOS.3076 & 3077/MDS/2014 SUBJECT : SECTION 11CHARITABLE TRUSTSINCOME REQUI RED TO BE APPLIED FOR CHARITABLE PURPOSEINSTRUCTIONS REGARDI NG. IN BOARD'S CIRCULAR NO. 2-P(LXX-5) OF 1963, DATED T HE 15TH MAY, 1963, IT WAS EXPLAINED THAT A RELIGIOUS OR CHARITAB LE TRUST CLAIMING EXEMPTION UNDER SECTION 11(1) OF THE INCOM E- TAX ACT, 1961, MUST SPEND AT LEAST 75 PER CENT OF ITS TOTAL INCOME, FOR RELIGIOUS OR CHARITABLE PURPOSES. IN OTHER WORDS, I T WAS NOT PERMITTED TO ACCUMULATE MORE THAN 25 PER CENT OF IT S TOTAL INCOME. THE QUESTION HAS BEEN RECONSIDERED BY THE B OARD AND THE CORRECT LEGAL POSITION IS EXPLAINED BELOW. 2. SECTION 11(1) PROVIDES THAT SUBJECT TO THE PROVI SIONS OF SECTIONS 60 TO 63 'THE FOLLOWING INCOME SHALL NOT B E INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR . . . '. THE REFERENCE IN SUB-SECTION (A) IS INVARIABLY TO 'INCOME' AND NOT TO 'TOTAL INCOME'. THE EXPRESSION 'TOTAL INCOME' HAS BEEN SPECIFICALLY DEFINED IN SECTION 2(45) OF THE ACT AS 'THE TOTAL A MOUNT OF INCOME . . . COMPUTED IN THE MANNER LAID DOWN IN TH IS ACT'. IT WOULD ACCORDINGLY BE INCORRECT TO ASSIGN TO THE WOR D 'INCOME' USED IN SECTION 11(1)(A), THE SAME MEANING AS HAS BEEN SPECIFICALLY ASSIGNED TO THE EXPRESSION 'T OTAL INCOME' VIDE SECTION 2(45). 3. IN THE CASE OF A BUSINESS UNDERTAKING HELD UNDER TRUST, ITS 'INCOME' WILL BE THE INCOME AS SHOWN IN THE ACCOUNT S OF THE UNDERTAKING. UNDER SECTION 11(4), ANY INCOME OF THE BUSINESS UNDERTAKING DETERMINED BY THE INCOME-TAX OFFICER IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, WHICH IS IN EXCESS OF THE INCOME AS SHOWN IN ITS ACCOUNTS, IS TO BE DEEME D TO HAVE BEEN APPLIED TO PURPOSES OTHER THAN CHARITABLE OR R ELIGIOUS, AND HENCE IT WILL BE CHARGED TO TAX UNDER SUB-SECTION ( 3). AS ONLY THE INCOME DISCLOSED BY THE ACCOUNT WILL BE ELIGIBL E FOR EXEMPTION UNDER SECTION 11(1), THE PERMITTED ACCUMU LATION OF 25 PER CENT WILL ALSO BE CALCULATED WITH REFERENCE TO THIS INCOME. 4. WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPER TY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME , AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATI ONS THEREOF TOWARDS THE PURPOSES OF THE TRUST OR OTHERW ISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPEN DITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE . IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDE D BACK WILL BECOME CHARGEABLE TO TAX UNDER SECTION 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN TH OSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSE S OF THE TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MA NNER, SHOULD BE NOT LESS THAN 75 PER CENT OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION UNDER SECTION 11(1). 6 ITA NOS.3076 & 3077/MDS/2014 5. TO SUM UP, THE BUSINESS INCOME OF THE TRUST AS DISCLOSED BY THE ACCOUNTS PLUS ITS OTHER INCOME COM PUTED ABOVE, WILL BE THE 'INCOME' OF THE TRUST FOR PURPOS ES OF SECTION 11(1). FURTHER, THE TRUST MUST SPEND AT LEAST 75 PER CENT OF THIS INCOME AND NOT ACCUMULATE MORE THAN 25 PER CENT THEREOF. THE EXCESS ACCUMULATION, IF ANY, WILL BECO ME TAXABLE UNDER SECTION 11(1). AFTER CONSIDERING THE CIRCULAR, THE HONBLE KERALA HIGH COURT HELD AS FOLLOWS:- HELD, THAT AFTER WRITING OFF THE FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES AND WHEN THE ASSESSE E AGAIN CLAIMED THE SAME AMOUNT IN THE FORM OF DEPRECIATION, SUCH NOTIONAL CLAIM BECAME A CASH SUR PLUS AVAILABLE WITH THE ASSESSEE, WHICH WAS OUTSIDE THE BOOKS OF ACCOUNT OF THE TRUST UNLESS IT WAS WRITTEN BACK WHICH WAS NOT DONE BY THE ASSESSEE. IT WAS NOT PERMISSIBL E FOR A CHARITABLE INSTITUTION TO GENERATE INCOME OUTSIDE T HE BOOKS IN THIS FASHION AND THERE WOULD BE VIOLATION OF SEC TION 11(1)(A). IT WAS FOR THE ASSESSEE TO WRITE BACK THE DEPRECIATION AND IF THAT WAS DONE, THE ASSESSING OF FICER WOULD MODIFY THE ASSESSMENT DETERMINING HIGHER INCO ME AND ALLOW RECOMPUTED INCOME WITH THE DEPRECIATION W RITTEN BACK BY THE ASSESSEE TO BE CARRIED FORWARD FOR SUBS EQUENT YEARS FOR APPLICATION FOR CHARITABLE PURPOSES . FURTHER HONBLE CALCUTTA HIGH COURT HAS HELD IN THE CASE DCIT VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST REPORTED IN [1993] 199 ITR 15(CAL.) THAT THE INCOME CONTEMPLATED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR ASSESSABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE KERALA HIGH COURT AND TAKIN G CUE FROM THE DECISION OF THE HONBLE CALCUTTA HIGH COUR T , WE DO NOT FIND ANY HESITATION TO CONFIRM THE ORDER OF THE LD. CIT(A) AND ALSO THE VIEWS EXPRESSED BY HIM IN HIS O RDER. ACCORDINGLY THIS APPEAL IS HELD IN FAVOUR OF THE RE VENUE. WITH RESPECT TO DISALLOWANCE OF CARRY FORWARD AND SET OFF OF EXCESS APPLICATION OF INCOME IN THE RELEVANT ASSESSMENT YEAR: 4.1. GROUND NO.(I) - DISALLOWANCE OF THE CARRY FORWARD AND SET OFF OF EXCESS APPLICATION OF INCOME . 7 ITA NOS.3076 & 3077/MDS/2014 THE ASSESSEE IN ITS RETURN OF INCOME HAD CLAIMED ` 1,00,70,474/- AS EXCESS APPLICATION OF INCOME TO BE CARRIED FORWARD AS FOLLOWS:- GROSS RECEIPTS 85% OF THE GROSS RECEIPTS ` 5,11,60,794 ` 4,34,86,675 APPLICATION OF INCOME INCLUDING CAPITAL EXPENDITURE EXCESS APPLICATION C/F ` 5,35,57,149 ` 1,00,70,474 HOWEVER, THE LD. ASSESSING OFFICER ALLOWED THE CLAI M OF EXCESS APPLICATION TO BE CARRY FORWARD RS. 23,96,35 5/- AS WORKED OUT HEREIN BELOW:- 4.2. ON APPEAL, THE LD. CIT (A) DENIED THE BENEFIT OF CARRY FORWARD OF EXCESS APPLICATION BY OBSERVING AS UNDER:- INCOME DERIVED FROM PROPERTY HELD UNDER TRUST MEAN S REAL INCOME AND NOT THE INCOME COMPUTED FOR ASSESSMENT. THE QUESTION OF SPENDING OF 85% OF INCOME AND ACCUMULAT ION OF 15% OF INCOME ARISE ONLY WHEN THERE IS REAL INCOME. THE INCOME DERIVED SHOULD BE DURING THE CURRENT YEAR AN D ACCUMULATION IS ALSO FROM CURRENT YEARS INCOME. I F THE TRUST IS ABLE TO SPEND THE ENTIRE INCOME DERIVED FROM TRUST, THE WHOLE EXPENDITURE IS TREATED AS APPLICATION AND EXEMPTED U/S. 11 OF THE ACT. THERE IS NO PROVISION U/S. 11 OF THE ACT TO CARRY FORWARD THE EXCESS SPENDING IN EXCESS OF 85% STIPUL ATION. IF THE TRUST SPENDS MORE THAN THE INCOME, IT SHOULD BE EITHER FROM CORPUS OR FROM LOAN OBTAINED. THE APPLICATION SHOU LD ALWAYS BE FROM INCOME DERIVED OR FROM INCOME SET APART OR ACC UMULATED INCOME. THEREFORE THE QUESTION OF CARRY FORWARD OF EXCESS EXPENDITURE AND SET OFF OF THE SAME SUBSEQUENTLY DO ES NOT ARISE AT ALL IN THE CASE OF TRUSTS. RELIANCE IS PL ACED ON THE DECISION OF ITAT DELHI BENCH F IN THE CASE OF PUS HPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER, RENAL & DIG ESTIVE DISEASES VS DDIT(E),INV. CIRCLE-II, NEW DELHI (2009 ) 29 SOT 316(DELHI). IN THE ABOVE DECISION, THE HONBLE ITA T ANALYSED ALL THE DECISIONS WHICH ARE IN FAVOUR OF CARRY FORW ARD AND SET OFF AND DISTINGUISHED THEM AND ARRIVED AT THE CORRECT D ECISIONS AS DECLARED BY THE INCOME-TAX ACT. THE BOMBAY HIGH COU RT IN THE CASE OF LD. CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 131 TAXMAN 386 OBSERVED THAT THE INCOME OF THE TRUST S.NO. A.Y GROSS RECEIPTS APPLICATION EXCESS APPLIC ATION 1 2008 - 09 5,11,60,794 5,35,57,149 RS.23,96,355 8 ITA NOS.3076 & 3077/MDS/2014 IS TO BE COMPUTED ON THE BASIS OF COMMERCIAL PRINCI PLES. IT IS NOT IN DISPUTE THAT TO ARRIVE AT THE ACTUAL INCOME, COMMERCIAL PRINCIPLES ARE TO BE APPLIED. THIS DOES NOT MEAN T HAT THE EXCESS EXPENDITURE IS TO BE CARRIED FORWARD AND ALL OWED IN THE SUBSEQUENT YEAR. THE PRINCIPLES OF SET APART/ACCUM ULATION OF INCOME ARISE ONLY IF IT IS REAL INCOME. OTHERWISE, THE INVESTMENT U/S. 11(5) OF THE ACT IS NOT POSSIBLE WITH DEEMED I NCOME. THE INTENTION OF THE LEGISLATURE IS TO INVEST REAL INCO ME DERIVED FROM PROPERTY OF THE TRUST IN SPECIFIC ASSETS WHEN THEY ARE NOT UTILIZED / APPLIED. THE VERY CONCEPT OF EXEMPTION U/S. 11 O F THE ACT IS DEFEATED IF PROVISIONS OF PROFITS AND GAINS OF BUSI NESS OR PROVISION RELATING TO CARRY FORWARD AND SET-OFF IS SUBSTITUTED FOR THE INCOME WHICH DO NOT FROM PART OF TOTAL INCOME INCLUDED UNDER CHAPTER-III OF THE INCOME-TAX ACT . 4.3. BEFORE US, THE LD. A.R. CITING THE DECISION O F THE BOMBAY TRIBUNAL IN ITA NO.6129/MUM./2013 IN THE CAS E OF M/S.MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATI ON, MUMBAI VIDE ORDER DATED 05.03.2015 ARGUED THAT THE ASSESSEE SHOULD BE ALLOWED TO CARRY FORWARD THE EXC ESS APPLICATION. THE LD. D.R ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT (A). 4.4 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. SECTION- 11(1)(A) OF THE ACT PROVIDES THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE SHALL NOT BE INCLUDED IN THE TOT AL INCOME TO THE EXTENT SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSE IN INDIA. THE ACT ALSO PROVIDES T HAT UPTO 15% OF SUCH INCOME IS ACCUMULATED OR SET APART, THEN THAT SHALL ALSO NOT BE INCLUDED IN THE TOTAL INCOME . FURTHER SECTION-11(1)(D) OF THE ACT PROVIDES THAT INCOME IN THE FORM OF VOLUNTARY CONTRIBUTION MADE WITH SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION WILL ALSO NOT BE INCLUDED IN THE TOTAL INCOME. BY VIRTUE OF SECTION-2(24) OF THE ACT THE D EFINITION OF INCOME INCLUDES ANY VOLUNTARY CONTRIBUTION RECEIVED BY THE TRUST CREATED WHOLLY OR PARTLY OF CHARITABLE OR RELIGIOUS PURPOSES . FURTHER EXPLANATION TO SECTION-11(1)(A)(B) R.W.S 12(1) OF THE ACT PROVI DES THAT ANY VOLUNTARY CONTRIBUTION RECEIVED OTHER THAN WITH SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE SHALL BE DEEMED TO BE THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST . FROM THE ABOVE IT IS CLEAR THAT, WHEN THE ASSESSEE TRUST APPLIES 85% OF ITS INCOME RECEIVED BY WAY OF VOLUN TARY 9 ITA NOS.3076 & 3077/MDS/2014 CONTRIBUTIONS OTHER THAN THE VOLUNTARY CONTRIBUTION S RECEIVED WITH SPECIFIC DIRECTIONS AND THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, THEN SUCH INCOME S HALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE TRUST. FURTH ER THE BALANCE 15% OF SUCH INCOME EVEN IF ACCUMULATED OR S ET APART SHALL ALSO NOT BE INCLUDED IN THE TOTAL INCOM E OF THE TRUST. THEREFORE, WHAT IS PROVIDED UNDER THE ACT IS WITH RESPECT TO APPLICATION OF INCOME FROM THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUS T AND ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY THE TRUST OTHER THAN CONTRIBUTIONS MADE WITH SPECIFIC DIRECTI ONS THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUS T . THUS, THERE IS NO REFERENCE IN SECTION-11 OF THE AC T WITH RESPECT TO APPLICATION OF FUND FROM THE CORPUS OF THE TRUST, LOAN OBTAINED BY THE TRUST, SUNDRY CREDITORS OF THE TRUST OR ACCUMULATE FUND OF THE TRUST FOR CLAIMING EXEM PTION U/S.11 (1) OF THE ACT. 4.5. APPLICATION OF FUND BY ANY CHARITABLE INSTITU TION IS POSSIBLE ONLY FROM THE FOLLOWING SOURCES:- I) VOLUNTARY CONTRIBUTIONS RECEIVED BY THE TRUST T OWARDS ITS CORPUS, II) OTHER VOLUNTARY CONTRIBUTIONS, III) ACCUMULATED FUND, IV) AMOUNT RECEIVED BY WAY OF LOAN, V) SUNDRY CREDITORS, VI) INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST. [HONBLE CALCUTTA HIGH COURT HAS HELD IN THE CAS E DCIT VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST REPORTED IN [1993] 199 ITR 15(CAL.) THAT THE INCOME CONTEMPLATED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR ASSESSABLE . FURTHER, HONBLE APEX HIGH COURT HAS HELD IN TH E CASE OF J.K.TRUST VS. LD. CIT /CEPT REPORTED IN [1957] 32 ITR 535(SC) THAT PROPERTY IS A TERM OF THE WIDEST IMPORT, AND SUBJECT ANY LIMITATION OR QUALIFICATION WHICH THE C ONTEXT MIGHT REQUIRE, IT SIGNIFIES EVERY POSSIBLE INTEREST WHICH A PERSON CAN ACQUIRE, HOLD AND ENJOY. BUSINESS WOULD UNDOUBTEDLY BE PROPERTY UNLESS THERE IS SOMETHING TO THE CONTRARY IN THE ENACTMENT . ] WHEN THE TRUST APPLIES ITS FUNDS FROM ITS CORPUS , ACCUMULATED FUND, SUNDRY CREDITORS OR FROM THE LOAN OBTAINED BY THE TRUST, THEN SUCH FUNDS WHICH ARE AP PLIED CANNOT BE SAID TO BE FUNDS APPLIED FROM THE INCOME OF THE TRUST. THEREFORE, THERE CANNOT BE A CASE WHERE THE TRUST CAN APPLY ITS INCOME MORE THAN THE INCOME RECEIVED BY IT FOR THE PURPOSE OF SECTION-11(1)(A)& (B) OF THE ACT . THUS EXCESS APPLICATION OF FUND OVER AND 10 ITA NOS.3076 & 3077/MDS/2014 ABOVE THE INCOME OF THE TRUST CAN ARISE ONLY WHEN F UNDS ARE APPLIED FROM THE CORPUS OF THE TRUST, ACCUMULAT ED FUND, LOAN OBTAINED BY THE TRUST OR GOODS AND SERVI CES RECEIVED FROM SUNDRY CREDITORS. IT CAN BE LOGICAL T O DEDUCE THAT WHEN FUNDS ARE APPLIED FROM BORROWED FU NDS OR BY WAY OF SUNDRY CREDITORS THE SAME CAN BE TREAT ED AS APPLICATION OF FUND IN THE YEAR IN WHICH SUCH LOAN/ SUNDRY CREDITORS ARE REPAID FROM THE INCOME OF THE TRUST. HOWEVER WHEN AMOUNT IS APPLIED FROM THE CORPUS FUND OR ACCUMULATED FUND THE SAME CANNOT BE TREATED AS APPLICATION OF FUND FOR THE PURPOSE OF SECTION 11 O F THE ACT, BECAUSE SUCH FUND HAVE ALREADY BEEN EXEMPT FRO M THE INCOME OF THE TRUST IN THE YEAR IN WHICH IT IS RECEIVED OR SUCH AMOUNT IS SET ASIDE AND THEREFORE ONCE AGAI N TREATING THE SAME AS APPLICATION OF FUND WILL AMOUN T TO DOUBLE DEDUCTION. SIMILARLY VOLUNTARY CONTRIBUTION RECEIVED TOWARD CORPUS IS EXEMPT FROM INCOME OF THE TRUST IN THE YEAR IN WHICH IT IS RECEIVED AND THEREFORE WHEN IT IS UTILIZED FOR THE OBJECTS OF THE TRUST IT CANNOT BE CONSIDERE D AS APPLICATION OF FUND OTHERWISE IT WILL AMOUNT TO DOU BLE DEDUCTION. FROM THE ABOVE FACTUAL AND MATHEMATICAL MATRIX IT IS EVIDENT THAT CARRY FORWARD OF EXCESS A PPLICATION OF FUND IN THE COMMERCIAL PRINCIPLES CANNOT BE ALLO WED AS PER THE PROVISIONS OF THE ACT BECAUSE IT WOULD RESU LT IN NOTIONAL APPLICATION OF INCOME IN THE SUBSEQUENT YE AR. THESE ASPECTS HAVE NOT BEEN CONSIDERED BY THE MUMBA I BENCH OF THE TRIBUNAL, AND THE UNREPORTED DECISION OF THE HONBLE BOMBAY HIGH COURT IS ALSO NOT PLACED BEFORE US. 4.6 NOW ANALYZING THE FACTS OF THE CASE BEFORE US, IT APPEARS THAT THE ASSESSEE TRUSTS GROSS RECEIPTS IS ` 5,11,60,794/- AND THE ASSESSEE TRUST HAVE SPENT ` 5,35,57,149/- WHICH SHOWS THAT THE ASSESSEE TRUST H AS SPENT ` 23,96,355/- MORE THAN ITS INCOME RECEIVED DURING THE RELEVANT YEAR. THIS AMOUNT OF ` 23,96,355/- MAY HAVE BEEN TAKEN OUT FROM THE CORPUS FUNDS, ACCUMULATE D FUNDS, LOAN OBTAINED BY THE ASSESSEE TRUST OR AR ISING OUT OF SUNDRY CREDITORS. THEREFORE IT IS OBVIOUS THA T THERE IS NO EXCESS APPLICATION OF INCOME OVER AND ABOVE THE INCOME RECEIVED BY THE TRUST , HENCE THE QUESTION OF CARRY FORWARD OF EXCESS APPLICATION OF INCOME DOES NOT ARISE . HOWEVER THE AMOUNT APPLIED FROM THE LOAN OR SUNDRY CREDITORS WILL BE ALLOWED AS APPLICATION O F FUND IN THE YEAR IN WHICH SUCH LOAN OR SUNDRY CREDITORS ARE REPAID. IT IS PERTINENT TO MENTION THAT IF THE AMOU NT IS APPLIED FROM THE CORPUS FUND OR ACCUMULATED FUND IT WILL 11 ITA NOS.3076 & 3077/MDS/2014 NOT BE TREATED AS APPLICATION OF FUND BECAUSE CORP US FUND AND ACCUMULATE FUND ARE ALREADY EXEMPT FROM THE INCOME OF THE TRUST AND ONCE AGAIN IF IT IS TREATED AS APPLICATION OF FUND IT WOULD AMOUNT TO DOUBLE DEDUC TION. THEREFORE THE CLAIM OF THE ASSESSEE TO CARRY FORWAR D THE EXCESS APPLICATION OF FUND CANNOT BE ENTERTAINED AP PLYING THE COMMERCIAL PRINCIPLES. HOWEVER IF THE EXCESS AM OUNT OF ` 23,96,355/- IS APPLIED FROM THE BORROWED FUND OR FR OM SUNDRY CREDITORS, THE SAME SHALL BE ALLOWED AS APPL ICATION IN THE YEAR IN WHICH SUCH LOAN OR SUNDRY CREDITORS ARE REPAID FROM THE INCOME OF THE TRUST AS DISCUSSED HEREIN ABOVE. NEEDLESS TO MENTION THAT THE INCOME OF THE T RUST REFERS TO INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUS T AND ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY THE TRUST OTHER THAN CONTRIBUTIONS MADE WITH SPECIF IC DIRECTIONS THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUS T I.E., ITEM NOS.(II) AND (VI) MENTIONED HEREINABOVE. THIS GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY DISPOSED OFF. 8. FOLLOWING THE ABOVE DECISION OF THIS TRIBUNAL, W E HEREBY HOLD THAT IN THE CASE OF THE ASSESSEE WHICH IS A CHARITABLE TRUST REGISTERED UNDER SECTION 12AA OF T HE ACT AND ENJOYING THE BENEFIT OF SECTION 11 OF THE ACT, WILL NOT BE ENTITLED TO CLAIM THE BENEFIT OF DEPRECIATION WHILE COMPUTING THE INCOME OF THE TRUST AND FURTHER THERE WOULD BE NO SCOPE ARITHMETICALLY TO SET OFF EXCESS APPLICATION OF FUN D DURING THE EARLIER ASSESSMENT YEARS IN THE RELEVANT ASSESSMENT YEARS. ACCORDINGLY, WE HEREBY SUSTAIN THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) ON BOTH THE IS SUES RAISED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEAR S. 12 ITA NOS.3076 & 3077/MDS/2014 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 11 TH AUGUST, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 11 TH AUGUST, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF .