DY.DIT(E)-II(2), MUMBAI V. ANJUMAN-E-MOHAMMEDI TRUST, MUMBAI

ITA 3248/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59850 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA NAIR
• Keywords: Charitable institution
• Section: 28; 11

Judgement Text

ITA NO 3248 OF 2011 ANJUMAN E-MOHAMMEDI TRUST MUMBAI PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE-PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.3248/MUM/2011 (ASSESSMENT YEAR: 2007-08) DY. D.I.T.-II(2) ANJUMAN E-MOHAMMADI ROOM NO.507, PIRAMAL CHAMBERS TRUST, BADRI MAHAL LAL BAUG, PAREL DR.D.N. ROAD, MUMBAI 400012 VS FORT MUMBAI 400001 PAN: AABTA 3123B APPELLANT RESPONDENT REVENUE BY: MS. USHA NAIR (CIT-DR) ASSESSEE BY: MR. FIROZ ANDHYARUJINA DATE OF HEARING: 20/02/2012 DATE OF PRONOUNCEMENT: 24/02/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY REVENUE AGAINST THE ORDERS OF THE CIT (A)-1 MUMBAI DATED 09.11.2010. THE ISSUE IN THE PRE SENT APPEAL RAISED BY REVENUE IS WITH REFERENCE TO THE CLAIM OF CARRY FORWARD AND SET OFF OF DEFICIT OF THE YEAR DISALLOWED BY AS SESSING OFFICER WITHOUT ANY REASON, BUT ALLOWED BY THE CIT (A). 2. BRIEFLY STATED, THE ASSESSEE IS A REGISTERED TRUST UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 VIDE REGISTRATION NO. B-736(BOM) DATED 8 TH MARCH, 1954 AND THE OBJECTS ARE ACCEPTED AS CHARIT ABLE IN NATURE AND THERE IS NO DISPUTE WITH REFERENCE TO TH E CLAIM OF EXEMPTION UNDER SECTION 11 OF THE I.T ACT. HOWEVER , THE ASSESSEE HAD FILED A LOSS RETURN AT ` .5,65,88,990/- BEING EXCESS OF EXPENDITURE OVER INCOME, CLAIMING CARRY FORWARD OF THE SAME TO BE SET OFF AGAINST THE RECEIPTS IN LATER YEAR(S). WITH OUT ANY DISCUSSION,THE ASSESSING OFFICER DETERMINED THE TOT AL INCOME AT NIL. IN THE APPEAL BEFORE CIT (A), IT WAS CONTENDED THA T THE ASSESSEE HAS CLAIMED CARRY FORWARD AND SET OFF OF THE LOSSES INC URRED IN THE YEAR ITA NO 3248 OF 2011 ANJUMAN E-MOHAMMEDI TRUST MUMBAI PAGE 2 OF 4 TO SUBSEQUENT YEAR(S). THE ASSESSEE RELIED ON VARIO US JUDGMENTS INCLUDING THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM.). THE LEARNED CIT (A) RELYING ON THE PRINCIPLES ESTABLISHED BY THE ABOVE JUDGMENT ALLOWED ASSESSEES CLAIM. THE REVENUE IS AGGRIEVED. 3. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE AND THE LEARNED COUNSEL IN THIS REGARD. 4. AFTER CONSIDERING THE ARGUMENTS AND EXAMINING THE F ACTS ON RECORD, WE DO NOT FIND ANY REASON TO DIFFER FROM TH E DIRECTIONS OF THE CIT (A). FIRST OF ALL THE ASSESSING OFFICER HAS NOT MADE OUT ANY CASE OR SPELT OUT ANY REASON WHY THE LOSS WAS DISALLOWED AND COMPUTED INCOME AT NIL. FURTHER, THE REVENUE IN ITS GROUND S CONTENDED THAT THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COU RT WAS NOT ACCEPTED BUT NOT CONTESTED OWING TO CERTAIN TECHNIC AL REASONS BUT THE CLAIM OF CARRY FORWARD CANNOT BE ALLOWED AS THE RE ARE NO SUCH PROVISIONS WHILE COMPUTING THE INCOME UNDER SECTION 11. WE DO NOT FIND ANY MERIT IN THE GROUNDS RAISED. THE ISSUE IS DIRECTLY COVERED BY THE ORDER OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM.). THE HON'BLE HIGH COURT HAS DECIDED THE ISSUE AS UNDER: NOW COMING TO QUESTION NO.3, THE POINT WHICH ARISE S 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 BEH ALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EAR LIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQ UENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETIN G THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS P URPOSES. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SE T OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUST, THEI R INCOME WAS ASSESSABLE 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 ASSESSAB LE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS UNDE R ITA NO 3248 OF 2011 ANJUMAN E-MOHAMMEDI TRUST MUMBAI PAGE 3 OF 4 SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THAT IN THE CASE, OF A CHARITA BLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUST ED AGAINST INCOME OF THE SUBSEQUENT YEARS. WE DO NOT F IND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOM E 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 AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EA RNED 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 ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 O F THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUD ED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293. ACCORDINGLY WE ANSWER QUESTION NO.3 IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAI NST THE DEPARTMENT. 5. SIMILAR VIEW WAS ALSO EXPRESSED RECENTLY BY THE HON 'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS. SH RI GUJARATI SAMAJ (REGD) (2011) 64 DTR (MP) 76. IN THE ABOVE RE FERRED CASE, IT WAS HELD: IN VIEW OF S.11(1)(A) IT CANNOT BE SAID THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZ ATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE E ARLIER YEAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. HAVING REGARD TO S.11(1)(A) WHEN THE INCOME OF THE TRUST IS USED OR PUT TO USE TO MEET THE CHARITABLE OR RELIGIOUS PURPOSES, I T IS APPLIED FOR CHARITABLE PURPOSE AND THE SAID APPLICA TION OF THE INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED T O MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGI OUS PURPOSES. THUS EVEN IF THE EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED IN THE EARLIE R YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEA R CAN BE SAID TO HAVE BEEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WHICH EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ITA NO 3248 OF 2011 ANJUMAN E-MOHAMMEDI TRUST MUMBAI PAGE 4 OF 4 ADJUSTED. THERE ARE NO WORDS OF LIMITATION IN S.(11 )(1)(A) EXPLAINING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR I N WHICH THE INCOME HAD ARISEN CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 60 CTR (RAJ.) 40 ; (1987) 164 ITR 439 (RAJ.) CONCURRED WITH . RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE HOL D THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CAN BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND, THEREFORE, THE A SSESSEES CLAIM FOR CARRY FORWARD OF EXCESS OF EXPENDITURE OVER INC OME OF THIS YEAR HAS TO BE ALLOWED. THE CIT (A) ORDER IS THEREFORE, UPHELD AND REVENUE GROUNDS ARE DISMISSED. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2012. SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED 24 TH FEBRUARY, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI