DCIT (E) 1(1), MUMBAI V. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY, MUMBAI

ITA 3373/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8873 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 18-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMALATHA
• Assessee Lawyers: R P ACHARYA
• Keywords: Charitable institution; Tax effect
• Section: 28

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 3373/MUM/2017 ( / ASSESSMENT YEAR: 2010 - 11 ) DY. CIT ( EXEMPTION ) - 1(1), ROOM NO. 506, 5 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI - 400 012 / VS. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY, 502, BENGAL CHEMICALS COMPOUND, VEER SAVARKAR MARG, PRABHADEVI, MUMBAI - 400 025 ./ ./ PAN/GIR NO. AABCT 1939 R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : MS. HEMALATHA / RESPONDENT BY : SHRI R. P. ACHARYA / DATE OF HEARI NG : 31.08.2017 / DATE OF PRONOUNCEMENT : 01.11. 2 017 / O R D E R PER SHAMIM YAHYA , A. M.: T HIS IS AN APPEAL BY THE R EVENUE ARISING OUT OF THE ORDER OF LEARNED CIT ( A ), MUMBAI DATED 10.02.2017, PERTAINING TO THE ASSESSMENT YEA R 2010 - 11. 2. THE GROUNDS OF APPEAL READ AS UNDER 2 ITA NO. 3373/MUM/2017 (A.Y. 2010 - 11) DY. CIT (EXEMPTION) VS. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY 1. W HETHER ON THE FACTS OF THE CASE AND IN LAW THE ID. CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.2,12,66,151/ - AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS.' 2. 'W HETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D OT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FAD THAT THERE WAS NO EXPRESS PROVISION IN THE I T ACT, 1961 PERMITTING ALLOW ANCE OF SUCH CLAIM.' 3. ' W HETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE L D . LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT RELYING UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT ON MERIT OF THE CASE, BUT DUE TO S M ALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. HOWEVER, ON THIS ISSUE THE DEPARTMENT HAS FILED SLP BEFORE THE APEX COURT IN OTHER CASES INCLUSIVE THE CASE OF MIDC(SPL (CIVIL) 9891 OF 2014) IN WHICH LEAVE HAS BEEN GRANTED AND THE MATTER IS PENDING IN ALL CASES FEN - ADJUDICATION BEFORE THE HON'BLE SUPREME COURT,' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - F, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' 3. THE ASSESSEE IN THIS CASE IS A TRUST. T HERE IS ONLY ONE I SSUE ARISING O UT OF THE ABOVE GROUNDS OF APPEAL RELATING TO CARRY FORWARD OF DEFICIT TO BE SET OF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 4. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORDS. IT TRANSPIRES THAT UPON ASSESSING OFFICERS DISALL OWANCE ON THE ABOVE ISSUE, THE LEARNED CIT - A HAS ALLOWED THE ASSESSEES APPEAL BY FOLLOWING HON'BLE JURISDICTIONAL HIGH COURT DIRECT DECISION ON THE ISSUE. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT DISPUTE THE PROPOSITION THAT THE ISSUE IS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE LEARNED CIT - A. THE R EVENUE HAS ALSO AGREED TO THIS IN THE GROUNDS FOR APPEAL RAISED HEREIN ABOVE AS IT IS 3 ITA NO. 3373/MUM/2017 (A.Y. 2010 - 11) DY. CIT (EXEMPTION) VS. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY MENTIONED THAT DEPARTMENT HAS NOT ACCEPTED THE HONBLE H IGH COURTS DECISION ON THIS ISSUE. BE THAT AS IT MAY , THE HONBLE J URISDICTIONAL HIGH COURT DECISION IS BINDING UPON THE ITAT. IN THIS REGARD , I MAY GAINFULLY REFER TO THE ORDER OF LEARNED CIT - A ON THE ISSUE AS UNDER: 6.2 I HAVE CONSIDERED THE FACTS AND C IRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN U NDER: I. APPELLANT RELYING UPON SEVERAL CASE LAWS STATED THAT DEFICIT OF THE EARLIER YEARS/CURRENT YEAR IS REQUIRED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. ON PERUSAL OF THE FACTS I FIND THAT THE CASE OF APPELLANT IS SQUARELY COVERED BY THE JUDGEMEN T OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL 264 ITR 110 WHEREIN THE HON. JURISDICTIONAL HIGH COURT HAS OBSERVED AS UNDER - ............'5. NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARISES FOR CONSIDERATION IS: WHETHER E XCESS 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 SUBSEQUENT 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 APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PU RPOSES. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SE LF - 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 SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INC OME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES 4 ITA NO. 3373/MUM/2017 (A.Y. 2010 - 11) DY. CIT (EXEMPTION) VS. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY 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 INCOM E EARNED 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 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION LL(L)(A) OF THE 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 (CUJ). ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSES AND AGAINST THE DEPARTMENT.' II. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON. JURISDICTIONAL HIGH COURT AS ABO VE, THE AO IS DIRECTED TO ALLOW THE CARRY FORWARD OF DEFICIT IN THE SUCCEEDING YEARS AFTER DUE VERIFICATION OF FACTS . 5. SINCE THE LD. CIT(A) HAS FOLLOWED THE HONBLE J URISDICTIONAL HIGH COURT DECISION MENTIONED HERE - IN - ABOVE , I DO NOT FIND ANY INFIRMITY IN THE SAME. HENCE , I U PHOLD THE ORDER OF LD. CIT(A). 6. IN THE RESULT , TH IS APPEAL FILED BY THE R EVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.11.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 01.11.2017 . . ./ ROSHANI , SR. PS 5 ITA NO. 3373/MUM/2017 (A.Y. 2010 - 11) DY. CIT (EXEMPTION) VS. INDO ITALIAN CHAMBERS OF COMMERCE & INDUSTRY / COPY OF THE ORDER FOR WARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI