Market Committee, Karnal V. ACIT, Karnal

ITA 3685/DEL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3651 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA SENIOR
• Assessee Lawyers: SIDHARTH JAIN
• Keywords: Depreciation; Charitable institution; Opportunity of being heard; Principle of natural justice; Unabsorbed depreciation
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3685/DEL./2009 (ASSESSMENT YEAR : 2007-08) MARKET COMMITTEE, VS. ACIT, NISSING, DISTT. KARNAL. KARNAL. (PAN : AAALM0086A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SIDHARTH JAIN, FCA REVENUE BY : SHRI A.K. MONGA, SENIOR DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT (APPEALS), KARNAL DATED 06.07.2009. 2. THE ASSESSEE HAS FILED A RETURN OF INCOME IN THE STATUS OF LOCAL AUTHORITY. EXCESS OF INCOME OVER EXPENDITURE WAS CLAIMED EXEMP TED U/S 11 OF THE INCOME-TAX ACT. THE ASSESSEE IS A MARKET COMMITTEE WHICH IS A STATUTORY BODY FUNCTIONS UNDER THE SUPERVISION AND CONTROL OF THE HARYANA STATE AG RICULTURAL MARKETING BOARD AND THE HARYANA STATE GOVERNMENT. THE MAIN OBJECTS OF THE COMMITTEE ARE TO HELP THE FARMERS AND TO SELL THEIR GOODS AT THE MAXIMUM PRIC E. 3. THE GROUNDS OF APPEAL READ AS UNDER :- ITA NO.3685/DEL./2009 2 1. THAT THE LEARNED CIT (A), WRONGLY CONSIDERED TH E ACCRUED INTEREST OF RS.2672250/- WHICH WAS NOT RECEIVED FRO M HVPN AND THERE IS ALSO REMOTE POSSIBILITIES OF RECOVERY OF P RINCIPAL EVEN IS UNJUSTIFIED AND ILLEGAL AND DESERVES TO BE QUASHED IN THE INTEREST OF NATURAL JUSTICE. 2. THAT THE LEARNED CIT (A), WRONGLY CONSIDERED THE ACCRUED INTEREST OF RS.210000/- WHICH WAS NOT RECEIVED FROM MARKET COMMITTEE PUNDRI, WHICH IS UNJUSTIFIED AND ILLEGAL AND DESERVES TO BE QUASHED IN THE INTEREST OF NATURAL JUSTICE. 3. THAT THE LD CIT (A) HAS ERRED IN LAW WHILE CONFI RMING THE NON CONSIDERATION OF DEPRECIATION OF RS.636547/- AS APPLICATION OF INCOME UNDER SECTION 11 TO 13 OF THE INCOME TAX ACT , AND THEREFORE THE SAME MAY PLEASE BE CONFIRMED AS APPLICATION OF INCOME FOR THE PURPOSE OF COMPUTATION OF INCOME OF THE ASSESSEE. 4. THAT LD CIT (A) WRONGLY CONFIRMED THE DISALLOWAN CE OF UNABSORBED DEPRECIATION CARRIED FORWARD LOSSES WHIC H IS ILLEGAL AND UNJUSTIFIED. 5. THAT THE LD CIT (A) HAS ERRED IN LAW WHILE CONFI RMING THE ACTION OF LD AO ABOUT NON CONSIDERATION OF EXCESS A MOUNT OF APPLICATION OF INCOME FOR PREVIOUS YEARS, WHICH IS ALSO TO BE ADJUSTED IN THE CURRENT YEAR AS APPLICATION OF INCO ME UNDER 11 TO 13 OF THE IT ACT, WHICH IS ILLEGAL, UNJUSTIFIED AND AG AINST THE NATURAL LAW AND THEREFORE THE SAME MAY PLEASE BE CONSIDERED AS APPLICATION OF INCOME FOR PERIOD UNDER CONSIDERATION. 6. THAT THE LD CIT (A) HAS ERRED IN LAW WHILE CONFI RMING THE NON CONSIDERATION OF ADVANCE INCOME TAX PAID AS APP LICATION OF INCOME UNDER SECTION 11 TO 13 OF THE INCOME TAX ACT , AND THEREFORE THE SAME MAY PLEASE BE CONFIRMED AS APPLICATION OF INCOME FOR THE PURPOSE OF COMPUTATION OF INCOME OF THE ASSESSEE. 4. IN GROUND NOS.1 & 2, THE ASSESSEE HAS CHALLENGED THE WRONG CONSIDERATION OF ACCRUED INTEREST OF RS.26,72,250/- AS INCOME NOT RE CEIVED FROM HVPN AS INCOME AND RS.2,10,000/- AS INCOME NOT RECEIVED FROM MARKE T COMMITTEE, PUNDRI, WHERE THERE IS REMOTE POSSIBILITY OF RECOVERY OF PRINCIPL E. ITA NO.3685/DEL./2009 3 5. AT THE OUTSET OF THE HEARING, THE LEARNED AR SUB MITTED THAT THESE GROUNDS ARE COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISI ONS OF ITAT AND ONE OF WHICH IS ITAT, DELHI BENCH F IN MARKET COMMITTEE, ASSANDH VS. ACIT, KARNAL IN ITA NO.2633/DEL./2008 ASSESSMENT YEAR 2005-06 VIDE ORDE R DATED 29 TH MAY, 2009 AND THE ITAT, DELHI BENCH F VIDE PARA NOS.8 TO 11 HEL D AS UNDER :- 8. ISSUE NO. B IS REGARDING INTEREST INCOME WHICH WAS ASSESSED BY THE AO ON ACCRUAL BASIS WHERE AS CLAIM OF THE ASSESSEE IS THAT ALL THE ASSESSEES ARE FOLLOWING CASH SYSTEM OF ACCOUNTING AND HENCE I NTEREST INCOME IS TO BE TAXED ON RECEIPT BASIS AND NOT ON ACCRUAL BASIS. TH IS ISSUE HAS BEEN RAISED BY THE ASSESSEE IN FOLLOWING APPEALS AS PER GROUND NOS. MENTIONED THEREIN AGAINST EACH APPEAL :- SL.NO. ITA NO. GROUND NOS. 1. 2633 2 & 6 2. 2645 2, 7 & 8 3. 2646 2, 7 & 8 4. 2647 2, 7, 8 5. 2771 5 6. 2772 2 7. 2773 2 8. 2634 2 9. 2636 2 10. 2637 2 9. IT IS SUBMITTED BY LD. A.R. OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION IN THE CASE OF VARIOUS MARKET COMMITTEES AS PER ITA 3830/DEL/2007 DATED 25 .4.2008 AND IN ITA NO.3111/DEL/07 DATED 6.2.2009. IT IS SUBMITTED , THAT BOTH THE TRIBUNAL DECISIONS ARE AVAILABLE IN THE PAPER BOOK AT PAGE N OS.14 TO 20 AND 54 TO 61 OF THE PAPER BOOK. OUR ATTENTION WAS DRAWN TO PARA NO.4 OF THE FIRST CITED DECISION (SUPRA) AND PARA NO.13 OF THE SECOND CITED DECISION (SUPRA) OF THE TRIBUNAL. IT IS SUBMITTED THAT AS PER BOTH THESE JU DGEMENTS, SIMILAR ISSUE WAS RESTORED BACK BY THE TRIBUNAL TO THE FILE OF LD CIT(A) FOR A FRESH DECISION AND' ACCORDINGLY IN THE PRESENT CASES ALSO , THIS ISSUE MAY BE RESTORED BACK TO THE FILE OF THE LD CIT(A) FOR A FR ESH DECISION WITH SIMILAR DIRECTIONS. THE LD DR OF THE REVENUE' SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AT PARAGRAPH NO.13 IN ITA 3111/DEL/07. WE REPRODUCE BELOW, PARA NO.13 FROM P AGE NO.59 OF THE PAPER BOOK. ITA NO.3685/DEL./2009 4 13. IN VIEW OF ABOVE, WE FEEL IT APPROPRIATE THAT THIS ASPECTS SHOULD ALSO BE DECIDED ON MERIT. LD CIT(A) SAYS THA T IT IS CLEAR FROM THE AUDIT REPORT AS WELL AS FROM THE FINAL ACC OUNT THAT THE ASSESSEE IS FOLLOWING MIXED SYSTEM OF ACCOUNTING. B UT HE HAS NOT CITED EVEN A SINGLE INSTANCE AS PER WHICH THE ASSES SEE HAS CONSIDERED INCOME OR EXPENSE ON ACCRUAL BASIS AND N OT ON CASH BASIS. BEFORE US, THE AUDIT REPORT AND FINAL ACCOU NTS ARE NOT FURNISHED. UNDER THESE FACTS, WE FEEL THAT THIS ISS UE SHOULD BE DECIDED AFRESH BY THE LD CIT(A) AFTER RECORDING A C ONCRETE BASIS OF HIS DECISION. WE SET ASIDE THE ORDERS OF LD CIT(A) REGARDING THIS ASPECT THAT INTEREST INCOME IS ASSESSABLE ON ACCRUA L BASIS, AND RESTORE THIS MATTER TO LD CIT(A)IN ALL THESE CASES WITH THE DIRECTION THAT HE SHOULD DECIDE THIS ASPECT OF THE MATTER ON MERIT AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BO TH SIDES AND HE SHOULD INDICATE IN HIS ORDER THE BASIS OF HIS DECIS ION ON THIS ISSUE. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTI CAL PURPOSES IN ALL THESE CASES. 11. IN THE PRESENT CASES ALSO, THE LD CIT(A) HAS DE CIDED THIS ISSUE AGAINST THE ASSESSEE ON THE BASIS THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING/MIXED SYSTEM OF ACC OUNTING WERE AS THE CLAIM OF THE ASSESSEE IS THAT THESE ASSESSEES ARE F OLLOWING CASH SYSTEM OF ACCOUNTING. THE LD CIT(A) HAD NOT GIVEN EVEN A SING LE INSTANCE IN THE PRESENT CASES ALSO, AS PER WHICH HE HAS HELD THAT T HE ASSESSEE HAS CONSIDERED INCOME OR EXPENSES ON ACCRUAL BASIS AND NOT ON CASH BASIS. WE, THEREFORE, FEEL IT FIT AND PROPER TO SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO HIS FILE IN A LL THE CASES WITH A DIRECTION THAT HE SHOULD DECIDE THIS ASPECT OF THE MATTER AFR ESH ON MERIT AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD T O BOTH SIDES AND TO INDICATE IN HIS ORDER THE BASIS OF HIS DECISION ON THIS ISSUE. ONE MORE CONTENTION WAS RAISED BY LD AR FOR THE ASSESSEE THA T EVEN IF IT IS HELD THAT INTEREST INCOME IN THE PRESENT CASES ARE TAXABLE ON ACCRUAL BASIS, THE SAME SHOULD BE CONSIDERED AS APPLICATION OF INCOME ALSO BECAUSE ADMITTEDLY, SUCH INTEREST INCOME WAS NOT RECEIVED BY THESE ASSE SSEES. WE DIRECT THE LD CIT(A) THAT IF THE ASSESSEE RAISES THIS CONTENTION BEFORE HIM, HE SHOULD DECIDE THIS ASPECT OF THE MATTER ALSO AS PER THE LA W. THIS ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL P URPOSES. 6. LD. DR HAS NOT MADE OUT ANY CONTRARY DECISION. 7. RESPECTFULLY FOLLOWING THE SAME, WE RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT (A) TO DECIDE THE ISSUE AS PER THE DIRECTION OF THE ITAT IN THE AFORESAID JUDGEMENT. ITA NO.3685/DEL./2009 5 8. IN GROUND NO.3, THE ISSUE IS REGARDING THE NON-C ONSIDERATION OF DEPRECIATION OF RS.636547/- AS APPLICATION OF INCOME UNDER SECTI ON 11 TO 13 OF THE INCOME TAX ACT. 9. THE LEARNED AR SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF ITAT. HE SUBMITTE D THAT ITAT, DELHI BENCH F IN MARKET COMMITTEE, ASSANDH VS. ACIT, KARNAL, CITED S UPRA, VIDE PARA NOS.12 TO 15 HELD AS UNDER :- 12. ISSUE NO.C RAISED REGARDING NON CONSIDERATION OF DEPRECIATION AS APPLICATION OF INCOME. THIS ISSUE HAS BEEN RAISED BY THE ASSESSEE IN FOLLOWING APPEALS AS PER GROUND NOS. MENTIONED THER EIN AGAINST EACH APPEAL :- SL.NO. ITA NO. GROUND NOS. 1. 2633 3 2. 2635 2 3. 2645 3 4. 2646 3 5. 2647 3 6. 2770 2 7. 2771 2 8. 3655 3 9. 2772 3 10. 3654 3 11 2773 3 12. 3656 3 13. 2774 2 13. IT WAS SUBMITTED BY LD A.R. FOR THE ASSESSEE TH AT THIS ISSUE ALSO IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL D ECISIONS IN THE CASES OF VARIOUS MARKET COMMITTEES AS PER ITA NO.3355/DEL/20 07 DATED 27.1.2009, ITA 1089/DEL/08 DATED 19 TH SEPTEMBER, 2008 AND ITA NO.3357/DEL/07 DATED 20 TH JUNE, 2008. IT IS SUBMITTED THAT ALL THESE TRIBUNAL DECISIONS ARE AVAILABLE ON PAGES 1 TO 4, 5 TO 9 AND 21 TO 42 OF THE PAPER BOOK. OUR ATTENTION WAS DRAWN TO PARA NO.4 AN D 5 OF THE FIRST TRIBUNAL DECISION, PARA 5 OF THE SECOND TRIBUNAL DE CISION AND PARA NO.11 OF THE THIRD TRIBUNAL DECISIONS. IT IS ALSO SUBMITT ED THAT THE TRIBUNAL HAS FOLLOWED THE JUDGEMENTS OF HON'BLE GUJARAT HIGH COU RT RENDERED IN THE CASE OF CIT VS SETH MANILAL RANCHHODDAS VISHRAM BHA WAN TRUST AS REPORTED IN 198 ITR 598 AND THE JUDGEMENT OF HON'BL E BOMBAY HIGH ITA NO.3685/DEL./2009 6 COURT RENDERED IN THE CASE OF CIT VS INSTITUTE OF B ANKING PERSONNEL SELECTION (IBPS) AS REPORTED IN 264 ITR 110 AND ALS O OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS RAIPUR PA LLOTTINE SOCIETY (M.P. HIGH COURT) (1989) 180 ITR 579. IT WAS SUBMITTED T HAT IN VIEW OF THIS, IN PRESENT CASES ALSO, THIS ISSUES SHOULD BE DECIDED I N FAVOUR OF THE ASSESSEE. LD. D.R. FOR THE REVENUE SUPPORTED THE ORDERS OF AU THORITIES BELOW. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE DECISIONS O F THE TRIBUNAL CITED BY LD AR FOR THE ASSESSEE. WE FIND THAT AS PER THE TRI BUNAL DECISIONS, AVAILABLE ON PAPER BOOK, THIS ISSUE HAS BEEN DECIDE D BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. FOR THE PURPOSE OF READY R EFERENCE, WE REPRODUCE PARA NO.11 FROM TRIBUNAL DECISION IN ITA 3357/DEL/0 7, WHICH IS AVAILABLE ON PAGE NO.32 OF THE PAPER BOOK. 'REGARDING THE SECOND ISSUE, WE FIND THAT LD CIT (A ) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE ON THE BASIS OF THE JUDGEMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SETH MANI LAL RANCHHODDAS VISHRAM BHAWAN TRUST (SUPRA) AND THE JU DGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL SELECTION (SUPRA), WE FIND THAT IN THE CAS E OF SETH MANILAL RANCHHODDAS VISHRAM BHAWAN TRUST (SUPRA), THE ISSUE BEFORE HON'BLE GUJARAT HIGH COURT WAS AS TO WHETHER WHILE COMPUTING INCOME U/S 11(1)(A) OF THE I.T. ACT, DEPRECIATION H AS TO BE ALLOWED. IN THIS CASE, HON'BLE GUJARAT HIGH COURT HAS FOLLOW ED THE JUDGEMENT OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS RAO BAHADUR CALAUALA CANNUN CHETTY CHARITY 1 35 ITR 485 AND JUDGEMENT OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS RAIPUR PALLOTINE SOCIETY, 180 ITR 579 WHE REIN IT WAS HELD THAT FOR THE PURPOSE OF COMPUTING ACCUMULATION OF INCOME .ALLOWABLE TO THE EXTENT OF 25% OF INCOME, THE INCO ME HAS TO BE COMPUTED IN THE NORMAL COMMERCIAL MANNER AND HENCE, DEPRECIATION HAS TO BE ALLOWED IN COMPUTING THAT IN COME. NO CONTRARY JUDGEMENT HAS BEEN BROUGHT TO OUR NOTICE A ND HENCE, WE ARE OF THE CONSIDERED OPINION THAT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD CIT (A) ON THIS ISSUE ALSO BECAUSE THIS ISSUE IS DECIDED BY HIM FOLLOWING VARIOUS JUDGEMENT OF GUJAR AT AND BOMBAY HIGH COURT AND HENCE WE CONFIRM THE SAME. TH IS ISSUE IS ALSO DECIDED IN FAVOUR OF ASSESSEE. 15. RESPECTFULLY FOLLOWING THE PRECEDENT, IN THE PR ESENT CASES ALSO, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE ON SIMIL AR LINES. HENCE THIS ISSUE STANDS DECIDED IN FAVOUR OF ASSESSEE. ITA NO.3685/DEL./2009 7 10. RESPECTFULLY FOLLOWING THE AFORESAID ORDER, WE ALLOW THIS GROUND OF THE ASSESSEES APPEAL ON THE SIMILAR LINES. HENCE, THI S ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE. 11. GROUND NO.4 IS RELATED TO ALLOWING THE BENEFIT OF UNABSORBED DE PRECIATION AND CARRY FORWARD LOSSES. AT THE OUTSET, LEARNED AR SU BMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, DELHI BENCH F IN MARKET COMMITTEE, ASSANDH VS. ACIT, KARNAL, CITED SUPRA . LEARNED DR WAS ALSO NOT HAVING ANY CONTRARY VIEW IN THIS REGARD. 12. WE HAVE HEARD BOTH THE SIDES. ITAT ON THIS ISS UE HAS DECIDED AS UNDER:- 18. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND THE DECISIONS O F THE TRIBUNAL CITED BY LD. AR FOR THE ASSESSEE. WE FIND THAT AS PER THE T RIBUNAL DECISIONS, AVAILABLE ON PAPER BOOK, THIS ISSUE HAS BEEN DECIDE D BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. FOR THE PURPOSE OF READY RE FERENCE, WE REPRODUCE PARA NO.16 FROM TRIBUNAL DECISION IN ITA 3111/DEL/0 7, WHICH IS AVAILABLE ON PAGE NO.60, 61 OF THE PAPER BOOK. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENTS CITED BEFO RE US. WE FIND THAT THIS ISSUE IS DECIDED BY THE LD. CIT(A) ON THE BASIS THAT SINCE THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR EXEMP TION U/S 11, THERE IS NO QUESTION OF ALLOWING OF DEPRECIATION OR UNABSORBED DEPRECIATION. HE HAS NOT RECORDED HIS FINDING AS TO WHETHER THERE ARE ANY BROUGHT FORWARD UNABSORBED DEPRECIATION/LOS SES OR NOT FOR A.Y. 2002-03 AND 2001-02 IN ITA 4111/D/07 AND FOR A .Y. 2002- 03 IN ITA 3111/ D/ 07. NO MATERIAL HAS BEEN PLACED BEFORE US ON THIS ASPECT. THE ISSUE REGARDING ALLOWABILITY OF D EPRECIATION IS TO BE DECIDED IN A.Y: 2001-02 AND 2002-03 AND NOT IN T HE PRESENT YEAR. IF THE CLAIM OF ASSESSEE REGARDING DEPRECIATI ON IS ALLOWED IN A.Y. 2001-02 AND 2002-03 AND IF THE SAME REMAINED U NABSORBED IN THOSE YEARS AND IN A.Y. 2003-04, THE SAME HAS TO BE ALLOWED AS SET OFF IN THE PRESENT YEAR FROM INCOME OF PRESENT YEAR BEFORE ALLOWING EXEMPTION U/ S 11. SIMILARLY, IF THERE IS ANY B/F LOSSES OF THESE YEARS AND ITS CARRY FORWARD WAS ALLOWED IN THOSE YE ARS, AND IT COULD NOT BE SET OFF IN A. Y. 2003-04, THEN SET OFF OF TH E SAME SHOULD BE ALLOWED IN THE PRESENT YEAR BEFORE ALLOWING EXEMPTI ON U/S 11. THE ISSUE REGARDING ELIGIBILITY OF EXEMPTION IS NOT REL EVANT BECAUSE SET OFF OF B/F UNABSORBED DEPRECIATION/LOSS IS TO BE AL LOWED AS PER LAW ITA NO.3685/DEL./2009 8 WHETHER THE INCOME IS EXEMPT OR NOT AND EXEMPTION W ILL OF THE REMAINING INCOME, IF ANY. WE RESTORE THIS ISSUE TO THE FILE OF A.O. TO ALLOW SET OFF OF B/F UNABSORBED DEP./LOSSES IF A NY OF A.Y. 2001- 02 AND 2002-03 IF CARRY FORWARD OF THE SAME IN THES E YEARS HAS BEEN ALLOWED AND IF IT COULD NOT BE SET OFF IN A.Y. 2003-04. THIS GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPO SES IN BOTH THESE CASES. 19. FROM THE ABOVE, WE FIND THAT AS PER THIS DECISI ON OF THE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE FILE OF A.O. TO ALLOW SET OFF OF BROUGHT FORWARD UNABSORBED DEPREDATION/LOSSES, IF IT IS FOU ND THAT CARRY FORWARD OF THE SAME HAS BEEN ALLOWED IN EARLIER YEARS WHICH RE MAINED TO BE SET OFF TILL THE PRESENT A.Y. IN THE PRESENT CASES ALSO, WE FIN D THAT THE LD. CIT (A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE ON THE BASI S THAT QUESTION OF CARRY FORWARD OF LOSSES IS NOT RELEVANT WHEN INCOME IS AS SESSED AS PER S.11 TO S.13. NO FINDING IS GIVEN BY LD. CIT (A) AS TO WHE THER CARRY FORWARD WAS ALLOWED IN THE YEAR FOR WHICH THE ASSESSEE IS CLAIM ING CARRY FORWARD OR WHETHER SUCH CARRY FORWARD EVEN IF ALLOWED REMAINED UNADJUSTED DURING THE PRESENT A.Y. AND UNDER THESE FACTS, WE RESTORE THIS ISSUE BACK TO THE FILE OF A.O. AS PER EARLIER TRIBUNAL DECISION, PARA 16 OF WHICH WAS REPRODUCED ABOVE. THE A.O. IS DIRECTED TO ALLOW SE T OF BROUGHT FORWARD UNABSORBED DEPRECIATION/LOSSES, IF ANY, IF CARRY FO RWARD OF THE SAME IN EARLIER YEARS HAS BEEN ALLOWED AND THE SAME REMAINS TO BE ADJUSTED TILL THE PRESENT A.Y. WHICH IS IN APPEAL BEFORE US. THE AO S HOULD PASS NECESSARY ORDER AS PER LAW IN ALL THESE CASES ON THIS ISSUE A FTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS IS SUE IS DECIDED IN FAVOUR OF ASSESSEE FOR STATISTICAL PURPOSES. RESPECTFULLY FOLLOWING THE SAME, WE ALSO RESTORE TH IS ISSUE TO THE FILE OF ASSESSING OFFICER. 13. GROUND NO.5 IS RELATED TO THE DIRECTION OF CIT (A) TO CONSIDER THE EXCESS AMOUNT OF APPLICATION OF INCOME OF PREVIOUS YEARS TO BE ADJUS TED IN CURRENT YEAR. THE REVENUE HAS CLAIMED THAT THERE IS NO SUCH PROVISION IN SECTION 11 TO 13 OF THE INCOME-TAX ACT, THEREFORE, SUCH DIRECTIONS ARE NOT AS PER LAW. LEARNED AR SUB MITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN I TA NO.2633/DEL/2008 IN THE CASE OF MARKET COMMITTEE, ASSANDH VS. ACIT, KARNAL, CITED S UPRA. LEARNED DR DID NOT CONTROVERT THE FINDING OF THE LEARNED AR. ITA NO.3685/DEL./2009 9 14. AFTER HEARING BOTH THE SIDES AND PERUSING THE D ECISION RELIED UPON BY THE LEARNED AR, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE PARA NOS.23 TO 25 OF THE AFORESAID ORDER OF THE ITAT AND ITAT HAS DECIDED AS UNDER : 23. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDER S OF AUTHORITIES BELOW AND THE JUDGEMENTS CITED BY LD AR FOR THE ASSESSEE. FIRST, WE EXAMINE THE APPLICABILITY OF THE JUDGEMENT OF HON'BLE MADRAS HI GH COURT IN THE PRESENT CASE. IN THAT CASE, WE FIND THAT AS PER THE FACTS NOTED BY HON'BLE MADRAS HIGH COURT, THE SURPLUS INCOME OF ASSESSEE A CCORDING TO BOOKS WAS RS.3,91,020/- AND THE AO IN THAT CASE HAD DISAL LOWED AND ADDED BACK VARIOUS AMOUNTS TOTAL OF WHICH WAS RS.1,54,657/-. IT IS ALSO NOTED THAT FOR THE PURPOSE OF THIS A.Y., THE INCOME SHOULD HAVE BE EN RS.5,45,687/- BEING THE SUM TOTAL OF BOOK INCOME RS.3,92,020/- AND THE ADDITION MADE BY AO OF RS.1,54,667/-. IT IS ALSO NOTED BY HON'BLE MADRA S HIGH COURT THAT IT WAS HELD BY THE TRIBUNAL THAT EVEN IF THIS AMOUNT OF RS .5,45,687/- WAS RECORDED AS INCOME OF ASSESSEE, THE ENTIRE AMOUNT W OULD BE EXEMPT BECAUSE THE ASSESSEE HAS SPENT ON CHARITABLE AND RE LIGIOUS PURPOSES A SUM OF RS.7,98,081/-. HENCE, IT WAS HELD BY THE TRIBUNA L THAT THE ASSESSEE WAS ENTITLED TO EXEMPTION U/S 11(1). AGAINST THIS DECIS ION OF THE TRIBUNAL THERE WAS A REFERENCE TO HON'BLE MADRAS HIGH COURT AND IT WAS HELD THAT SINCE SOME FACTS WERE NOT CLEAR AS TO WHETHER THE AMOUNT OF RS.7,98,081/- INCLUDED THE SURPLUS OF RS.3,91,020/- AND ALSO FOR WANT OF CLARIFICATION AS TO WHERE FROM THIS AMOUNT OF RS.7,98,081/- CAME FRO M AND WHETHER IT IS INCLUDING ACCUMULATED SURPLUS OF PRECEDING YEARS AN D FOR WANT OF SOME OTHER CLARIFICATIONS, THE QUESTIONS COULD NOT BE AN SWERED AND THE MATTER WAS RESTORED BACK TO THE TRIBUNAL TO VERIFY THESE M ATTERS AND DISPOSE OF MATTER IN ACCORDANCE WITH S.11 OF THE ACT. THE LAS T PARA OF THE JUDGEMENT OF HON'BLE MADRAS HIGH COURT IS RELEVANT WHICH IS R EPRODUCED BELOW FROM PAGE 839 OF 223 ITR. ACCORDING TO THE TRIBUNAL, THE SURPLUS FOR THE PUR POSE OF THE A.Y.1 WOULD BE RS.3,91,020/- + RS.1,54,666 I.E. RS.5,45,6 87/-. IF THAT IS SO, WHERE DID THE SURPLUS INCOME OF RS.7,98, 081/- COME FROM? WHETHER IT IS AN ACCUMULATED SURPLUS OF THE P.Y. OR WHETHER IT INCLUDES THE SURPLUS OF RS.3,91,020/-. IF IT IS AC CUMULATED SURPLUS OF THE P.YS, IT IS NOT KNOWN WHETHER THE ASSESSEE H AS FOLLOWED THE PROCEDURE AS CONTEMPLATED U/S 12(2) OF THE ACT. TH E TRIBUNAL IS, THEREFORE, DIRECTED TO VERIFY AS TO WHETHER THE SUR PLUS OF RS.7,98,081 INCLUDED THE SURPLUS OF RS.3,91,020/- A ND WHERE THIS RS.7,98,081/- CAME FROM, AND WHETHER THE SAID AMOUN T HAS BEEN APPLIED FOR CHARITABLE PURPOSES IN ACCORDANCE WITH THE PROVISIONS CONTAINED IN S.11(1) OF THE ACT. WITHOUT GETTING CL ARIFICATIONS ON THESE ASPECTS, IT IS NOT POSSIBLE TO ANSWER THE QUE STION REFERRED TO US. AFTER ASCERTAINING THESE FACTS, THE TRIBUNAL IS DIR ECTED TO DISPOSE OF THIS MATTER IN ACCORDANCE WITH THE PROVISIONS CONTA INED IN S.11 OF THE ACT. WE, ACCORDINGLY, RETURN THE QUESTIONS RE FERRED TO US ITA NO.3685/DEL./2009 10 UNANSWERED. 24. FROM THE ABOVE, IT IS CLEAR THAT THIS JUDGEMENT IS OF NO HELP TO THE ASSESSEE IN THE PRESENT DISPUTE BEFORE US. 25. NOW, WE EXAMINE THE APPLICABILITY OF THE JUDGEM ENT OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF MAHARA NA OF MEWAR CHARITABLE FOUNDATION (SUPRA). WE FIND THAT THIS IS SUE IS COVERED IN FAVOUR OF ASSESSEE BY THIS JUDGEMENT OF HON'BLE RAJASTHAN HIGH COURT RENDERED IN THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION AS REPORTED IN 164 ITR439. IN THIS CASE, THE ISSUE BE FORE HON'BLE RAJASTHAN HIGH COURT WAS AS TO WHETHER THE DEFICIT OF RS.59,7 70/- ARISING OUT OF EXCESS OF EXPENDITURE OVER INCOME DURING THE P.Y. R ELEVANT TO A.Y. 19~O- 71 SHOULD BE SET OFF AGAINST THE SURPLUS OF INCOME OVER EXPENDITURE RELATING TO THE A.Y. 1971-72 IN COMPUTING THE TAXAB LE INCOME OF THE LATER A.Y. UNDER THESE FACTS, IT WAS HELD BY HON'BLE RAJ ASTHAN HIGH COURT THAT THE TRIBUNAL WAS RIGHT IN DIRECTING THAT THE DEFICI T OF RS.59,770/- ARISING OUT OF EXCESS OF EXPENDITURE OVER INCOME DURING THE P.Y. RELEVANT TO A.Y. 1970-71 SHOULD BE SET OFF AGAINST THE SURPLUS OF IN COME OVER EXPENDITURE RELATING TO THE A.Y. 1971-72 IN COMPUTING THE TAXAB LE INCOME OF THE LATER A.Y. NO OTHER CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY LD. D.R. FOR THE REVENUE AND HENCE RESPECTFULLY FOLLOWING THIS J UDGMENT OF HON'BLE RAJASTHAN HIGH COURT WE HOLD THAT DEFICIT ARISING O UT OF THE EXCESS OF EXPENDITURE OVER INCOME DURING ANY EARLIER YEAR CAN BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR BUT THE RELEVANT FACTS R EGARDING QUANTUM OF SUCH EXCESS EXPENDITURE OVER INCOME IN THE EARLIER YEAR IS NOT AVAILABLE BEFORE US AND HENCE, WE RESTORE BACK THIS ISSUE TO THE FILE OF AO TO FIND OUT AS TO WHETHER THERE WAS ANY EXCESS OF EXPENDITU RE OVER INCOME IN ANY EARLIER YEAR AND IF THERE IS SO EXCESS OF EXPENDITU RE OVER INCOME FOUND IN ANY EARLIER YEAR, THE SAME CAN BE SET OFF AGAINST T HE INCOME OF THE CURRENT YEAR AS PER THIS JUDGEMENT OF HON'BLE RAJASTHAN HIG H COURT. WITH THESE DIRECTIONS, THIS ISSUE IS RESTORED BACK TO THE FILE OF AO FOR HIS DECISION AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. SINCE THE QUANTUM OF THE EXCESS EXPENDITURE OVER IN COME IN THE EARLIER YEARS IS NOT AVAILABLE BEFORE US, WE RESTORE THE ISSUE TO THE FI LE OF THE ASSESSING OFFICER WITH A DIRECTION THAT IF THERE IS SO EXCESS OF EXPENDITURE OVER INCO ME FOUND IN ANY EARLIER YEAR, THE SAME CAN BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR I N VIEW OF THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. MAHARAN A OF MEWAR CHARITABLE FOUNDATION, 164 ITR 439. 15. IN GROUND NO.6, THE ISSUE IS REGARDING PAYMENT OF INCOME/ADVANCE TAX WHICH AS PER ASSESSEE SHOULD BE CONSIDERED AS APPLICATION OF INC OME. LEARNED AR SUBMITTED THAT THIS ITA NO.3685/DEL./2009 11 ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ITA NO.2633/DEL/2008 IN THE CASE OF MARKET COMMITTEE, A SSANDH VS. ACIT, KARNAL, CITED SUPRA. HE ALSO RELIED ON THE JUDGEMENT OF HON'BLE A.P. HIGH COURT IN THE CASE OF CIT VS. NIZAMS SUPPL. RELIGIOUS ENDOWMENT TRUST (TRUSTEE OF HEH) (A.P. HIGH COURT) (1981) 127 ITR 378 AND JUDGEMENT OF HON'BLE MADRAS HIGH CO URT IN THE CASE OF CIT VS. JANAKI AMMAL AYYA NADAR TRUST (MADRAS HIGH COURT). LEARNE D DR DID NOT CONTROVERT THE FINDING OF THE LEARNED AR. 16. AFTER HEARING BOTH THE SIDES AND PERUSING THE D ECISION RELIED UPON BY THE LEARNED AR, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE VIDE PARA NOS.30 TO 32 OF THE AFORESAID ORDER OF THE ITAT AND ITAT VIDE PARA 32 H AS DECIDED AS UNDER : 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIALS ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW AND THE TRIBUNAL DECISION CITED BY LD. AR FOR THE ASSESSEE. WE FIND THAT IT HAS BEEN HELD BY HON'BLE MADRAS HIGH COURT IN THE CASE CITED (SUPRA) THAT THE PAYMENT OF TAX SHOULD BE TREATED AS HAVING BEEN APP LIED FOR CHARITABLE PURPOSES AND THE ASSESSEE IS ENTITLED TO EXEMPTION. RESPECTFULLY FOLLOWING THIS JUDGEMENT OF HON'BLE MADRAS HIGH COURT, WE DEC IDE THIS ISSUE IN FAVOUR OF ASSESSEE IN ALL THESE CASES. THIS ISSUE STANDS DECIDED IN FAVOUR OF ASSESSEE. 17. RESPECTFULLY FOLLOWING THE AFORESAID ORDER, WE ALLOW THIS GROUND OF THE ASSESSEES APPEAL. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF JUNE, 2011. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 30 TH DAY OF JUNE, 2011 TS ITA NO.3685/DEL./2009 12 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT (A), KARNAL 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.