DCIT, Bangalore V. Federation of Karnataka Chambers Of Commerce & Industry, Bangalore

ITA 386/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9356 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK JHA
• Assessee Lawyers: A C RAJU
• Keywords: Rectification of order; Charitable institution; Capital expenditure
• Section: 12; 154; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.386 /BANG/20 16 (ASST. YEAR 2006-07) THE DY. COMMISSIONER OF INCOME-TAX, (E) CIRCLE-1, BENGALURU. . APPELLANT VS. FEDERATION OF KARNATAKA CHAMBERS OF COMMERCE & INDUSTRY, FEDERATION HOUSE, P.B. NO.9996, KEMPEGOWDA ROAD, HIGH GROUNDS BENGALURU-560 009. . RESPONDENT APPELLANT BY : SHRI DK JHA, ADDL. CIT RESPONDENT BY : SHRI AC RAJU, C.A DATE OF HEARING : 31-08-2016 DATE OF PRONOUNCEMENT : 16-09-2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER:` THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) - 14 BENGALURU DATED 28/12/2015 AND IT PERTAINS TO THE ASSESSMENT YEAR 2006-07. ITA NO.386/B/16 2 2. WHILE COMPLETING THE RECTIFICATION ORDER U/S. 154 OF THE INCOME TAX ACT, THE ASSESSING OFFICER HAD ALLOWED SET OFF FOR - A.Y. 1998-99 - RS.10, 85,310 A.Y. 1999-00 - RS. 3,65,062 RS.14,50,372 RESTRICTED THE SAME TO RS.14,50,372/- WITHOUT GIVIN G ANY REASON AGAINST THE ELIGIBLE AMOUNTS CLAIMED BY THE ASSESSE E. 3. WHEREAS THE ASSESSEE H AD CLAIMED SET OFF OF:- ASST. YEAR AMOUNT OF DEFICIT 2003-04 11,44,811 2002-2003 22,96,218 2001-2002 21,71,147 2000-2001 25,58,310 1999-2000 4,71,499 1998-1999 10,85,310 1997-1998 9,60,305 4. AGGRIEVED BY THIS, THE ASSESSEE HAS COME IN APPEAL BEFORE CIT(A) AND HAD RAISED THE FOLLOWING GROUNDS: ITA NO.386/B/16 3 I. THE DDIT IS NOT CORRECT IN NOT SETTING OFF BROUGHT FORWARD LOSS/DEFICIT II. THE DDIT IS NOT CORRECT IN COMPUTING THE TOTAL INCOME WITHOUT CONSIDERING THE LOSS OR DEFICIT RELATING TO EARLIER. 5. THE ASSESSEE APPEARED FOR HEARING AND FILED HI S WRITTEN SUBMISSIONS AND HAD RELIED ON: CIT VS.MAHARANA OF MEWAAR CHARITABLE FOUNDATION 164 ITR 39 (RAJ) DI VS. RAGHUVANSHI CHARITABLE TRUST, 197 TAXMAN 170 (DEL.) TRUSTEES OF BALKANJI BARI (1979) 10 CTR (TRIB.) 22 CIT VS. SACRED HEART CHURCH 278 ITR 180 (GUJ) CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION 264 ITR 110 (BOM) GEM & JEWELLERY EXPORT PROMOTION COUNCIL VS. ITO (68 ITD 95) IT APPELLATE TRIBUNAL MUMBAI ITA NO.386/B/16 4 DY. DIRECTOR OF INCOME TAX (E)-I(1), MAHARASHTRA INDL. DEVELOPMENT MUMBAI TRIBUNAL IN I.T.A. NOS. 4777/MUM/2009 COMMISSIONER OF INCOME TAX VS. MATRISEVA TRUST 242 ITR 20 (MADRAS HIGH COURT) 6. THE CIT(A) HELD AS FOLLOWS:- THE AR MENTIONED THAT AS PER SECTION 1(1)(A) THERE IS NO RESTRICTION THAT THE ENTIRE INCOME HAS TO BE APPLIED IN THE SAME YEAR ONLY, WHICH MEANS THAT EXC ESS APPLICATION CAN BE SET-OFF IN THE SUBSEQUENT YEAR O UT OF RECEIPT OF INCOME DURING THE NEXT YEAR. AS A COROL LARY, THEREFORE, IT WAS CLAIMED THAT THE EXCESS APPLICATI ON OF ANY YEAR CAN BE SET OFF IN THE SUBSEQUENT YEAR. HOWEVER, JURISDICTIONAL ITAT ORDER IN THE CASE OF ACIT VS CITY HOSPITAL CHARITABLE TRUST (2015)42 ITR(TRIB) 583 (BANGALORE) AND DCIT VS MANIPAL ACADEMY OF HIGHER EDUCATION (2015)44 ITR(TRIB) 18 (BANGALORE) HAS CONSIDERED THE ISSUE IN FAVOUR OF T HE ASSESSEE. HOWEVER, THE DEPARTMENT FILED APPEAL ON SIMILAR ISSUE IN KARNATAKA HIGH COURT AND IS PENDIN G. RESPECTFULLY FOLLOWING THE JURISDICTIONAL ITAT ORDE R IN THE ABOVE CASES, THIS GROUND OF APPEAL IS ALLOWED. ITA NO.386/B/16 5 7. AGGRIEVED DEPARTMENT IS IN APPEAL BEFOR E US AND HAS RAISED THE FOLLOWING GROUND:- I) WHETHER, IN THE GIVEN FACTS AND CIRCUMSTANCES, THE CIT(A) IS CORRECT WITHOUT APPRECIATING THE FACT THA T THE NORMAL COMPUTATION OF INCOME UNDER RESPECTIVE HEADS AS ENVISAGED U/S 15 TO 59 ARE NOT APPLICABLE TO THE COMPUTATION OF INCOME IN RESPECT OF CHARITABLE TRUST/INSTITUTION FOR THE PURPOSE OF CLAIMING EXEMP TION U/S 11, 12 AND 13 AND, THEREFORE, THE PROVISIONS RELATING TO SET-OFF OF LOSS FROM ONE SOURCE AGAINST THE INCOME FROM ANOTHER SOURCE, SET-OFF OF LOSS FROM ON E HEAD AGAINST INCOME FROM ANOTHER HEAD AND CARRY FORWARD AND SET-OFF OF LOSS AGAINST THE INCOME OF SUBSEQUENT YEARS AS ENVISAGED U/S 70 TO 79 ARE ALSO NOT APPLICABLE TO THE CHARITABLE TRUST/INSTITUTIONS . II) WHETHER, IN THE GIVEN FACTS AND CIRCUMSTANCES, THE CIT(A) IS CORRECT WITHOUT APPRECIATING THE FACT THA T THE ISSUE OF APPLICATION OF INCOME MORE THAN THE INCOME COMPUTED DOES NOT ARISE, EXCEPT IN A CASE WHERE THE ASSESSEE HAS INCURRED HUGE AMOUNT OF CAPITAL EXPENDITURE SOURCED OUT OF BORROWED OR CORPUS DONATIONS OR 15% OF INCOME SET PART OVER A PERIOD OF TIME. HOWEVER, EXPENDITURE INCURRED OUT OF THE ABOVE SOURCES CANNOT BE TERMED AS APPLICATION O F FUNDS OUT OF THE INCOME EARNED IN A PARTICULAR ITA NO.386/B/16 6 ASSESSMENT YEAR IN AS MUCH AS LOAN BORROWED DOES NOT FALL UNDER THE CATEGORY OF INCOME EARNED BY THE ASSESSEE, CORPUS FUND DONATION DOES NOT COME UNDER INCOME BY VIRTUE OF SECTION 11(1)(D) AND 15% OF INCOME SET APART IN EARLIER ASSESSMENT YEAR CANNOT BE CONSTRUED AS INCOME OF THE CURRENT YEAR AND 15% SET APART OUT OF THE CURRENT YEAR INCOME IS ALSO EXCLUD ED FROM INCOME AVAILABLE FOR APPLICATION. AS SUCH, TH E CONCEPT OF APPLICATION IS ONLY TO SHOW THAT THE INC OME IS FULLY UTILIZED RATHER THAN CLAIMING EXCESS EXPENDITURE EITHER REVENUE OR CAPITAL OVER AND ABOV E THE INCOME SO AS TO CLAIM EXCESS APPLICATION OR DEFICIT/LOSS TO BE CARRIED FORWARD TO SUBSEQUENT ASSESSMENT YEARS. EVEN IN THE CASE OF EXCESS APPLICATION BY VIRTUE OR BORROWED FUNDS/CORPUS FUND DONATIONS/15% SET APART OF EARLIER YEARS, THE INCOM E OF THE ASSESSEE CANNOT BE CONVERTED TO LOSS BUT AT BEST IT CAN BE MADE NIL. HENCE, THE CARRY FORWARD OF EXCESS APPLICATION OF INCOME AS CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. 8. WE FIND THAT CO-ORDINATE BENCH OF THE TRIB UNAL HAS HELD AS FOLLOWS IN THE CASE OF JYOTHY CHARITABLE TRUST [201 5] 60 TAXMANN.COM 165(BANGALORE TRIB.) ITA NO.386/B/16 7 SECTION 11 OF THE INCOME-TAX ACT, 1961 CHARITABLE OR RELIGIOUS TRUST EXEMPTION OF INCOME FROM PROPERTY HELD UNDER (APPLICATION OF INCOME) ASSESSMENT YEAR 2010-11 WHETHER IN CASE OF CHARITABLE TRUST WHOSE INCOME IS EXEMPT U/S 11, EXCESS OF EXPENDITURE INCURRED ON RELIGIOUS AND CHARITABLE PURPOSES IN EARLIER YEARS CAN BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS AND SUCH ADJUSTMENT WOULD BE REGARDED AS APPLICATION OF INCOME FOR SUBSEQUENT YEARS HELD, YES [PARA 14] [IN FAVOUR OF ASSESSEE ] 9. RESPECTFULLY FOLLOWING THE DECISION OF CO -ORDINATE BENCH IN THE CASE OF JYOTHY CHARITABLE TRUST (SUPRA), THE DEPA RTMENTAL APPEAL IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ITA NO.386/B/16 8 ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2016 . SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER BANGALORE DATED : 16/9/2016 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED 4.THE CIT(A) CONCERNED 5.DR 6.GF BY ORDER ASST. RE GISTRAR, ITAT, BANGALORE