ACIT, Meerut V. M/s Devendra Kumar Garg Charitable Trust, Meerut

ITA 4118/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86984 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: SAMP ATH
• Keywords: Charitable institution; Capital expenditure
• Section: 143(3); 28; 11

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI N.K. SAINI , ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER ITA NO. 411 8 /DEL/201 3 ASSESSMENT YEAR 200 8 - 09 A CIT, CIRCLE - 1, VS. M/S DEVENDRA KUMAR GARG MEERUT . CHARITABLE TRUST , 61, SHIVAJI ROAD, MEERUT. (PAN AA BTD 0942 R ) ( APPELLANT) (RESPONDENT) DATE OF HEARING : 1 7 .0 3 .2015 DATE OF PRONOUNCEMENT : 20 . 03 .2015 APPELLANT BY : SMT. PARWINDER KAUR, SR. DR. RESPONDENT BY : SRI SAMP ATH , AND SRI RAJ KUMAR, ADVOCATES ORDER PER SHRI GEORGE GEORGE K , J M : 1. TH IS APPEAL , AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST THE CIT(A) S ORDER DATED 29 .0 4 .201 3 . THE RELEVANT ASSESSMENT YEAR IS AY 200 8 - 0 9 . 2. THE GROUNDS RAISED IN THIS AP PEAL READS AS FOLLOWS: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS.4,75,54,136/ - CLAIMED BY THE ASSESSEE TRUST ON A/C OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR, IGNORING THE COMMERCIAL PRINCIPLES ACCORDING TO WHICH CAPITAL EXPENDITURE DOES NOT RELATE TO INCOME & EXPENDITURE ACCOUNT AT ALL AND HENCE, CAPITAL LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST FUTURE INCOME. IT A NO. 411 8 /DEL /201 3 2 2. WHETHER IN THE FACTS AND CIRCUMS TANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS. 4,75,54,136/ - CLAIMED BY THE ASSESSEE TRUST RELYING UPON THE VARIOUS DECISIONS AS MENTIONED IN THE APPELLATE ORDER WHEREAS THE SAID DECISIONS RELATE TO SOME OTHER DISTIN GUISHABLE POINTS I.E. ALLOWABILITY OF BROUGHT FORWARD BUSINESS LOSSES WORKED OUT ACCORDING TO COMMERCIAL PRINCIPLES AND NOT WITH THE CARRY FORWARD OF LOSSES ON A/C OF CAPITAL EXPENDITURE. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS.4,75,54,136/ - CLAIMED BY THE ASSESSEE TRUST WITHOUT REBUTTING THE AO'S FINDING THAT THE LOSS CLAIMED BY THE ASSESSEE WAS DUE TO CAPITAL EXPENDITURE AS ADMITTED AND MENTIONED BY THE ASSESSEE ITSELF IN C OMPUTATION OF INCOME ENCLOSED WITH THE RETURN. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/OR DELETE ANY GROUND(S) OF APPEAL. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE SET ASID E AND THAT OF THE A.O. RESTORED. 3 . BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS. THE ASSESSEE IS A SOCIETY RUNNING A SCHOOL . THE RETURN OF INCOME WAS FILED ON 30.09.2008, DISCLOSING A LOSS OF RS.4 ,75,54,136/ - . THE ASSESSMENT WAS TAKEN UP FOR SCR UTINY AND ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED BY ORDER DATED 16 .12.2010. THE ASSESSING OFFICER DENIED THE BENEFIT OF CARRY FORWARD OF LOSS . THE ASSESSING OFFICER WAS OF THE VIEW , THE LOSS WAS ON ACCOUNT OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR AND SAME CANNOT BE ALLOWED TO BE CARRIED FORWARD TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEAR. 4 . AGGRIEVED , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT FINDING OF THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE READS AS FOLLOWS: - 4 ...I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS FILED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS AND I HAVE ALSO GONE THROUGH THE VARIOUS JUDGMENTS OF SUPERIOR AUTHORITIES AS CITED AND RELIED UPON BY THE APPELLANT IN SUPPORT OF ITS IT A NO. 411 8 /DEL /201 3 3 CLAIM FOR CARRY FORWARD AND SET OFF OF LOSSES AGAINST FUTURE YEAR'S SURPLUS. I HAVE ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD AND FIND THAT THE ISSUE IN QUESTION STANDS ALREADY RESOLVED IN FA VOUR OF THE ASSESSEE. THE ISSUE INVOLVED IN THE INSTANT APPEAL IS SQUARELY COVERED BY VARIOUS JUDGMENTS OF SUPERIOR AUTHORITIES AS CITED BY THE APPELLANT IN. ITS WRITTEN SUBMISSION AND I ALSO FIND THAT IN ABOVE JUDGMENTS VARIOUS HON'BLE COURTS HAVE HELD TH AT IN THE CASES OF TRUST CLAIMING EXEMPTION U/S. 11 OF THE I.T. ACT, 1961, THE LOSSES HAVE TO BE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST THE SUBSEQUENT YEAR'S SURPLUS, IF ANY. IN VIEW OF ABOVE, RESPECTFULLY RELYING ON ABOVE RULINGS OF VARIOUS HON 'BLE COURTS I HOLD THAT THE INCOME OF THE TRUST IS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN CASE EXCESS EXPENDITURE OVER AND ABOVE THE INCOME RECEIVED BY THE SOCIETY HAS BEEN INCURRED IN EARLIER YEAR(S) ON CHARITABLE PURPOSE, SUCH EXCESS (LOSS) HAS T O BE CARRIED FORWARD AND SET OFF AGAINST THE SUBSEQUENT YEAR'S SURPLUS, IF ANY, AND SUCH ADJUSTMENT OF LOSS/DEFICIT OF CURRENT YEAR AGAINST INCOME / SURPLUS OF SUBSEQUENT YEAR WOULD AMOUNT TO APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE PURPOSE IN SUB SEQUENT YEAR WITHIN THE MEANING OF SECTION 11 (I) (A) OF THE I.T. ACT, 1961. 5 . THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. LD. DR RELIED ON THE ORDER OF THE ASSESSMENT. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSU E IN QUESTION IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF ADDL. CIT VS. M/S CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY IN ITA NO. 5627/DEL/2010 (ORDER DATED 26.08.2011) . 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECO RD. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATION IS WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING THE BENEFIT OF CARRIED FORWARD OF LOSS. THE ASSESSING OFFICER HELD THAT THE LOSS SUFFERED WAS ON ACCOUNT OF CAPITAL EXPENDITURE AND AS SUCH SAME CANNOT BE A LLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS. THIS ISSUE ACCORDING TO US IS NO LONGER RES INTEGRA . THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ADDL. CIT VS. M/S CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY (SUPRA) HAD HELD THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE LOSSES AGAINST THE SUBSEQUENT YEAR S SURPLUS. THE RELEVANT FINDING S OF THE COORDINATE BENCH ORDER READS AS FOLLOWS: - IT A NO. 411 8 /DEL /201 3 4 5 . THE CIT(A) HAS MADE A REFERENCE IN THOSE ASSESSMENT YEARS TO SECTION 11(4) OF THE INCOME - TAX ACT. IN THE CASE OF CIT VS. INSTITUTE OF BANKING REPORTED IN 264 ITR PAGE 110 AN ARGUMENT WAS RAISED BEFORE THE HON BLE MUMBAI HIGH COURT BY THE REVENUE THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF CONTAINED CODE MENTIONED IN SECTION 11 TO 13 OF INCO ME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS U/S 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. ACCORDING TO THE REVENUE, THERE WAS NO PROVISION FOR CARRY FORWA RD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST THE INCOME OF SUBSEQUENT YEARS. THIS ARGUMENT WAS REJECTED BY THE BOMBAY HIGH COURT AND IT HAS BEEN HELD THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMM ERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE RELIGIOUS PURPOSE IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APP LICATION OF THE INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSE. THE LEARNED CIT(A) HAS FOLLOWED THIS DECISION APART FROM OTHERS REFERRED ABOVE ...... 6. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 7 . IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL , WE HOLD THE CIT(A) IS JUSTIFIED I N ALLOWING THE CLAIM OF THE ASSESSEE TO CARRY FORWARD THE LOSSES OF THE CURRENT YEAR AGAINST SURPLUS OF THE SUBSEQUENT YEAR. IT IS ORDERED ACCORDINGLY. 8 . IN THE RESULT, THE APPEAL FILED BY REVENUE IS DISMISSED . TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 0 TH MARCH , 201 5 . SD/ - SD/ - ( N.K. SAINI ) (GEORGE GEORGE K.) A CCOUNTANT MEMBER J UDICIAL MEMBER DATED: 2 0 TH MARCH , 201 5 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI