Sri Sai Seva Charitable Trust, Navsari V. The ACIT, Circle-6, Surat

ITA 413/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2328 (ITAT-SURAT)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Charitable institution
• Section: 11

Judgement Text

SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.413/AHD/2014 / A.Y.:2010-11 SRI SAI SEVA CHARITABLE TRUST C/O SRI SATHYA SAI SEVA, VIDYANIKRTAN, NEAR TAT SSL, N.H. NO.8, GANESH SISODRA NAVSARI 396445 PAN: AAETS0436Q V S . ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 SURAT APPELLANT /RESPONDENT /ASSESSEE BY SHRI SU JESH C . SURATWALA, CA /REVENUE BY SHRI O. P. SINGH CIT (D.R.) / DATE OF HEARING: 13.03.2018 /PRONOUNCEMENT ON 25.04.2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT (IN SHORT THE CIT (A)) DATED 26.12.2013 PERTAINING TO ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 6 SURAT (IN SHORT THE AO) DATED UNDER SECTION 143 (3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 2 OF 6 2. GROUND NO. 1 TO 4 RELATES TO DISALLOWING OF DEDUCTION UNDER SECTION 11 OF RS. 35,37,443 FOR THE PAYMENTS TOWARDS LEASE ASSETS AND IN ALTERNATE AO/CIT (A) HAS NOT APPRECIATED PAYMENTS TOWARDS LEASE , THE APPELLANT HAD APPLIED 85% OF INCOME AS REQUIRED UNDER SECTION 11(1)(A) OF THE ACT. 3. SUCCINCT FACTS AS PER RECORDS ARE THAT THE ASSESSEE CHARITABLE TRUST HAS INCURRED EXPENDITURE OF RS. 37,55,443 TOWARDS DEVELOPMENT OF LEASE LAND ACQUIRED FROM SRI SATHYA SAI TRUST GUJARAT, PRIOR TO EXECUTION ON LEASE ON 20.03.2010 AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. THE AO, HOWEVER, DISALLOWED THIS CLAIM ON THE GROUND THAT EXPENDITURE WAS INCURRED DURING THE F.Y. 2008-09 AS AGREED BY THE PARTIES, THEREFORE, IS CANNOT BE SET OFF AGAINST THE INCOME OF CURRENT YEAR. IN APPEAL, THE CIT(A) OF OBSERVED THAT THE ASSESSEE HAS CLAIMED THE EXPENDITURE FOLLOWING CASH SYSTEM OF ACCOUNTING WHICH IS BEING FOLLOWED SINCE INCEPTION OF TRUST. IN CASH SYSTEM OF ACCOUNTING, INCOME AND EXPENDITURE ARE RECORDED AND ALLOWED ON RECEIPT BASIS AND PAYMENT BASIS RESPECTIVELY. SINCE THE ASSESSEE HAS SPENT THE MONEY IN THE FINANCIAL YEAR 2008-09, SUCH EXPENDITURE SO INCURRED IS NOT ALLOWABLE AS DEDUCTION DURING THE YEAR UNDER CONSIDERATION. SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 3 OF 6 WITH REGARD TO CASE LAWS OF VARIOUS HIGH COURTS, AS RELIED BY THE ASSESSEE, THE CIT(A) OBSERVED THAT IT HAS BEEN INVARIABLY HAD THAT EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSE HAVE BEEN INCURRED IN EARLIER YEARS CAN BE AS ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR. BUT, IN THOSE CASES, WHICH SYSTEM OF ACCOUNTING WAS BEING APPLIED NOT BEEN IS NOT SPECIFICALLY MENTIONED, THEREFORE, THE RATIO OF SAID JUDGEMENTS IS NOT APPLICABLE IN THE CASE OF THE APPELLANT. 4. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE RELYING ON THE JUDGEMENTS IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293 (GUJARAT), CIT V. MAHARANA MEWAR CHARITABLE TRUST (1987) 164 ITR 4 3 9 (RAJ.), GEM AND JEWELLERY EXPORT PROMOTION COUNSEL V. SIXTH ITO [1999] 68 ITD 95(MUM), DIRECTOR OF INCOME-TAX V. RAGHUVANSHI CHARITABLE TRUST, [I.T.A. NO. 1075 OF 2008 DTD. 27.07.2010 OF DELHI HIGH COURT ] , SATYA VIJAY PATIL HINDU DHARAMSHALA TRUST V. CIT [1972] N86 ITR 683 (GUJARAT), CIT V. ST.GEORGE FORNA CHURCH [1988] 170 ITR 62(KER), CIT V. KANIKA PAMESWARI DEVASTHANAM AND CHARITIES [1982] 133 ITR 779 (MAD) AND CIT V. ESTATE OF V. L. ETHIRAJ [1982] 136 ITR 12 (MADRAS) SUBMITTED THAT EXPENDITURE INCURRED IN EARLIER YEAR CAN BE SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 4 OF 6 ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THEREFORE, CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER. 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE FACTS, HAD THE RIVAL SUBMISSIONS, AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE EXPENDITURE WAS INCURRED ON LEASE HOLD LAND BELONGING TO SRI SATYA SAI TRUST- GUJARAT, ON WHICH EXPENDITURE HAS BEEN INCURRED ON AGREED BASIS BEFORE EXECUTION OF DEED ON 20.03.2010,WITH A UNDERSTANDING THAT SAME WOULD BE ACQUIRED BY THE TRUST FOR ITS CHARITABLE PURPOSES. THIS LAND HAS BEEN ACQUIRED BY THE ASSESSEE TRUST VIDE EXECUTION DEED ON 20. 03. 2010. SINCE, THE DEED HAS BEEN EXECUTED DURING THE YEAR UNDER CONSIDERATION, HENCE SAID EXPENDITURE IS CLAIMED AS APPLICATION OF INCOME FOR THE YEAR UNDER CONSIDERATION. WE FIND THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS OF HONOURABLE HIGH COURTS AS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE OBSERVATION OF THE CIT(A) THAT THE ASSESSEE FOLLOWING CASH SYSTEM OF ACCOUNTING, HENCE, APPLICATION OF INCOME IS REQUIRED TO BE MADE IN THE YEAR IN WHICH THE EXPENDITURE IS ACTUALLY INCURRED HAS NO LEGS TO STAND WITH AS IN CASH SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 5 OF 6 SYSTEM ALSO CARRY FORWARD IS ALLOWED. ON THE SAID AN ANALOGY, WE OBSERVE THAT THE ASSESSEE CAN CARRY FORWARD SUCH EXPENDITURE TO BE SET-OFF IN SUBSEQUENT YEAR OUT OF INCOME OF THAT YEAR. THEREFORE, WE DO NOT FIND ANY MERITS IN THE CONTENTION OF THE LEARNED CIT(A). IT IS A WELL SETTLED PROPOSITION THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIPLES AND IF, COMMERCIAL PRINCIPLES IS FOR DETERMINING THE INCOME ARE APPLIED, IT IS BUT NATURAL THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN 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 SUCH AN ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE PROVISIONS CONTAINED IN SECTION 11 OF THE ACT, AND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11 AS HELD IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995]211 ITR 293 (GUJARAT) BY THE HONOURABLE GUJARAT HIGH COURT. ACCORDINGLY, FOLLOWING THE RATIO OF ABOVE JUDGEMENT, THE AO IS DIRECTED TO ALLOW DEDUCTION OF EXPENDITURE DURING THE YEAR UNDER APPEAL. ACCORDINGLY, GROUND NO. 1 TO 4 OF APPEAL OF THE ASSESSEE ARE ALLOWED. SRI SAI SEVA CHARITABLE TRUST V. ACIT-CIRCLE-6 SURAT /I.T.A. NO. 413/AHD/20/A.Y.:10-11 PAGE 6 OF 6 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.04.2018. SD/- SD/- (C.M. GARG) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED: 26 TH APRIL, 2018/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT