ITO -(E)2(3), MUMBAI V. SUSHILABEN RAMNIKLAL JHAVERI, MUMBAI

ITA 4131/MUM/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 0649 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Assessee Lawyers: P P BHANDARI
• Keywords: Charitable institution; Tax effect
• Section: 12A; 12; 11

Judgement Text

P A G E | 1 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI IN THE INCOME TAX APPELLATE TRIBUNAL ' G ' BENCH, MUMBAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 4131 /MUM/2017 (ASSESSMENT YEAR: 2013 - 14 ) ITO(E)2(3) ROOM NO. 513 , PIRAMAL CHAMBERS, LAL BAUG PAREL, MUMBAI - 400 012 VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI , CHARITABLE TRUST, 705, MAJESTIC SHOPPING CENTRE, 144, GIRGAUJ ROAD, MUMBAI - 400004 PAN AACTS1816L REVENUE ASSESSEE REVENUE BY: SHRI NISHANT SAM A IYA, D.R ASSESSEE BY: MR. NITESH JOSHI, ADVOCATE & MR. P.P. BHANDARI , C.A DATE OF HEARING: 26 .09.2018 DATE OF PRONOUNCEMENT: 2 8 .09.2018 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY T HE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 1, MUMBAI, DATED 06.03.2017, WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 19.02.2016 FOR A.Y 2013 - 14. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUND S OF APPEAL: 1. WHETHER ON THE FA C TS OF THE CASE AND IN THE LAW THE LD. CIT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.2,05,54,360/ - AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS. 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXP RESS PROVISION IN THE I.T. ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT BY RELYING UPON THE JUDGMENT OF THE HONBLE P A G E | 2 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI 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 SMALLNES S OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HONBLE 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 FOR ADJUDICATION BEFORE THE HONBLE SUPREME COURT. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LE AVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUNDS WHICH MAY BE NECESSARY. 2. BRIEFL Y STATED, THE ASSESSEE WHICH IS A TRUST REGISTERED WITH THE DIT(E), MUMBAI, UNDER SEC. 12A , AND ALSO WITH THE CHARITABLE C OMMISSIONER, MUMBAI, HAD FILED ITS RETURN OF INCOME FOR A.Y 2013 - 14 ON 30.09.2013 ALONG WITH THE INCOME AND EXPENDITURE ACCOUNT , BALANCE SHEET AND AUDIT REPORT IN FORM 10B, DECLARING TOTAL INCOME AT RS. NIL. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD ADJUSTED THE BROUGHT FORWARD LOSS OF A.Y 2008 - 09 OF RS.13,42,372/ - , AGAINST THE SURPLUS FOR THE YEAR UNDER C ONSIDERATION VIZ. A.Y 2013 - 14. FURTHER, IT WAS NOTICED BY HIM THAT THE ASSESSEE HAD CLAIMED CARRY FORWARD OF THE DEFICIT OF RS.2,05,54,360/ - FOR THE EARLIER YEARS TO BE ADJUSTED AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS . THE AFORESAID CLAIM OF THE ASSESS EE DID NOT FIND FAVOUR WITH THE A.O. THE A.O WAS OF THE VIEW THAT THE EXPENDITURE INCURRED IN THE EARLIER YEARS COULD NOT BE MET OUT OF TH E INCOME OF THE SUBSEQUENT YEAR AND , THE UTILISATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. THE A.O SUPPORTED H IS AFORES AID CONVICTION ON THREE GROUNDS VIZ. (I) THAT THE CORPUS DONATIONS RECEIVED BY THE ASSESSEE TRUST WAS NOT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST; (II) THAT THE EXPENDITURE INCURRED OUT OF /FROM CORPUS FUNDS/DONATIONS COULD NOT BE CONSIDERED AS APPLICATION OF INCOME UNDER SEC.1 1(1)(A) OF THE ACT; AND (III) THAT ONLY INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO P A G E | 3 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA WAS TO BE CONSIDERED AS APPLICATION OF INCOME , AS PER THE PROVISIONS CONTEMPLATED UNDER SEC . 11(1)( A) OF THE ACT. IN THE BACKDROP OF HIS AFORESAID OBSERVATIONS, THE A.O WAS OF THE VIEW , THAT AS A CONJOINT READING OF SEC.2(24)(IIA) R.W.S.12(1) AND SEC. 11(1)(D) REVEALED THAT CORPUS DONATIONS/FUNDS DID NOT CON STITUTE THE INCOME OF THE ASSESSEE TRUST FROM THE PROPERTY HELD UNDER TRUST , THUS, THE APPLICATION OF THE SAME WOULD NOT FALL WITHIN THE SWEEP OF SEC. 11(1)(A). FURTHER, THE A.O WAS OF THE VIEW THAT THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE C ASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), HAVING BEEN RENDERED IN CONTEXT OF THE PRE - AMENDED SEC. 12 OF THE ACT, THUS, WOULD NOT BE APPLICABLE TO THE CASE OF THE PRESENT ASSESSEE. ON THE BASIS OF HIS AFORESAID DELIBERATIONS , THE A.O DIS ALLOWED THE ADJUSTMENT MADE BY THE ASSESSEE OF THE BROUGHT FORWARD LOSS AGAINST THE SURPLUS FOR THE YEAR UNDER CONSIDERATION. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) OBSERVING THAT THE ISSUE UNDER CONSIDERATION WAS COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), THUS RESPECTFULLY FOLLOWED THE SAME AND DIRECTED THE A.O TO ALLOW THE CARRY FORWARD OF DEFICIT IN THE SUCCEEDIN G YEAR , AF TER DUE VERIFICATION OF FACTS. 5. THE REVENUE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER OF THE A.O. IT WAS SUBMITTED BY THE LD. A . R THAT AS THE UTILISATION OF THE CORPUS DONATIONS/FUNDS COULD NOT BE CONSTRUED AS THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITAB LE OR RELIGIOUS PURPOSES, HENCE THE APPLICATION OF THE SAME COULD NOT BE BROUGHT WITHIN THE SWEEP OF SE C. 11(1)(A) OF THE ACT. THE LD. D.R IN ORDER TO BUTTRES S HIS AFORESAID CONTENTION DREW OUR ATTENTION TO SEC. 12(1) OF THE ACT, AND SUBMITTED THAT VOLUNTARY CONTRIBUTIONS RECEIVED BY THE TRUST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PUR POSES WITH A SPECI FIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION , WAS NOT TO BE DEEMED AS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR P A G E | 4 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI CHARITABLE OR RELIGIOUS PURPOSES. THE LD. D.R FURTHER IN ORDER TO FORTIFY HIS AFORESAID CONT ENTION CARRIED OUT A CONJOINT READING OF SEC. 2(24) (IIA) AND SEC.12 OF THE ACT. ON BEING CONFRONTED WITH THE FACT THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL WAS COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), THE LD. D.R RE LIED ON THE ORDER OF THE A.O AND SUBMITTED THAT AS THE SAID JUDGMENT WAS RENDERED IN CONTEXT OF THE PRE - AMENDED SEC. 12 OF THE ACT (THAT IS PRIOR TO AMENDMENT MADE AVAILABLE ON THE STATUTE , VIDE THE FINAN CE ACT, 1972 W.E.F 01.04.1973), THUS, THE OBSERVATIONS THEREIN ARRIVED WOULD NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 6. PER CONTRA, THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) SUBMITTED THAT THE ISSUE INVOLVED IN THE PRESENT CASE WAS SQ UARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM). IT WAS AVERRED BY THE LD. A.R , THAT THE HONBLE HIGH COURT HAD CLEARLY HELD THAT THE INCOME DERIVED FROM THE TRUST PROPERTY WAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES, AND ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS WAS TO BE ADJUSTED AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR . THE LD. A.R DRAWING OUR ATTENTION TO THE AFORESAID JUDGMENT SUBMITTED THAT IT WAS EXPLICITLY HELD THAT THE ADJUSTMENT OF THE DEFICIT OF THE EARLIER YEARS WAS TO BE EXCLUDED FROM THE I NCOME OF THE TRUST FOR THE SUBSEQUENT YEAR UNDER SEC. 11(1)(A) OF THE ACT. THE LD. A.R FURTHER SUBMITTED THAT THE ISSUE UNDER CONSIDERATION WAS NO MORE RES - INTEGRA IN LIGHT OF THE RECENT JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT (EXEMPTION) VS. SUBROS EDUCATIONAL SOCIETY (2018) 166 DTR (SC) 257. THE LD. A.R DRAWING OUR ATTENTION T O THE AFORESAID JUDGMENT , SUBMITTED THAT THE HONBLE APEX COURT WHILE DISMI SSING THE APPEAL OF THE REVENUE HAD AFFIRMED THE ORDER OF THE HIGH COURT OF DELHI, WHEREIN IT WAS CONCLUDED THAT ANY EXCESS EXPENDITURE INCURRED BY THE TRUST/CHARITABLE INSTITUTION IN AN EARLIER ASSESSMENT YEAR , COULD BE ALLOWED TO BE SET OFF AGAINST THE INCOME OF SUBSEQUENT YEARS BY INVOKING SEC. 11 OF THE INCOME T AX ACT , 19 61. IT WAS THUS SUB MITTED BY THE LD. A.R , THAT AS THE CIT(A) GOING BY THE RULE OF JUDICIAL P A G E | 5 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI DISCIPLINE HAD RIGHTLY FOLLOWED THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM), THUS , NO INFIRMITY DID EMERGE FROM HIS ORDER. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES OF BOTH THE PAR T IES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT OUR INDULGENCE HAS BEEN SOUGHT BY THE REVENUE TO AD JUDICATE , AS TO WHETHER , THE CIT(A) WAS RIGHT IN LAW AND FACTS OF THE CASE IN ALLOWING THE CARRY FORWARD OF THE DEFICIT OF EARLIER YEAR S , FOR BEING SET OFF AGAINST THE SURPLUS OF SUBSEQUENT YEARS OF THE ASSESSEE TRUST. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION , AND ARE OF THE CONSIDERED VIEW THAT THE ISSUE INVOLVED IN THE CASE BEFORE US IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. INSTITUTE OF BANKING (2003) 264 ITR 110 (BOM). WE FIND , T HAT THE HONBLE HIGH COURT WHILE DISMISSING THE APPEAL OF THE REVENUE HAD OBSERVED , THAT AS THE INCOME OF THE TRUST WAS TO BE COMPUTED ON COMMERCIAL PRINCIPLES, THUS ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS, AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR , WAS TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR. WE FIND THAT THE HONBLE HIGH COURT HAD IN UNEQUIVOCAL TERM S OBSERVED , THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST IN THE EARLIER YEARS, AGAINST THE SURPLUS OF THE SUBSEQUENT YEAR , WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SEC. 11(1)(A) OF THE ACT. STILL FURTHER, A SIMILAR VIEW HAD BEEN TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT(EXEMPTION) VS . SUBROS EDUCATIONAL SOCIETY (2018) 166 TDR (SC) 257. THE HONBLE APEX C OURT , WHILE AFFIRMING THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI , HAD IN THE AFOREMENTIONED CASE DISMISS ED THE APPEAL OF THE REVENUE AND HAD DECLINED TO DISLODGE THE OBSERVATIONS OF THE HIGH COURT , THAT THE EXCESS EXPENDITURE INCURRED BY THE CHARITABLE TRUST/CHARITABLE INSTITUTION IN AN EARLIER ASSESSMENT YEAR WERE TO BE ALLOWED TO BE SET OFF AGAINST THE INCOM E OF SUBSEQUENT YEARS BY INVOKING SEC. 11 OF THE ACT. WE ARE OF THE CONSIDERED VIEW , THAT AS THE ISSUE INVOLVED IN THE APPEAL BEFORE US P A G E | 6 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI IS NO MORE RES - INTEGRA , HENCE GOING BY THE RULE OF JUDICIAL DISCIPLINE, WE RESPECTFULLY FOLLOW THE SAME. IN TERMS OF OUR AFORESAID OBSERVATIONS, FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A) , WHICH IS FOUND TO BE IN CONFORMITY WITH THE AFORESAID JUDICIAL PRONOUNCEMENT S, WE THUS , UPHOLD HIS ORDER. 8. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COUR T ON 2 8 .09.2018 S D / - S D / - ( B.R.BASKARAN ) (RAVISH SOOD) AC COUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 28 .09 .2018 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 7 ITA NO. 4131/MUM/2017 A.Y. 2013 - 14 ITO(E)2(3) VS. SHRI SUSHILABEN RAMNIKLAL JHAVERI