ITO (E) 2 (3), MUMBAI V. SETH WALCHAND HIRACHAND LOKA KALYAN TRUST, MUMBAI

ITA 4143/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9176 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 06-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: HARSHAD AGARWAL
• Keywords: Charitable institution; Tax effect
• Section: 28

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 41 43 /MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13 ) ITO - (E) - 2(3), ROOM NO. 513, PIRAMAL CHAMBERS, LAL BAUG, PAREL, MUMBAI - 400 012 / VS. SETH WALCHAND HIRACHAND LOKA - KALYAN TRUST C/O., PAE LTD. 69, TARDEO ROAD, MUMBAI - 400 034 ./ ./ PAN/GIR NO. AAATS 0520 K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI / SMT. N. HEMALATHA / RESPONDENT BY : SHRI HARSHAD AGARWAL / DATE OF HEARING : 09.10.2017 / DATE OF PRONOUNCEMENT : 10.10. 2017 / O R D E R PER SHAMIM YAHYA , A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS ) , MUMBAI (CIT(A) FOR SHORT) DATED 0 9 .03.2017 , PERTAINING TO THE ASSESSME NT YEAR (A.Y.) 2012 - 13. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1 . WHETHER ON THE FACTS OF THE CASE AND IN HUE THE L D.CLT(A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF RS.2,41,28,160/ - AND ALLOWING SE T OFF AGAINST THE INCOME OF THE SUBSEQUENT Y E ARS. 2 ITA NO. 4143/MUM/2017 (A.Y. 2012 - 13) ITO - (E) VS. SETH WALCHAND HIRACHAND LOKA - KALYAN TRUST 2 . WHETHER, ON THE. FUELS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD C1T(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSE E FOR CARRY FORWARD OF THE SAID DEFICIT , IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE I. T. ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM. 3. WHETHER, ON THE. FUELS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD C1T(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSE E FOR CARRY FORWARD OF THE SAID DEFICIT BY RELYING UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN T HE 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 O F THE CASE, BUT DUE T O SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFO RE HON'BLE 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 2074) IN WHICH LEAVE HAS BEEN GRANTED A ND THE MA TT ER IS VENDING IN ALL CASES FOR ADJUDICATION BEFORE THE HON'BLE SUPREME COURT. 3. T HE I SSUE IN THIS APPEAL RELATES TO T HE DISALLOWANCE OF CARRY FORWARD OF DEFICIT TO BE SET OF AGAINST THE INCOME OF THE SUBSEQUENT YEARS , IN CASE OF THE TRUST . 4. I H AVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT TRANSPIRES THAT U PON ASSESSING OFFICERS (AO) DISALLOWANCE ON THE ABOVE SAID ISSUE , THE LD. CIT(A) HAS ALLOWED THE ASSESSEE'S APPEAL BY FOLLOWING THE HON'BLE JURISDICTIONAL HIGH COURTS DIRECT DECISION ON THE ISSUE. BOTH THE COUNSEL FAIRLY AG REED THAT THE ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT RELIED UPON BY THE L D. CIT(A). THE R EVENUE HAS ALSO AGREED TO THIS IN THE GROUNDS FOR APPEAL RAISED HEREIN ABOVE , AS IT IS MENTIONED THAT THE DEPARTMENT HAS NOT ACCEPTED THE HON BLE HIGH COURT'S DECISION ON THE S E ISSUE S . BE THAT AS IT MAY , THE HON'BLE JURISDICTIONAL HIGH COURTS DE CISION IS BINDING UPON THE ITAT. IN THIS REGARD , I MAY GAINFULLY REFER TO THE ORDER OF L D. CIT(A) ON THE ISSUE AS UNDER : DISALLOWANCE OF CARRYFORWARD OF DEFICIT TO BE SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. 3 ITA NO. 4143/MUM/2017 (A.Y. 2012 - 13) ITO - (E) VS. SETH WALCHAND HIRACHAND LOKA - KALYAN TRUST 5.2 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE A.O AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR O F THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED HERE IN UNDER: I. AN IDENTICAL ISSUE HAD ARISEN IN APPELLANT'S OWN CASE IN A.Y. 2010 - 11 WHEREIN THE CARRY FORWARD OF DEFICIT WAS DISALLOWED BY AO WHICH WAS UPHELD BY CIT(A). THE APPELLANT PREFERRED APPEAL BEFORE HON'BLE ITAT, WHO VIDE ORDER DATED 6.1.2017 HAVE ALLOWED THE APPEAL OBSERVING AS UNDER: 'WE HAVE CONSIDERED THE RIVAL CONTENTION OF THE PARTIES AND SEEN THAT HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. INSTITUTE OF BANKING (SUPRA), WHILE CONSIDERING THE SIMILAR GROUND HELD AS UNDER : 'IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW CARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE GRO UND THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF - CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS O F BUSINESS' U/S. 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THAT, IN THE CASE OF A CHAR/TABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQ UENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN 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 WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH AD JUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST U/S. 11 (L)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDA L [1995] 211 ITR 293. ACCORDINGLY, WE ANSWER QUESTIN NO. 3 IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSES AND AGAINST THE DEPARTMENT' 4 ITA NO. 4143/MUM/2017 (A.Y. 2012 - 13) ITO - (E) VS. SETH WALCHAND HIRACHAND LOKA - KALYAN TRUST THUS, RESPECTFULLY FOLLOWING THE DECISION OFJURISDICTIONAT HIGH COURT, WE FIND THAT THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL ARE SQUARELY COVERED IN ASSESSE'S FAVOUR. HENCE/ THE APPEAL OF THE ASSESSEE IS ALLOWED. AS A RESULT, APPEAL FILED BY ASSESSEE IS STANDS ALLOWED . 5 . SINC E THE L D. CIT(A) HAS FOLLOWED THE HON'BLE JURISDICTIONAL HIGH COURT DECISION MENTIONED HERE - IN - ABOVE , I DO NOT FIND ANY INFIRMITY IN THE SAME. HENCE , I U PHOLD THE ORDER OF L D. CIT(A) . 6 . IN THE RESULT , TH IS APPEAL FILED BY THE R EVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.10.2017 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 10.10.2017 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI