Kanohar Lal Trust Society, Meerut V. ACIT, Meerut

ITA 4312/DEL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2904 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 29-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Revenue expenditure; Capital expenditure
• Section: 143(3); 12AA; 28

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI I.C.SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4312/DEL/2015 (ASSESSMENT YEAR: 2010 - 11 ) KANOHAR LAL TRUST SOCIETY, 125,TRISHLA BHAWAN, HARI NAGAR, MEERUT, PAN:AABTS3019G VS. ACIT, CIRCLE - 1, MEERUT (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. K SAMPATH, ADV REVENUE BY: SH. RAJESH KUMAR, SR. DR DATE OF HEARING 29/05 / 2017 DATE OF PRONOUNCEMENT 29 / 05 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS PREFERRED BY THE ASSESSEE TRUST AGAINST THE ORDER OF LD CIT(A) - MEERUT FOR AY 2010 - 11 WHEREIN THE ORDER OF THE LD CIT(A) PASSED ON 12.02.2013 U/S 143(3) OF THE ACT WAS CONFIRMED. THE ASSESSEE HAS RAISED FOLLOWING THREE GROUN DS OF APPEAL: - 1. THE LD CIT(A) HAS FAILED TO APPRECIATE THE CONTENT AND TENOR OF VARIOUS HIGH COURT AND TRIBUNAL JUDGMENTS CITED BEFORE HIM WHICH ARE A DIFFERENT AUTHORITY ON THE ISSUE AT HAND AND HAS THEREBY VIOLATED THE PRINCIPLES OF JUDICIAL DISCIPL INE. 2. THAT THE LD CIT(A) HAS FAILED TO APPRECIATE THAT INCOME HAS TO BE COMPUTED COMMERCIALLY EVEN IN CASES COVERED U/S 11 - 13 OF THE INCOME TAX ACT, 1961 AND RESULTANT LOSS, IF ANY, ARISING DUE TO SURPLUS APPLICATION OF INCOME, HAS TO BE COMPUTED AND CA RRIED FORWARD TO NEXT YEAR TO BE SET OFF THEREIN ACCORDINGLY. 3. THE LD CIT(A) HAS ALSO FAILED TO APPRECIATE THAT NEITHER SECTION 11 NOR SECTION 72 OF THE INCOME TAX ACT HAVE A MUTUAL RIDER FOR COMPUTATION OF INCOME OR FOR ITS CARRY FORWARD AND SET OFF AND HENCE THE IMPUGNED ORDER DESERVES TO BE QUASHED. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A TRUST REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 AND ALSO REGISTERED U/S 12AA OF THE ACT. THE ACTIVITIES OF THE TRUST ARE IN CONFIRMATIVE W ITH THE OBJECT OF EDUCATION ACTIVITIES WERE FOUND BY THE PAGE 2 OF 3 ASSESSING OFFICER . THE ASSESSEE FILED ITS RETURN OF INCOME SHOWING NIL INCOME ON 14.10.2010 AND ALSO CLAIMED BROUGHT FORWARD LOSSES OF RS. 3342761/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER THAT DURING THE YEAR THERE IS SURPLUS OF RS. 176057/ - AND FURTHER BROUGHT FORWARD LOSS OF RS. 3342761/ - WAS ALSO CLAIMED. THE ABOVE BROUGHT FORWARD LOSSES NOTHING BUT EXCESS OF EXPENDITURE OVER INCOME IN EARLIER YEAR. THE LD ASSESSING OFFICER WAS OF THE VIEW THAT SUCH EXCESS OF EXPENDITURE HAS AR ISEN BECAUSE OF CAPITAL EXPENDITURE SHOWN BY THE ASSESSEE IN EARLIER YEAR AS APPLICATION OF INCOME. THEREFORE, ACCORDING TO THE LD AO SUCH LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD. THEREFORE, AO WAS FRAMED U/S 143(3) OF THE ACT ON 12.02.2013, SAME WAS CHALLENGED BEFORE THE LD CIT(A), WHO REJECTED THE APPEAL OF THE ASSESSEE, HENCE, THIS APPEAL. 3. THE LD AR SUBMITTED THE SAME ARGUMENT, WHICH WAS SUBMITTED BEFORE THE LOWER AUTHORITIES. THE LD DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IT IS UNDISPUTED THAT IN EARLIER YEARS THE EXCESS OF EXPENDITURE OVER INCOME HAS RESULTED ON ACCOUNT OF THE APPLICATION OF INCOME OF THE ASSESSEE ON THE OBJECT OF THE TRUST. ACCORDING TO PROVISIONS OF SECTION 11(1) DOES N OT MAKE ANY DISTINCTION BETWEEN CAPITAL AND REVENUE EXPENDITURE. IN VIEW OF THIS THE STAND TAKEN BY THE LOWER AUTHORITIES IN DISALLOWING THE DEFICIT OF EARLIER YEARS AGAINST INCOME OF THE CURRENT YEAR HOLDING THAT SUCH DEFICIT HAS ARISEN BECAUSE OF CLAIM O F CAPITAL EXPENDITURE IS ERRONEOUS. THE ABOVE ISSUE IS SQUARELY COVERED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN 264 ITR 110 IN CIT VS. INSTITUTE OF BANKING. THE HON'BLE HIGH COURT HELD AS UNDER: - NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARISE S FOR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR FOR CHARITABLE PURPOSES ? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILISATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION O F INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. 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 GROUND THAT IN THE CASE OF A CHARITABLE TRUS T, 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 OF BUSINESS UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEARS. WE DO NOT FIND ANY M ERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PAGE 3 OF 3 PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PUR POSES 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 ADJUSTMENT HAS BEEN MADE HAVING RE GARD 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 UNDER SECTION 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN T HE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293. ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 5. IN VIEW OF ABOVE DECISION OF HON'BLE HIGH COURT WE DO NOT FIND THAT THE ORDERS OF THE LOWER AUTHORITIES ARE IN ACCORDANCE WITH THE LAW. IN VIEW OF THIS WE REVERSE THE FINDINGS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER GRANT DEDUCTION OF EXCESS OF EXPENDITURE OVER INCOME OF RS. 3342761/ - TO THE ASSESSEE. 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 9 / 05 / 2017 . - S D / - - S D / - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 9 / 05 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI