M/s. KSD Charitable Trust, Meerut V. Addl.CIT, Meerut

ITA 4326/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96884 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 09-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Charitable institution; Rule of consistency; Capital expenditure
• Section: 143(3); 28; 11

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 2 : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4 056 /DEL/201 4 ASSESSMENT YEAR 200 9 - 10 M/S CITY EDUCATIONAL AND SOCIAL VS. ADDITIONAL COMMISSIONER OF WELFARE SOCIETY , INCOME TAX, RANGE - 1, 47/L - 4, JAWAHAR QUARTERS, BEGUM MEERUT B RIDGE, MEERUT. (PAN : AA A T C 0 960 H ) DATE OF HEARING : 08 .0 7 .2015 DATE OF PRONOUNCEMENT : 10 .08 .2015 ITA NO. 4326 /DEL/201 4 ASSESSMENT YEAR 200 8 - 09 M/S KSD CHARITABLE TRUST, VS. ADDITIONAL COMM ISSIONER OF C/O GANESH COLD, INCOME TAX, RANGE - 1, STORAGE COMPLEX, MEERUT RAILWAY ROAD, MEERUT. (PAN : AABTK2686H ) ( APPELLANT) (RESPONDENT) DATE OF HEARING : 09 .0 7 .2015 DATE OF PRONOUNCEMENT : 10. 08 .2015 APPELLANT BY : SH RI V. RAJA KUMAR, ADV. RESPONDENT BY : S H RI ROBIN RAWAL, SR. DR ORDER TH ESE APPEAL S HAVE BEEN FILED BY THE DIFFERENT ASSESSEE AGAINST THE SEPARATE ORDERS PASSED BY THE LD. CIT(A) PER TAINING TO RELEVANT ASSESSMENT YEAR S 2009 - 10 & IT A NO S . 4056 & 4326 /DEL /201 4 2 2008 - 09 RESPECTIVEL Y. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE COMMON AND IDENTICAL, HENCE, WE ARE DISPOSING OF THE SAME BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE, BY DEALING WITH ITA NO. 4056/DEL/2014 (AY 2009 - 10). 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN ITA NO. 4056/DEL/2014 (AY 2009 - 10): - 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND LAW IN DISALLOWING CARRY FORWARD OF EXCESS CAPITAL EXPENDITURE WHICH NEEDS TO BE SET OFF AGAINST THE FUTURE INCOME. 2. THE LD. CIT(A) HAS FURTHER ERRED IN DI SALLOWING THE APPEAL OF THE ASSESSEE ON THE BASIS OF ITAT ORDER IN 29 SOT 316 WHEREAS THE SAME STANDS ALREADY OVERRULED AND DECIDED BY THE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE IN AY 2005 - 06 IN ITA NO. 5627/D/2010. THE ORDER BEING DATED 26.8.2011. 3. THAT THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE JUDICIAL DISCPLKINE AND THEREBY GONE BEYOND THE DICTA OF THE HON BLE TRIBUNAL IN SEVERAL CASES INCLUDING ONE IN ASSESSEE S CASE IN AY 2005 - 06 AND WHICH ORDERS WERE ALL BEFORE HIM. 4. THAT THE ORDER OF THE LD. CIT(A) BEING ARBITRARY AND ILLEGAL BE QUASHED OR MODIFIED SUITABLY. 3. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN ITA NO. 4326/DEL/2014 (AY 2008 - 09): - IT A NO S . 4056 & 4326 /DEL /201 4 3 1. THAT THE LD. CIT(A) HAS ERRED ON FACTS AND LAW IN DISALLOWING CARRY FORWARD OF EXCESS CAPI TAL EXPENDITURE WHICH NEEDS TO BE SET OFF AGAINST THE FUTURE INCOME. 2. THE LD. CIT(A) HAS FURTHER ERRED IN DISALLOWING THE APPEAL OF THE ASSESSEE ON THE BASIS OF ITAT ORDER IN 29 SOT 316 WHEREAS THE SAME STANDS ALREADY OVERRULED AND DECIDED BY THE TRIBU NAL IN ANOTHER CASE OF CITY EDUCATIONAL AND SOCIAL WELFARE SOCIETY IN AY 2005 - 06 IN ITA NO. 5627/D/2010. THE ORDER BEING DATED 26.8.2011. 3. THAT THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE JUDICIAL DISCIPLINE AND THEREBY GONE BEYOND THE DICTA OF THE HON BLE TRIBUNAL IN SEVERAL CASES INCLUDING THE ONE MENTIONED IN GROUND NO. 2 ABOVE. 4. THAT THE ORDER OF THE LD. CIT(A) BEING ARBITRARY AND ILLEGAL BE QUASHED OR MODIFIED SUITABLY. 4 . BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOC IETY , RUNNING SEVERAL EDUCATIONAL INSTITUTIONS. THE OBJECTS OF THE ASSESSEE S TRUST ARE PRIMARILY IN FIELD OF EDUCATION . THE RETURN OF INCOME FOR THE CURRENT YEAR WAS FILED ON 3 0.09.200 9 DECLARING A LOSS OF RS.48,00,215/ - . THE ASSESSMENT WAS TAKEN UP FOR S CRUTINY AND ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED BY ORDER DATED 27.12.201 1 . THE ASSESSING OFFICER DENIED THE BENEFIT OF CARRY FORWARD OF LOSS CLAIMED . THE AO WAS OF THE VIEW, THE LOSS CLAIMED BY THE ASSESSEE WAS NOT BASED ON NORMAL COMMERCIAL P RINCIPLES OF ACCOUNTING. MOREOVER, VARIOUS EXPENSES OF CAPITAL NATURE HAD BEEN IT A NO S . 4056 & 4326 /DEL /201 4 4 CLAIMED DEDUCTIBLE FUTURE RECEIPTS/ INCOME WHICH WAS PERMISSIBLE EVEN IN NORMAL ACCOUNTING SYSTEM. AS PER AO EXEMPTION MEANT THAT TAX COULD NOT BE CHARGED ON SUCH INCOME. THIS DID NOT MEANT ANY DEDUCTION. HENCE, ASSESSEE S CLAIM FOR CARRY FORWARD OF EXCESS CAPITAL EXPENDITURE AGAINST FUTURE RECEIPTS WAS NOT ALLOWED. HOWEVER, SINCE THE TOTAL APPLICATION OF INCOME WAS MORE THAN 85% OF TOTAL RECEIPTS, EXEMPTION U/S. 11 WAS ALLOWED BY THE AO. HOWEVER, THE CARRY FORWARD OF EXCESS CAPITAL EXPENDITURE TO BE SET OFF AGAINST THE FUTURE INCOME WAS NOT ALLOWED BY THE AO. 5 . AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER IN DENYING CARRIED FORWARD OF LOSS TO BE SET OFF AGAINST SUB SEQUENT YEAR S SURPLUS, THE ASSESSEE PREFERRED AN APPEAL TO THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE VIDE ORDER DATED 18.2.2014. 6 . THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BEFORE THE TRIBUNAL. LD. DR STRONGLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6 .1 ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE S SOCIETY REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN DISALLOWING THE APPEAL OF THE ASSESSEE ON THE BASIS OF T HE ITAT ORDER IN 29 SOT 316 WHEREAS THE SAME STANDS ALREADY OVERRULED AND DECIDED BY THE TRIBUNAL IN THE CASE OF THE SAME ASSESSEE IN AY 2005 - 06 IN ITA NO. 5627/DEL/2010 VIDE ORDER DATED 26.8.2011 AND HENCE, THE ISSUE IN QUESTION IS SQUARELY COVERED BY TH E AFORESAID ORDER OF THE TRIBUNAL . IT A NO S . 4056 & 4326 /DEL /201 4 5 7 . I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. I FIND THAT T HE ASSESSING OFFICER WAS OF THE VIEW THE LOSS SUFFERED DURING THE YEAR WAS ON ACCOUNT OF CAPITAL EXPENDITURE AND THEREFORE LOSS CANNOT ALLOWED TO BE CARRIED FORWARD. THIS ISSUE ACCORDING TO ME IS NO LONGER RES INTEGRA . I FURTHER FIND THAT T HE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE AY 2005 - 06 ( S UPRA) BY FOLLOWING THE JUDGMENT OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITU TE OF BANKING ( REPORTED IN 264 ITR 110 (BOM.) ) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE . THE RELEVANT FINDING OF THE COORDINATE BENCH ORDER READS AS FOLLOWS: - 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. L EARNED CIT(A) WHILE PERMITTING THE ASSESSEE TO CLAIM SET OFF AGAINST THE BROUGHT FORWARD LOSSES HAS PUT RELIANCE UPON THE FOLLOWING DECISIONS: - CIT VS. MATRI SEWA TRUST, 242 ITR 20 (MAD.); CIT VS. INSTITUTE OF BANKING, 264 ITR 110 (BOM.); CIT VS. MAHARAN A OF MEWAR CHARITABLE FOUNDATION 164 ITR 439 & GOVINDU NAICKER ESTATE VS. ADIY, 248 ITR 368 5. WE HAVE GONE THROUGH THE ORDER OF THE CIT(A) IN ASSESSMENT YEARS 2001 - 02, 2003 - 04 & 2004 - 05. IN THOSE YEARS, THE ASSESSEE HAS BEEN PERMITTED TO CARRY FORWARD TH E LOSSES AND ALSO TO CLAIM SET OFF OF SUCH LOSSES AGAINST THE INCOME. 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 INCOME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT AS SESSABLE 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 FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED A GAINST 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 COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN A DJUSTMENT 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 APPLICATION OF THE INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSE. THE LEARNED CIT(A) HAS FOLLOWED THIS DECISION APART FROM OTHERS REFERRED ABOVE. THE ORDER OF THE CIT(A) IN THREE ASSESSMENT YEARS HAVE BEEN ACCEPTED BY THE REVENUE. IN THIS YEAR, THE LEARNED CIT(A) HAS SIMPLY BASED HIS DECISION ON THE FINDING GIVE N IN EARLIER ASSESSMENT YEARS. KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, WE DO NOT IT A NO S . 4056 & 4326 /DEL /201 4 6 SEE ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN RESULT, THE APPEAL OF THE REVE NUE IS DISMISSED. 8 . IN VIEW OF ABOVE, COORDINATE BENCH ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE (SUPRA) WHICH IS IDENTICAL TO THE FACTS OF THE INSTANT CASE, I QUASH THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE CARRIED FORWARD OF CURRENT YEAR S LOSS TO BE SET OFF IN THE FUTURE YEARS. IT IS ORDERED ACCORDINGLY. 9 . IN THE RESULT, BOTH THE APPEAL S FILED BY ASSESSEE ARE ALLOWED. TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 10 - 8 - 2015 . SD/ - ( H.S. SIDHU ) J UDICIAL MEMBER DATED: 10 - 8 - 201 5 . SRBHATNAGAR COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI IT A NO S . 4056 & 4326 /DEL /201 4 7