Sh. Roop Kishore Madan, New Delhi V. DCIT, New Delhi

ITA 4744/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5239 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 30-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Charitable institution; Capital expenditure
• Section: 143(3); 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R.S. SYAL, HONBLE VICE PRESID ENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-4774/DEL/2013 ( ASSESSMENT YEAR: 2008-09) ACIT CIRCLE 1 MEERUT VS DEV CHARITABLE EDUCATIONAL TRUST SHAMBHU NAGAR BAGHPAT ROAD MEERUT AABTD1912B ASSESSEE BY SH. V. RAJA KUMAR, ADV. REVENUE BY SH. ANSHU PRAKASH, SR. DR ORDER PER SHRI K.N. CHARY, J.M. THIS IS AN APPEAL CHALLENGING THE ORDER DATED 28.0 5.2013 IN APPEAL NO. 670/255/2010-11/NOIDA PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), NOIDA, U.P. ( FOR SHORT HEREINAFTER CALLED LD. CIT(A)). 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A TRUST, REGISTERED UNDER THE REGISTRATION ACT, 1908. THE MAIN OBJECT OF THE TRUST IS EDUCATIONAL AND OTHER CHARITABLE ACTIVITIES OF GENE RAL PUBLIC UTILITY. DATE OF HEARING 07.08.2017 DATE OF PRONOUNCEMENT 11.08.2017 2 ITA NO. 4774/DEL/2013 FOR THE AY 2008-09 THEY HAVE FILED THEIR RETURN OF INCOME ON 10.11.2008 SHOWING A LOSS OF RS. 1,40,65,747/- BUT DURING THE 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT HEREI NAFTER CALLED THE ACT) PROCEEDINGS AO DISALLOWED THE SAME ON TH E GROUND THAT THE LOSS CLAIMED BY THE ASSESSEE WAS IN FACT ON ACC OUNT OF THE CAPITAL EXPENDITURE IN PURCHASE OF LAND AT VILLAGE PANCHLI KHURD, MEERUT AND THE COMMERCIAL PRINCIPLE OF ACCOUNTING P ROVIDE FOR DEDUCTION OF THE EXPENSES OF REVENUE NATURE ONLY. APPEAL PREFERRED BY THE ASSESSEE WAS ALLOWED BY THE LD. CI T (A) BY FOLLOWING A CATENA OF DECISIONS TO SAY WHILE APPLYI NG THE RECEIPTS OF THE TRUST FOR ITS OBJECTS IF ANY DEFICIT OCCURS ON ACCOUNT OF CAPITAL EXPENDITURE, THE SAME CAN BE ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST THE RECEIPTS OF THE YEARS. 3. AGGRIEVED BY THE SAID FINDINGS OF THE LD. CIT (A ) THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LD. CIT (A) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS. 1,40,6 5,747/- CLAIMED BY THE ASSESSEE TRUST ON ACCOUNT OF CAPITAL EXPENDI TURE INCURRED DURING THE YEAR, IGNORING THE COMMERCIAL PRINCIPLES ACCORDING TO WHICH CAPITAL EXPENDITURE ACCOUNT AT ALL AND HENCE, CAPITAL LOSS CANNOT BE ALLOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST FUTURE INCOME. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS. 1,40,6 5,747/- CLAIMED 3 ITA NO. 4774/DEL/2013 BY THE ASSESSEE TRUST RELYING UPON THE VARIOUS DECI SIONS AS MENTIONED IN THE APPELLANT ORDER WHEREAS THE SAID D ECISION RELATE TO SOME OTHER DISTINGUISHABLE POINTS I.E. ALLOWABILITY OF BROUGHT FORWARD BUSINESS LOSSES WORKED OUT ACCORDING TO COM MERCIAL PRINCIPLES AND NOT WITH THE CARRY FORWARD OF LOSSES ON ACCOUNT OF CAPITAL EXPENDITURE. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS. 1,40,6 5,747/- CLAIMED BY THE ASSESSEE TRUST WITHOUT REBUTTING THE AOS FI NDING THAT THE LOSS CLAIMED BY THE ASSESSEE WAS DUE TO CAPITAL EXPENDIT URE AS ADMITTED AND MENTIONED BY THE ASSESSEE ITSELF IN COMPUTATION OF INCOME ENCLOSED WITH THE RETURN. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY AND/ OR DELETE ANY GROUNDS OF APPEAL. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS) MAY BE SET ASI DE AND THAT OF THE AO RESTORED. 4. INSOFAR AS THE FACTS ARE CONCERNED, ABSOLUTELY T HERE IS NO DISPUTE. AS A MATTER OF FACT LD. AO, IN HIS ORDER, OBSERVED THAT THE OBJECTS OF THE TRUST AS REVEALED BY THE COPY OF THE TRUST DEED ARE MAINLY EDUCATIONAL AND OTHER CHARITABLE ACTIVITIES OF GENERAL PUBLIC UTILITY, AND THE ACTIVITIES OF THE TRUST WERE FOUND TO BE WITHIN ITS BYE-LAWS, GENUINE AND CHARITABLE IN NATURE. ONLY G ROUND ON WHICH THE AO REJECTED THE COMPUTATION OF INCOME AS FURNISHED BY THE ASSESSEE IS THAT THE COMPUTATION OF ANY LOSS ON ACCOUNT OF EXPENDITURE OF CAPITAL NATURE AND DEDUCTION CLAIMED U/S 11 OF THE ACT CANNOT BE ALLOWED AS PER THE PROVISIONS OF THE INCOME TAX ACT. 5. BEFORE US THE ASSESSEE RELIED UPON A CATENA OF D ECISIONS INCLUDING (I) ACIT VS. DEVENDRA KUMAR GARG CHARITAB LE TRUST IN 4 ITA NO. 4774/DEL/2013 ITA NO. 4118/DEL/13 FOR AY 2008-09 DATED 29.03.2015 , (II) DEVENDRA KUAMR GARG CHARITABLE TRUST & ORS. VS. ACI T IN ITA NO. 3030, 3032, 3031 & 3028/DEL/15 DATED 27.07.2015, (I II) ADDL. CIT VS. CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY ITA N O. 5627/DEL/10 FOR AY 2005-06 DATED 26.08.2011, (IV) ACIT VS. CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY IN ITA NO. 4119/D/13 FOR AY 08-09 DATED 20.03.2015, (V) ADDL. CIT VS. SUBHARTI KKB CHARITAB LE TRUST IN ITA NO. 1553/DEL/11 FOR AY 06-07 DATED 11.05.2012, (VI) DIT VS. RAGHUVANSHI CHARITABLE TRUST (2011) 197 TAXMAN 170 (DEL), (VII) CITY EDUCATIONAL AND SOCIAL WELFARE SOCIETY & ORS. VS. ADDL. CIT IN ITA NO. 4056 & 4326/DEL/14 FOR AY 09-10 DATED 10 .08.2015, (VIII) M.J. CHARITABLE TRUST VS. ADDL. CIT IN ITA N O. 5549/DEL/14 FOR AY 09-10 DATED 29.02.2016, (IX) M.J. CHARITABLE TRUST VS. ACIT, MEERUT IN ITA NO. 3526/DEL/15 FOR AY 2010-11 DATED 16.12.2016 AND (X) FATEH CHAND CHARITABLE TRUST VS. ACIT, MEERUT IN ITA NO. 1665/DEL/12 FOR AY 2006-07. ON A CAREFUL PERUSAL OF THE DECISIONS, WE FIND THAT IN THESE MAT TERS THE ISSUE INVOLVED WAS THAT WHETHER ANY LOSS OCCASIONED DUE T O THE DEFICIT OCCURRED ON ACCOUNT OF APPLICATION OF THE RECEIPTS OF THE TRUST FOR 5 ITA NO. 4774/DEL/2013 ACQUIRING CAPITAL ASSET TO FURTHER THE OBJECTS OF T HE TRUST COULD BE ALLOWED TO BE CARRIED FORWARD. 6. WE FOUND THAT THE ISSUE INVOLVED IN THIS APPEAL IS VERY SIMILAR TO THE GROUNDS RAISED IN ACIT, CIRCLE-1 VS M/S DEVENDRA KUMAR GARG CHARITABLE TRUST, ITA NO. 4118/DEL/2013 (ASSESSMENT YEAR 2008-09) READS AS FOLLOWS:- '1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS.4,75,54,136/- CLAIMED BY THE ASSESSEE TRUST ON A /C OF CAPITAL EXPENDITURE INCURRED DURING THE YEAR, IGNOR ING THE COMMERCIAL PRINCIPLES ACCORDING TO WHICH CAPITAL EXPENDITURE DOES NOT RELATE TO INCOME & EXPENDITURE ACCOUNT AT ALL AND HENCE, CAPITAL LOSS CANNOT BE AL LOWED TO BE CARRIED FORWARD FOR SET OFF AGAINST FUTURE INCOM E. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS. 4,75,54,136/- CLAIMED BY THE ASSESSEE TRUST REL YING UPON THE VARIOUS DECISIONS AS MENTIONED IN THE APPE LLATE ORDER WHEREAS THE SAID DECISIONS RELATE TO SOME OTH ER DISTINGUISHABLE POINTS I.E. ALLOWABILITY OF BROUGHT FORWARD BUSINESS LOSSES WORKED OUT ACCORDING TO COMMERCIAL PRINCIPLES AND NOT WITH THE CARRY FORWARD OF LOSSES ON A/C OF CAPITAL EXPENDITURE. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT (APPEALS) HAS ERRED IN LAW IN ALLOWING THE LOSS OF RS.4,75,54,136/- CLAIMED BY THE ASSESSEE TRUST WITH OUT REBUTTING THE AO'S FINDING THAT THE LOSS CLAIMED BY THE ASSESSEE WAS DUE TO CAPITAL EXPENDITURE AS ADMITTED AND MENTIONED BY THE ASSESSEE ITSELF IN COMPUTATION OF INCOME ENCLOSED WITH THE RETURN. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, MODIFY A ND/OR DELETE ANY GROUND(S) OF APPEAL. 6 ITA NO. 4774/DEL/2013 7. WHILE ANSWERING THE ISSUE INVOLVED IN THE ABOVE GROUNDS, THE TRIBUNAL IN THE COURSE OF THE ORDER OBSERVED AS FOL LOWS: 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLITARY ISSUE THAT ARISES FOR OUR CONSIDERATIO N IS WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING THE BENEFIT OF CARRIED FOR WARD OF LOSS. THE ASSESSING OFFICER HELD THAT THE LOSS SUFFERED WAS O N ACCOUNT OF CAPITAL EXPENDITURE AND AS SUCH SAME CANNOT BE ALLOWED TO B E CARRIED FORWARD TO SUBSEQUENT YEARS. THIS ISSUE ACCORDING TO US IS NO LONGER RES INTEGRA. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF ADDL. CI T VS. M/S CITY EDUCATIONAL & SOCIAL WELFARE SOCIETY (SUPRA) HAD HE LD THAT THE ASSESSEE IS ENTITLED TO CARRY FORWARD THE LOSSES AGAINST THE SUBSEQUENT YEAR'S SURPLUS. THE RELEVANT FINDINGS OF THE COORDINATE BE NCH ORDER READS AS FOLLOWS:- '5.......THE CIT(A) HAS MADE A REFERENCE IN THOSE A SSESSMENT 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 A N ARGUMENT WAS RAISED BEFORE THE HON'BLE MUMBAI HIGH COURT BY THE REVENUE THAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOM E 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 ASSESSABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSI NESS' U/S 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. ACCORDING TO THE REVENUE, THERE WAS NO PROVISION FO R CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST THE INCOME OF SUBSEQUENT YEARS. THIS ARGUMENT WAS R EJECTED BY THE BOMBAY HIGH COURT AND IT HAS BEEN HELD THAT INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON C OMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE RE LIGIOUS PURPOSE IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICA TION OF THE INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSE. THE LEARNED CIT(A) HAS FOLLOWED THIS DECISION APART FRO M OTHERS REFERRED ABOVE......' 6. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D.' 7. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE H OLD THE CIT(A) IS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE TO CARRY FORWARD THE LOSSES 7 ITA NO. 4774/DEL/2013 OF THE CURRENT YEAR AGAINST SURPLUS OF THE SUBSEQUE NT YEAR. IT IS ORDERED ACCORDINGLY. 8. IN VIEW OF THIS ESTABLISHED POSITION OF LAW AS WE DELINEATE FROM THE DECISIONS REFERRED TO ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NOTHING ILLEGAL OR IRREGULAR IN THE LD. CIT(A) FINDING THAT THE INCOME OF THE TRUST IS TO BE COMPU TED ON COMMERCIAL PRINCIPLES AND IN CASE EXCESS EXPENDITUR E OVER AND ABOVE THE INCOME RECEIVED BY THE SOCIETY HAS BEEN I NCURRED IN EARLIER YEAR(S) ON CHARITABLE PURPOSE, SUCH EXCESS (LOSS) HAS TO BE CARRIED FORWARD AND SET OFF AGAINST THE SUBSEQUENT YEARS SURPLUS, IF ANY, AND SUCH ADJUSTMENT OF DEFICIT/LOSS OF CURR ENT YEAR AGAINST INCOME/SURPLUS OF SUBSEQUENT YEAR WOULD AMOUNT TO A PPLICATION OF INCOME OF THE TRUST FOR CHARITABLE PURPOSE IN SU BSEQUENT YEAR WITHIN THE MEANING OF SECTION 11(I)(A) OF THE ACT. WE ACCORDINGLY CONFIRM THE IMPUGNED ORDER AND DISMISS THE GROUNDS OF APPEAL. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.08.2017 SD/- SD/- (R.S. SYAL) (K. NARSIM HA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 11.08.2017 *KAVITA ARORA 8 ITA NO. 4774/DEL/2013 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED ON 09.08.2017 DRAFT PLACED BEFORE AUTHOR 10.08.2017 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 11.08.2017 APPROVED DRAFT COMES TO THE SR.PS/PS 11.08.17 KEPT FOR PRONOUNCEMENT ON 11.08.17 FILE SENT TO THE BENCH CLERK 11.08.17 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.