ADIT I(2), MUMBAI V. GOREGAON SPORTS CLUB, MUMBAI

ITA 4764/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88492 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 02-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 28; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BE NCH, MUMBAI , ! '# $ $ $ $ , '# % BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./I .T.A. NOS. 4764 & 4765/MUM/2013 ( & & & & / ASSESSMENT YEARS : 2007-08 & 2009-10 THE ADIT (E)-11(1), PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400 012 / VS. M/S. GOREGAON SPORTS CLUB 391-A, DR. DADA SAHEB, BHADKAMKAR MARG, MUMBAI #' ! ./ ( ./ PAN/GIR NO. : AAATG 0279P ( ') / APPELLANT ) .. ( *+') / RESPONDENT ) ') , / APPELLANT BY: SHRI PAVAN KUMAR BEERLA *+') - , / RESPONDENT BY: SHRI HARESH SHAH - ./! / DATE OF HEARING :02.03.2015 01& - ./! / DATE OF PRONOUNCEMENT :02.03.2015 '2 / O R D E R PER N.K. BILLAIYA, AM: THESE TWO APPEALS BY THE REVENUE ARE PREFERRED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT(A)-1, MUMBAI PERTAIN ING TO ASSESSMENT YEARS 2007-08 & 2009-10. IN BOTH THESE APPEALS THE COMMON GRIEVANCES READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW BENEFIT OF EXEMPTION U/S. 11 TO THE ASSESSEE WHEN T HE ACTIVITIES OF ASSESSEE ARE AKIN TO THOSE OF A MUTUA L ITA NOS. 4764 & 4765/M/13 2 ASSOCIATION AND DO NOT FALL WITHIN THE DEFINITION O F CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE I. T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR SET OFF AND CARRY FORWARD OF DEFICIT O F EARLIER YEARS, IGNORING THE FACT THAT THERE IS NO EXPRESS P ROVISION IN THE I.T. ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLA IM. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2008-09 IN ITA NO. 6621/M/12. 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANY DISTINGUISHING FACT/DECISION IN FAVOUR OF THE R EVENUE. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE RELEVANT DECISION OF THE TRIBUNAL IN ITA NO. 66 21/M/12 FOR A.Y. 2008-09. WE FIND FORCE IN THE CONTENTION OF THE LD . COUNSEL. THE ISSUES INVOLVED IN THE YEAR UNDER CONSIDERATION WERE ALSO THERE BEFORE THE TRIBUNAL IN A.Y. 2008-09. WE FIND THAT THE TRIBUNA L HAS FOLLOWED THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT IN A SSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 VIDE ORDER DT. 14.2.201 2 AND FINALLY CONCLUDED THAT THE ASSESSEES CLAIM THAT IT IS ENTI TLED FOR EXEMPTION U/S. 11 HAS BEEN UPHELD FROM THE STAGE OF HIGH COURT. 6. NOW THAT IT HAS BEEN HELD THAT THE ASSESSEE IS A CHARITABLE INSTITUTION AND DULY RECOGNIZED U/S. 12A THEREFORE, THE INCOME HAS TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 11 OF THE ACT. RESPECTFULLY FOLLOWING THE EARLIER YEARS ORDER, WE DIRECT THE AO TO ITA NOS. 4764 & 4765/M/13 3 COMPUTE THE TOTAL INCOME OF THE ASSESSEE IN TERMS O F SEC. 11 TO 13 OF THE ACT. THIS GROUND OF THE REVENUE IS DISMISSED. 7. COMING TO THE SECOND GRIEVANCE THAT THE LD. CIT( A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE FOR SET OFF AND CARRY FORWARD OF DEFICIT OF EARLIER YEARS. 8. WE FIND THAT THIS ISSUE WAS CONSIDERED BY THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING 264 ITR 110 WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER: NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARIS ES FOR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUEN T YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLIC ATION OF INCOME IN THE SUBSEQUENT YEAR FOR CHARITABLE PURPOSES? IT WA S 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 UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR R ELIGIOUS PURPOSES. IN THE PRESENT CASE, THE AO DID NOT ALLOW CARRY FORWAR D OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF TH E SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUS T, THEIR INCOME WAS ASSESSABLE UNDER SELF-CONTAINED CODE MENTIONED IN S E. 11 TO 13 OF THE INCOME-TAX ACT AND THAT THE INCOME OF THE CHARITABL E TRUST WAS NOT ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS UNDER SEC. 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSS ES WAS RELEVANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EARLIER YEA RS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FR OM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT O F 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 O F THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEV OLENT PROVISIONS CONTAINED IN SE. 11 OF THE ACT AND THAT SUCH ADJUST MENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST U/S. 11(1)(A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGEMENT OF THE GUJA RAT HIGH COURT IN THE CASE OF CIT VS SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293. ACCORDINGLY, WE ANSWER QUESTIO N NO. 3 IN THE AFFIRMATIVE, I.E. IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT. ITA NOS. 4764 & 4765/M/13 4 RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THIS GROUND RAISED BY THE REVENUE IS DI SMISSED. 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 2 ND MARCH, 2015. SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) '# /JUDICIAL MEMBER ! '# / ACCOUNTANT MEMBER MUMBAI; 3' DATED : 2 ND MARCH, 2015 . . ./ RJ , SR. PS '2 '2 '2 '2 - -- - *. *. *. *. 4&. 4&. 4&. 4&. / COPY OF THE ORDER FORWARDED TO : 1. ') / THE APPELLANT 2. *+') / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 67 *. , , / DR, ITAT, MUMBAI 6. 78 9 / GUARD FILE. '2 '2 '2 '2 / BY ORDER, +. *. //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI