DY DIT (E)-I(1), MUMBAI V. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPN. (MIDC), MUMBAI

ITA 4778/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8025 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUM EET KUMAR
• Keywords: Charitable institution
• Section: 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H,MUMBAI BEFORE SHRI R.K. PANDA (AM) & SHRI VIJAY PAL RAO ( JM) I.T.A.NOS.4777 & 4778/MUM/2009 (A.YS. 2004-05 & 2005-06)) DY.DIRECTOR OF INCOME-TAX (E)-I(1), R.NO. 504, PIRAMAL CHAMBERS, 5 TH FLOOR, PAREL, MUMBAI-400 012. VS. MAHARASHTRA INDL. DEVELOPMENT CORPORATION (MIDC), UDYOG SARATHI MAROL IDL. AREA, MAHAKALI CAVES RD., ANDHERI (E), MUMBAI-93. (PAN: AAACM3560C) APPELLANT RESPONDENT APPELLANT BY SHRI SUMEET KUMAR. RESPONDENT BY NONE. O R D E R PER VIJAY PAL RAO, JM: THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF CIT(A)-XXXII, MUMBAI, BOTH DATED 28-04-2009 FOR THE ASSTT. YEARS 2004-05 AND 2005-06 RESPECTIVELY. THE REVENUE HAS RAISED A SOLI TARY COMMON ISSUE IN THESE APPEALS AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE LD. CIT (A) ERRED IN DIRECTING THE AO TO GRANT CARRY FORWARD OF THE DEFICIT OF RS.554029 77/- TO THE SUBSEQUENT YEAR FOR BEING SET OFF AGAINST THE SURPLUS IF ANY, IN THE SUBSEQUENT YEARS IGNORING THAT THE ASSESSEE HAS NO SURPLUS FOR THE CURRENT YEAR INCOME AND THE DEFICIT SO CLAIMED HAS ARISEN DUE TO EXCESS EXPENDI TURE BEING INCURRED BY THE TRUST. 2. WE HAVE HEARD THE LD. D.R. AND CONSIDERED THE RE LEVANT MATERIAL ON RECORD. SINCE NOBODY HAS APPEARED ON BEHALF OF THE ASSESSEE, WE HAVE NO ITA NOS.4777-4778/M/09 MIDC 2 PRIVILEGE TO HEAR THE ASSESSEE. ACCORDINGLY, WE PR OCEED TO DISPOSE OF THESE APPEALS EX PARTE. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. D.R . AND PERUSING THE ORDERS OF THE AO AS WELL AS THE CIT(A), WE FIND THAT THE CIT(A) HAS DECIDED THE ISSUE BY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING (264 ITR 110) AND HAS HEL D AS UNDER : 2.1 AS PER THE ASSESSMENT ORDER, THE A.O. HAS GRAN TED EXEMPTION U/S.11 FOR AN AMOUNT OF RS.15,10,03,965/- APPLIED B Y THE ASSESSEE FOR CHARITABLE PURPOSES IN INDIA FROM RS.26,74,540/ - BEING THE SURPLUS IN INCOME AND EXPENDITURE ACCOUNT. THE DEFI CIT WAS THEREFORE RS.5,54,02,977/-. HOWEVER THE INCOME WAS ASSED AT NIL IN VIEW OF THE NET RESULT BEING A DEFICIT WHICH WAS NO T SPECIFICALLY ALLOWED TO BE CARRIED FORWARD FOR SET-OFF IN SUBSEQ UENT YEAR. IN THIS REGARD THE APPELLANT HAS PLEADED THAT IT IS ENTITLE D FOR THE CARRY FORWARD OF THE DEFICIT IN VIEW OF THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING 264 ITR 110 AS WELL AS OF GUJARAT HIGH COURT IN THE CASE OF SHRI PLOT SWET AMBAR MURTI PUJAK JAIN MANDAL 211 ITR 293 WHEREIN IT HAS BEEN HELD TH AT THE DEFICIT CAN BE CARRIED FORWARD BY THE TRUST FOR FUTURE APPL ICATION OF INCOME. COPIES OF THESE JUDGEMENTS HAVE ALSO BEEN FURNISHED BY THE APPELLANTS. 2.2 I HAVE CONSIDERED THE ABOVE HIGH COURT JUDGEMENTS. IT IS SEEN THAT THE APPELLANT IS A TRUST REGISTERED U/S.1 2A OF THE ACT AND HENCE ITS INCOME IS EXEMPT AS PER PROVISIONS OF SEC TION 11 OF THE ACT. IN THE CASE OF INSTITUTE OF BANKING, HONBLE B OMBAY HIGH COURT HAVE HELD THAT THE ASSESSEE WHO WAS ENTITLED FOR EX EMPTION U/S.11 OF THE ACT, WAS ALSO ENTITLED FOR CARRY FORWARD OF THE DEFICIT OF EARLIER YEARS TO BE SET-OFF AGAINST THE SURPLUS OF THE SUBS EQUENT YEARS. HONBLE BOMBAY HIGH COURT HAVE FOLLOWED GUJARAT HIG H COURT JUDGMENT IN THE CASE OF SHRI PLOT SWETAMBAR MURTI P UJAB JAIN MANDAL 211 ITR 293 (SUPRA). SINCE HE JUDGEMENT IN T HE CASE OF INSTITUTE OF BANKING HAS BEEN DELIVERED BY HONBLE JURISDICTIONAL HIGH COURT, SAME IS BINDING. I THEREFORE DIRECT THE A.O. TO GRANT CARRY FORWARD OF THE DEFICIT COMPUTED BY HIM AT RS. 5,54,02,977/- TO THE SUBSEQUENT YEAR FOR BEING SET-OFF AGAINST THE S URPLUS IF ANY, IN THE SUBSEQUENT YEARS. IT IS TO BE NOTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE HONBLE HIGH COURT ADJUDICATED THE ISS UE 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 SUBSEQUEN T YEAR AND ITA NOS.4777-4778/M/09 MIDC 3 WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLIC ATION 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 SUBSEQ UENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXP ENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASSESS ING 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 T HAT IN THE CASE OF A CHARITABLE TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF- CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 1 3 OF THE INCOME- TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS 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 EXPENDITU RE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEA RS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT F THE DEPARTMENT. I NCOME 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 AN D RELIGIOUS PURPOSES IN EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APP LICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE H AVING REGARD TO BE 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 VI EW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAN JAIN MANDIR [1995] 211 ITR 293. ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE A FFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMEN T. RESPECTFULLY FOLLOWING THE ABOVENOTED DECISION OF H ONBLE JURISDICTIONAL HIGH COURT, WE FIND NO REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A). THE SAME IS UPHELD. 4. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THE 23RD DAY OF MARCH, 201 1. SD/- SD/- (R.K. PANDA) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 23RD MARCH , 2011. NG: ITA NOS.4777-4778/M/09 MIDC 4 COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXXII,,MUMBAI. 4 DIT (EXEMTION), MUMBAI. 5.DR, H BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NOS.4777-4778/M/09 MIDC 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 17-03-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 17-03-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER