MAHARASHTRA STATE ROAD TRANSPORT CORPORATION, MUMBAI V. ADIT (EXEMPTION) -I (1), MUMBAI

ITA 5327/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8403 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Assessee Lawyers: K K NAULAKHA
• Keywords: Depreciation; Charitable institution; Unabsorbed depreciation
• Section: 12A; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.5393/M/2016 ASSESSMENT YEAR: 2009-10 DY. COMMISSIONER OF INCOME TAX (EXEMPTIONS)- 2(1), ROOM NO.519, 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, LOWER PAREL, MUMBAI - 400077 VS. M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC), MAHARASHTRA VAHATUK BHAVAN, DR. ANANT RAO NAIR MARG, MUMBAI-400 008 PAN: AAACM 4699J (APPELLANT) (RESPONDENT) & ITA NO.5327/M/2016 ASSESSMENT YEAR: 2009-10 M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC), MAHARASHTRA VAHATUK BHAVAN, DR. ANANT RAO NAIR MARG, MUMBAI-400 008 PAN: AAACM 4699J VS. ASSISTANT DIRECTOR OF INCOME TAX (EXEMPTION)-I(1), MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI GIRISH DAVE, A.R. & SHRI K.K. NAULAKHA, A.R. REVENUE BY : SHRI R.P. MEENA, D.R. DATE OF HEARING : 24.08.2017 DATE OF PRONOUNCEMENT : 10.11.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS-ONE BY THE REVENUE AND TH E OTHER BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATED 29.06.2016 ITA NO.5393/M/2016 & ITA NO.5327/M/2016 M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC) 2 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREIN AFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT YEAR 2009- 10. ITA NO.5393/M/2016 (REVENUES APPEAL) 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A COMPANY ESTABLISHED UNDER THE RO AD TRANSPORT CORPORATION ACT, 1950 MAINLY WITH THE OBJ ECT OF PROVIDING PASSENGER TRANSPORT FACILITY. THE ASSESSEE HAS CLAI MED EXEMPTION U/S 11 OF THE ACT, 1961 AS IN EARLIER YEARS BY STATING THAT ITS OBJECTIVE IS CHARITABLE IN NATURE. BEFORE THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. A.P.S.R .T.C. (159 ITR 1) AND THE DECISION OF HONBLE SUPREME COURT IN ITA NO.3316 OF 1984 WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 11. THE MAIN ACTIVITY OF THE CORPORA TION CONTINUES TO BE SAME AS IN EARLIER YEARS. THE ASSESSEE IS REGIS TERED U/S 12A OF THE INCOME TAX ACT, 1961. DURING ASSESSMENT PROCEEDING S, THE AO RESTRICTED THE EXPENSES CLAIMED BY THE ASSESSEE TO RS.35,66,76,55,317/-, BEING INCOME EARNED BY ASSESS EE AFTER SETTING APART 15% ACCUMULATION UNDER SECTION 11(1)(A). 3. THE MATTER WAS CONTESTED BEFORE LD. CIT(A) AND T HE LD. CIT(A) HAS ALLOWED THE APPEAL BY OBSERVING AS UNDER : 5 . I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION OF THE LD. AR. DURING THE APPELLANT PROCEEDING, THE LD . AR EXPLAINED THAT ONLY ONE ISSUE IS INVOLVED IN THIS APPEAL WHICH IS CLEAR LY SPELT OUT IN THE ADDITIONAL GROUND. THE OPERATING EXPENSES NET OF DEPRECIATION WAS RS.37,88,50,35,994/- AND THE NON-OPERATING EXPENSES WAS RS.73,82,48,475/-. THUS, THE TOTAL EXPENSES ON OBJECTS WERE RS.38,62,3 2,84,469/- . THE AO HAS RESTRICTED THE EXPENSES AS OBJECTS TO TH E INCOME OF THE YEAR AT ITA NO.5393/M/2016 & ITA NO.5327/M/2016 M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC) 3 RS.35,66,76,55,317/- AND HAS NOT ALLOWED THE LOSS OF RS. 295,56,29,152/- TO BE CARRIED FORWARD. THE HON'BLE BOMBAY HIGH COURT I N THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) HAS HELD THAT E XCESS EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS AND SUCH ADJUSTMENTS WOULD BE APPLICATION OF INCOME IN SUBSEQUENT YEARS. RESPECTFULLY FOLLOWING THE ABOVE DECISION AND OTHER DECISIONS RELIED ON BY THE APPELLANT, THE AO IS DIRECTED TO ALLOW CARRY FORWARD THE DEFICIT DARNED BY APPELLANT AFTER VERIFICATION. THE GROUND IS ALLOWED FOR STATISTICAL PURPOSE. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. WE FIND THAT THE LD. CIT(A) WHILE DECIDING THE APPEAL HAS RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE O F INSTITUTE OF BANKING PERSONNEL AND HELD THAT EXCESS EXPENDITURE IN EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF SUBSEQUENT YE AR AND SUCH ADJUSTMENT WOULD BE REGARDED AS APPLICATION OF INCO ME IN SUBSEQUENT YEAR. WE REPRODUCE THE JUDGMENT OF HON BLE BOMBAY HIGH COURT WHEREIN IT IS 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 A DJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR FOR CHARITABLE PURPOS ES ? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EAR LIER 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 AP PLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASS ESSING 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 TRUST, 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 CHARI TABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS UNDE R 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 SUBSEQUE NT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DE RIVED FROM THE TRUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AN D IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EA RNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INC OME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SE CTION 11 OF THE ACT AND THAT SUCH ITA NO.5393/M/2016 & ITA NO.5327/M/2016 M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC) 4 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 THE CASE OF CIT V. SHRI PLOT SWETAMBER MUR TI PUJAK JAIN MANDAL [1995] 211 ITR 293 . ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFI RMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 5. RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENT, W E DISMISS THE DEPARTMENTAL APPEAL. ITA NO.5327/M/2016 (ASSESSEES APPEAL) 6. THE ASSESSEES APPEAL IS IN RESPECT OF NOT ALLOW ING THE STATUTORY ALLOWANCE OF CURRENT YEAR DEPRECATION OF RS.1,73,01 ,94,464/- AND CARRY FORWARD OF UNABSORBED DEPRECIATION AND ALSO T HE DEFICITS OF EARLIER YEARS AS PER RECORDS EVEN THOUGH RAISED BEF ORE LD. CIT(A). 7. WE FIND THAT THE LD. CIT(A) HAS NOT ADJUDICATED T HIS MATTER BY A SPEAKING ORDER AND THE ISSUE REMAINS UNCLEAR AND FIGURES REQUIRE VERIFICATION. THEREFORE, WITHOUT DELVING MUCH DEEP ER, THE MATTER IS RESTORED BACK TO THE FILE OF LD. CIT(A) FOR ADJUDIC ATION BY WAY OF SPEAKING ORDER. THE ASSESSEE IS DIRECTED TO SUBSTAN TIATE THE SAME. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D AND THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 10.11.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.11.2017. * KISHORE, SR. P.S. ITA NO.5393/M/2016 & ITA NO.5327/M/2016 M/S. MAHARASHTRA STATE ROAD TRANSPORT CORPORATION (MSRTC) 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.