ITO (E) 1(1), MUMBAI V. BOMBAY NATURAL HISTROY SOCIETY, MUMBAI

ITA 5473/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7157 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH K BHAT
• Assessee Lawyers: T A KHAN
• Keywords: Charitable institution
• Section: 12; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B , MUMBAI BEFORE SHRI PAWAN SINGH , JUDICIAL M EMBER & SHRI RAJESH KUMAR , ACCOUNTANT MEMBER I TA NO. 5473/MUM/2015 ASSESSMENT YEAR : 2010 - 11 ITO (EXEMPTION) - 1(1), MUMBAI VS. M/S. BOMBAY NATURAL HISTORY SOCIETY, HORN BILL HOUSE, OPP LION GATE, SBS ROAD MUMBAI 400 023 PAN NO. AAATB1708Q ( APPELLANT) RESPONDENT) CO NO. 115/MUM/2015 (ARISING OUT OF ITA NO.5473/MUM/2015) ASSESSMENT YEAR : 2010 - 11 M/S. BOMBAY NATURAL HISTORY SOCIETY, HORN BILL HOUSE, OPP LION GATE, SBS ROAD MUMBAI 400 023 PAN NO. AAATB1708Q VS. ITO (EXEMPTION) - 1(1), MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI GANESH K. BHAT RE SPONDENT BY : SHRI T.A. KHAN DATE OF HEARING : 23/05/2018 DATE OF PRONOUNCEMENT : 24 / 05 /2018 O R D E R PER RAJESH KUMAR , ACCOUNTANT MEMBER THIS APPEAL IS FILED BY REVENUE AND CROSS OBJECTION BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 1, MUMBAI DATED 22/09/2015 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 2 ITA NO.5473/MUM/2015 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: - 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) WAS RIGHT IN DIRECTING THE AO TO ALLOW CARRY FORWARD OFF THE DEFICIT OF EARLIER YEARS TO BE SET OFF OF THE SURPLUS OF CURRENT YEAR INCOME & SUBSEQUENT YEARS AND CONSIDER SUCH ADJUSTMENT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE?' 2. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN ALLOWING THE C/F OF DEFICIT AMOUNTING T O RS. 57,38,572/ - AGAINST INCOME FOR SUBSEQUENT ASSESSMENT YEARS WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS COMPUTED THE TAX UNDER HEAD ' INCOME FROM OTHER SOURCES' WHICH IS NOT ALLOWABLE AS PER THE NORMAL PROVISION OF THE I.T. ACT AS WELL AS SEC TION 11 OF THE I.T. ACT.?' 3. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN ALLOWING THE EXPENDITURE AS APPLICATION OF INCOME OUT OF CORPUS, ACCUMULATION U/S LL(L)(A) WHICH RESULTANT DEFICIT TO THE ASSESSEE IN EARLIER YEARS. AS THE CORPUS FUND IS NOT CONSTITUTE AS INCOME, HENCE THERE IS NO QUESTION OF ALLOWIBILITY AS APPLICATION OF INCOME U/S LL(L)(A) OUT OF CORPUS.?' 4. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN ALLOWING CARRIED FO RWARD OF DEFICIT OF EARLIER YEARS AMOUNTING TO RS. 57 ? 38,572/ - ON ACCOUNT OF EXCESS EXPENDITURE OVER THE INCOME) AGAINST INCOME FOR SUBSEQUENT YEARS, WITHOUT APPRECIATING THE FACTS THAT THIS WOULD HAVE TO THE EFFECT OF GRANTING DOUBLE DEDUCTION TO THE ASSES SEE, FIRST AS ACCUMULATION OF INCOME U/S LL(L)(A) OR AS CORPUS DONATION U/S LL(L)(D) IN THE EARLIER YEARS OR CURRENT YEAR AND THEN AS APPLICATION OF INCOME U/S 1 L(L)(A) IN THE CURRENT OR SUBSEQUENT YEARS WHICH WAS LEGALLY NOT PERMISSIBLE?' 5. 'WHETHE R ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT ERRED IN ALLOWING THE ASSESSEE TO CARRY FORWARD DEFICIT AGAINST THE INCOME OF SUBSEQUENT YEAR IGNORING THAT THE DETERMINATION OF INCOME U/S. 11, 12 & 13 IS A SEPARATE CODE AND DOES NOT CONTAI N SUCH PROVISIONS AS CONTAINED IN CHAPTER VI OF THE ACT?' 6. 'WHETHER ADJUSTMENT OF DEFICIT (EXCESS OF EXPENDITURE OVER INCOME) OF CURRENT YEAR AGAINST THE INCOME OF SUBSEQUENT YEAR WOULD AMOUNT TO APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE PUR POSES IN THE SUBSEQUENT YEAR WITHIN THE MEANING OF SECTION 11(1) (A) OF THE ACT?' 7. 'WHETHER ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE ID. CIT(A) ERRED IN ALLOWING THE C/F OF DEFICIT OF EARLIER YEAR AMOUNTING TO RS. 57,38,572/ - AGAINST INCOME F OR SUBSEQUENT ASSESSMENT YEARS RELYING ON THE DECISION OF THE HONFALE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM) WITHOUT APPRECIATING THE FACTS THAT THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SERVICES IS DISTINGUISHABLE TO THE FACTS OF THE ASSESSE'S CASE?' 3. THE COMMON ISSUE RAISED IN ALL THE GROUNDS OF APPEAL IS AGAINST THE ACTION OF CIT(A) DIRECTING THE AO TO ALLOW CA RRY FORWARD OFF THE EXCESS ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 3 EXPENDITURE IN THE EARLIER YEAR FOR SETTING OFF AGAINST THE SURPLUS OF CURRENT YEAR AND ALL THE SUBSEQUENT YEARS. 4. AT THE OUTSET, LEARNED AR OF ASSESSEE POINTED OUT THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N OF THE CO - ORDINATE BENCH IN ITS OWN CASE IN ITA NO.5143/MUM/2016 IN A.Y.2011 - 12 VIDE ORDER DATED 12/05/2017 AND THEREFORE, THE LEARNED COUNSEL PRAYED THAT IN THE CURRENT YEAR , APPEAL OF THE REVENUE DESERVE D TO BE DISMISSED IN VIEW OF THE SAID DECISION OF THE CO - ORDINATE BENCH. 5. LEARNED DR RELIED ON THE GROUND OF THE APPEAL FILED BY THE REVENUE. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DECISION CITED BY THE LEARNED AR. WE OBSERVE FROM THE RECORD BEFORE US THAT THE ISSUE CHALLENGED BY THE REVENUE IS WHETHER THE CIT(A) WAS CORRECT IN DIRECTING THE AO TO ALLOW THE EXCESS EXPENDITURE / LOSSES BROUGHT FORWARD FROM EARLIER YEAR TO BE SET OFF AGAINST THE SURPLUS IN THE CURRENT YEAR AND SUBSEQUENT YEARS AND CONSIDERING THE SAME AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. ON T HE PERUSAL OF THE DECISION OF THE CO - ORDINATE BENCH IN ITA NO.5143/MUM/2016(SUPRA), WE FIND THAT IDENTICAL ISSUE AROSE IN ASSESSEES OWN CASE WHICH WAS DECIDED BY THE CO - ORDINATE BENCH IN HIS F AVOUR BY OBSERVING AND HOLDING AS UNDER: - WE HAVE HEARD THE LEARNED D R AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE HON'BLE BOMBAY HIGH COURT IN INSTITUTE OF BUNKING PERSONNEL (SUPRA] HELD AS UNDER: ' 5. NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARISES FOR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCO ME IN SUBSEQUENT YEAR FOR CHARITABLE PURPOSES? IT WAS ARGUED ON ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 4 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 O F EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE PRESENT CASE, THE ASSESSING 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 M SUCTION 11 TO SECTION 13 OF THE INCOME - TAX ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS R ELE VANT . THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION TO CARRY FORWARD OF THE EXCESS OF EXPEND IT URE OF EARLIER YEARS TO BE ADJ USTED AGAINST INCOM E OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS AL SO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJUSTMENT OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN T HE EARLIER YEARS AGAINST THE I NCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME 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 SECTION 11 OF THE ACT AND CHAT SUCH 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 B Y THE JUDGMENT OF THE GUJARA T HIGH COURT IN TH E CASE OF C IT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995)211 ITR 293 . ACCORDINGLY, WE ANSWER QUESTION NO.3 IN TH E AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT 6. WE FIND THAT THE LEARNED CIT(A) HAS RIGHTLY FALLOWED THE ABOVE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT AND DIRECTED THE A.O. LO ALLOW THE CARRY FORWARD AND SET OFF OF DEFICIT AFTER DUE VERIFICATION OF FACTS. WE UPHOLD THE ORDER OF LEARNED CIT(A). 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. WE THEREFORE, FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN ASSESSEES OWN CASE, WE DISMISS THE APPEAL OF THE REVENUE. C.O.NO.115/MUM/2015 8. THE ISSUE S RAISED IN CROSS OBJECTION NO.1 TO 3 ARE IN SUPPORT OF THE ORDER OF CIT(A) ALLOWING THE CARRY FORWARD OF THE DEFICIT / EXCESS EXPENDITURE ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 5 OF THE EARLIER YEARS TO BE SET OFF AGAINST THE INCOME OF CURRENT YEAR AND SUBSEQUENT YEARS. SINCE WE HAVE ALREADY DISMISSED THE APPEAL OF THE REVENUE CHAL LENGING THE FINDING OF CIT(A) ON THIS ISSUE, THEREFORE, THE CROSS OBJECTION S OF THE ASSESSEE SUPPORTING THE ORDER OF CIT(A) ON THIS ISSUE ARE RENDERED INFRUCTUOUS . 9 . THE ISSUE RAISED IN THE CROSS OBJECTION NO.4 IS AGAINST THE ORDER OF THE CIT(A) NOT DIREC T ING THE AO TO DELETE THE EXCESS INCOME WHICH INADVERTENTLY SHOWN AMOUNTING TO RS.35,05,729/ - ON ACCOUNT OF INTEREST INCOME WHICH WAS ALREADY INCLUDED IN THE GROSS RECEIPTS AND WAS BROUGHT TO THE NOTICE BY FILING THE REVISED STATEMENT OF INCOME DURING TH E ASSESSMENT PROCEEDINGS. 10 . LEARNED AR AT THE OUTSET SUBMITTED BEFORE THE BENCH THAT THE ISSUE AS RAISED BY THE ASSESSEE BY WAY OF CROSS OBJECTION IS FULLY COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. PRUTHVI BROKERS & SHAREHOL DERS PVT. LTD., 3908/2010 AS REPORTED IN 349 ITR 336 AND THEREFORE, THE SAME HAS NOT BEEN CONSIDERED BY THE AUTHORITIES BELOW. LEARNED COUNSEL PRAYED BEFORE THE BENCH THAT THE SAME SHOULD BE DECIDED IN THE LIGHT OF THE SAID DECISION. 1 1 . LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(A) . 1 2 . H AVING CONSIDERED THE FACTS AT HAND AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED BEFORE THE CIT(A) BY THE ASSESSEE QUA SHOWING EXCESS INCOME AMOUNTING TO RS . 35,05,729/ - ON ACCOUNT OF INTEREST INCOME WHICH WAS ALREADY SHOWN IN THE GROSS RECEIPTS AND THUS RESULTING INTO ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 6 DOUBLE INCOME BEING SHOWN IN THE RETURN WHICH WAS DULY BROUGHT TO THE NOTICE OF THE AO DURING THE ASSESSMENT PROCEEDINGS, HOWEVER, THE AO REJECT ED THE SAME. SIMILARLY, THE CIT(A) ALSO DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE SHOULD HAVE REVISED THE RETURN BEFORE THE COMPLETION OF THE ASSESSMENT PROCEEDINGS WHICH HE FAILED TO DO SO AND THUS, THE CLAIM OF THE ASSESSEE WOULD HAVE RESULTED INTO RE DUCTION OF INCOME RETURNED WHICH IS NOT PERMISSIBLE UNDER THE ACT AND THUS, FOLLOWING THE CASE OF GOETZE INDIA LTD., VS CIT 284 ITR 323, CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 1 3 . AFTER TAKING INTO THE STATEMENT OF THE LEARNED AR, WE FIND THAT IT WOULD BE IN THE INTEREST OF JUSTICE AND FAIR PLAY , THE MATTER IS RESTORED BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME IN THE LIGHT OF THE DECISION CITED BY LEARNED AR IN THE CASE OF CIT VS PRUTHVI BROKERS & SHAREHOLDE RS PVT. LTD. A CCORDINGLY, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE SAME AFRESH AS DIRECTED ABOVE. 14. IN THE RESULT, CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. 1 5 . IN THE RESULT, THE APPEAL FILED BY REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 24 / 05 /2018 . SD/ - SD/ - ( PAWAN SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 24 / 05 /2018 . KARUNA, SR.PS ITA NO. 5473/MUM/2015 & CO.NO.115/MUM/2015 M/S. BOMBAY NATURAL HISTORY SOCIETY . 7 C OPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. THE CIT 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI