DCIT (E) 2(1), MUMBAI V. THE EXECUTIVE BOARD OF THE METHODIST CHURCH IN INDIA, MUMBAI

ITA 6544/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4854 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 09-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: SHANKAR K JALGAR
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Opportunity of being heard; Question of law; Speculation loss; Tax effect; Capital expenditure
• Section: 63; 28; 11; 143(3); 10AA; 260A; 80G; 12A

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.6544/ MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13) DCIT (E) 2(1) MUMBAI / V. THE EXECUTIVE BOARD O F THE METHODIST CHURCH IN INDIA , 1, PROSPECT CHAMBERS, G R OUND FLOOR. 313 , D.N . ROAD, FLORA FOUNTAIN, FORT, MUMBAI - 400001. ./ PAN : AAATT5754E CO. NO.354 / MUM/2018 ./ I.T.A. NO . 6544/MUM/2017 ( / ASSESSMENT YEAR: 2012 - 13) THE EXECUTIVE BOARD OF THE METHODIST CHURCH IN INDIA, 1, PROSPECT CHAMBERS, G R OUND FLOOR. 313, D.N. ROAD, FLORA FOUNTAIN, FORT, MUMBAI - 400001. / V. DCIT (E) 2(1) MUMBAI ./ PAN : AAATT5754E ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY: SHRI. O.P MEENA, DR ASSESSEE BY : SHRI. SHANKAR K JALGAR / DATE OF HEARING : 07 - 02 - 2019 / DATE OF PRONOUNCEMENT : 13 - 02 - 2019 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER: THIS APPEAL, FILED BY REVENUE, BEING ITA NO. 6544/MUM/2017 AND CROSS OBJECTIONS(CO) BEARING CO NO. 354 /MUM/2018 ARISING OUT OF APPEAL IN ITA NO. 6544/MUM/2017 FILED BY THE ASSESSEE , ARE BOTH I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 2 DIRECTED AGAINST THE APPELLATE ORDER DATED 28.08.2017 IN APPEAL NO. CIT(A) - I/ IT/E - II / 13/2015 - 16 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) - 1 , MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR (AY) 2012 - 13 , THE APPELLATE PROCEEDINGS HAD ARISEN BEFORE LEARNED CIT(A) FROM THE ASSESSMENT ORDER DATED 17.03.2015 PASSED BY LEARNED ASSESSING OFFICER ( HEREINAFTER CALLED THE AO) U/S 143(3) OF THE I NCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2012 - 13 . 2. THE GROUNDS OF APPEAL RAISED BY REVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1. 'WHETHER ON TH E FACTS OF THE CASE AND IN LAW THE LD.CIT( A) ERRED IN ALLOWING THE CARRY FORWARD OF DEFICIT OF EARLIER YEARS AMOUNTING TO RS.5,23,93,620/ - AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUCCEEDING YEARS.' 2. 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. C1T(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSES FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE I T ACT, 1961 PERMITTING ALLOWANCE OF SUCH CLAIM.' 3. WHETHER, ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSES FOR CARRY FORWARD OF THE SAID DEFICIT BY RELYING UPON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELE CTION, IGNORING THE FACT THAT THE DEPARTMENT HAS NOT ACCEPTED THE SAID DECISION OF THE JURISDICTIONAL HIGH COURT ON MERIT OF THE CASE, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. HOWEVER, ON THIS ISSUE THE DEPARTME NT HAS FILED SLPS IN OTHER CASES BEFORE THE HON'BLE APEX COURT INCLUSIVE THE CASE OF MIDC (SLP (CIVIL) 9891 OF 2014), IN WHICH LEAVE HAS BEEN GRANTED AND THE ISSUE IS PENDING FOR ADJUDICATION BEFORE THE HON'BLE SUPREME COURT AND THE CASE HAS NOT REACHED FI NALITY,' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - I , MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED'. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 3 3. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THE MEMO OF CROSS OBJECTIONS FILED WITH THE TRIBUNAL , READS AS UNDER : - 1. GROUND NO. 1 - REG. - RE - COMPUTATION OF DEFICIT : 1.1 THE LEARNED CIT(A) ERRED IN RE - COMPUTING THE AMOUNT OF DEFICIT AT RS. 5,23,93,620 AS AGAINST THE ACTUAL DEFICIT OF RS. 8,05,52,838 CLAIMED BY THE ASSESSEE. 2. GROUND NO. 2 - REG. - NO OPPORTUNITY OF BEING HEARD : 2.1 THE LEARNED CIT(A) ERRED IN NOT PROVIDING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD BEFORE MAKING THE RE - COMPUTATION OF DEFICIT TO BE CARRIED FORWARD. 3. THE RESPONDENT CRAVES LEAVE TO ADD, AMEND OR ALTER THE GROUNDS OF CROSS - OBJECTION EITHER BEFORE OR AT THE TIME OF HEARING OF THE A PPEAL. 4 . THE SOLITARY ISSUE RAISED BY REVENUE IN THEIR APPEAL IS WITH RESPECT TO PART RELIEF GRANTED BY LEARNED CIT(A) WHILE ADJUDICATING FIRST APPEAL OF THE ASSESSEE BY ALLOWING CARRY FORWARD OF DEFICIT BEING EXCESS OF EXPENDITURE OVER INCOME TO THE TUNE OF RS. 5,23,93,620/ - T O SUBSEQUENT YEARS , AS AGAINST DEFICIT OF RS. 8,05,52,838/ - CLAIMED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE TO BE CARRIED FORWARD TO SUBSEQUENT YEARS WHICH EARLIER WAS DISALLOWED BY AO IN ENTIRETY , VIDE ASSESSMENT ORDER DATED 17.03.2015 FRAMED BY THE AO U/S 143(3) . T HE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE IS A TRUST REGISTERED AS A CHARITABLE O RGANIZATION WITH DIT(E), MUMBAI U/S. 12A VIDE REGISTRAT ION NO. 2362 AND THE TRUST IS ALSO REGISTERED WITH CHARITY COMMISSIONER, MUMBAI VIDE R EGISTRATION NO. F - 405(BOM). THE ASSESSEE - TRUST CLAIM S TO BE ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF ADVANCEMENT OF THE METHODIST CHURCH IN INDIA BY MEANS OF E VANGELISTIC, EDUCATIONAL LITERAR Y, MEDICAL, INDUSTRIAL, CHARIT ABLE, SOCIAL AND OTHER ACTIVITIES. THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED RS. 8,05,52,838/ - AS DEFICIT BEING EXCESS OF EXPENDITURE OVER INCOME . THE AO DENIED THE ASSESSEE BENEFIT OF CARRY FORWARD OF THESE LOSSES /DEFICIT BEING EXCESS OF EXPENDITURE O VER INCOME TO SUBSEQUENT YEARS TO BE SET OFF AGAINST SURPLUS ARISING IN SUBSEQUENT YEARS , VIDE I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 4 ASSESSMENT ORDER DATED 17.03.2015 PASSED BY THE AO U/S. 143(3) , BY HOLDING AS UNDER: - 3. CLAIM OF DEFICIT : DURING THE COURSE OF HEARING, IT WAS OBSERVED THAT THE ASSESSEE HAD SHOWN RS.8,05,52,838 / AS DEFICIT. 3.1. THE LOSS SHOWN BY THE ASSESSEE IS NOT ALLOWED TO BE CARRIED FORWARD TO BE SET OFF AGAINST FUTURE SURPLUS BECAUSE OF THE FOLLOWING REASONS: THE SET OFF OF BROUGHT FORWARD DEFICIT CLAIME D BY THE ASSESSEE IS NOT ALLOWED TO BE SET OFF AGAINST INCOME OF CURRENT YEAR BECAUSE OF THE FOLLOWING REASONS : 3.2 THE HEADING OF SECTION 11 OF I.T. ACT STATES 'INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES.' THUS, THE SECTION LAYS DOWN PROCEDURE FOR COMPUTATION OF INCOME. THE SECTION NOWHERE MENTIONS THE WORD 'DEFICIT' OR 'LOSS'. 1. WHEN THE INCOME IS NOT TAXED U/S. 11, THERE CANNOT BE A CASE FOR CARRYING FORWARD OF LOSSES OF THE YEAR. HOW CAN LOSS BE CARRIED FORWARD IN RESPECT OF IN COME THAT IS NOT TAXABLE. SECTION 10A(6) AND 10AA(8) OF I.T. ACT DO NOT ALLOW CARRY FORWARD OF LOSSES SINCE INCOMES U/S 10A AND 10AA ARE EXEMPT. ON SIMILAR GROUND, LOSS/DEFICI T UNDER SECTION 11 OF I.T. ACT S HOULD NOT BE ALLOWED TO BE CARRIED FORWARD. 2. UNLIKE IN THE CASE OF BUSINESS WHERE SECTION 72 PROVIDES FOR CARRY FORWARD AND SET OFF OF BUSINESS LOSSES, THERE IS NO SUCH ENABLING PROVISION IN THE CASE OF TRUSTS. IN THE ABSENCE OF ANY EXPLICIT PROVISION IN THE ACT, THE LOSS CANNOT BE ALLOWED TO BE CAR RIED FORWARD. AS PER SECTION 73(4), SPECULATION LOSS CAN BE CARRIED FORWARD FOR 4 YEARS. AS PER SECTION 72(3], BUSINESS LOSS CAN BE CARRIED FORWARD FOR 8 YEARS. IN THE ENTIRE INCOME TAX ACT, THERE IS NO MENTION OF NUMBER OF YEARS FOR WHICH LOSS U/S 11 CAN BE CARRIED FORWARD BECAUSE IT WAS NEVER THE INTENTION OF LEGISLATURE TO ALLOW CARRY FORWARD OF ANY LOSS OR DEFICIT UNDER SECTION 11 OF I.T. ACT. 3. IF THE INCOME OF THE TRUST IS COMPUTED ON COMMERCIAL PRINCIPLES, THEN THE SAME SHALL BE TREATED AS INCOME FROM OTHER SOURCES. AS PER THE PROVISIONS OF SECTION 74A OF THE INCOME TAX ACT, LOSS UNDER THE HEAD 'INCOME FROM OTHER I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 5 SOURCES' CAN BE SET OFF ONLY IN RESPECT OF INCOME FROM OWNING AND MAINTAINING RACE HORSES. 4. THERE IS NO PROVISION WHICH ALLOWS DETER MINATION OF LOSS/ DEFICIT WHILE COMPUTING TAXABLE INCOME U/S. 11. THIS IS SO BECAUSE SECTION 11 PRESCRIBES CERTAIN CONDITIONS FOR CLAIMING EXEMPTION. IF 85% OR MORE OF THE INCOME IS APPLIED TO OBJECTS OF THE TRUST DURING THE YEAR, THE ENTIRE INCOME IS TO B E ASSESSED AS EXEMPT. THE ASSESSEE HAS A CHOICE TO SPEND A PORTION OF THE CURRENT INCOME IN THE SUCCEEDING YEAR WHICH IT COULD NOT SPEND AS PER PROCE DURE LAID DOWN IN SECTION 11(2). 5. THE EXPRESS WORDING OF SECTION 11 INDICATES THAT IN ORDER TO SATISFY THE REQUIREME NTS OF SECTION 11 (2)(B) THE INVESTMENT MUST NECESSARILY COME OUT OF THE CURRENT YEARS INCOME. AN INVESTMENT MADE IN THE PAST OBVIOUSLY CANNOT SATISFY THIS REQUIREMENT. AS PER THE RATIO DECIDENDI OF DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF INDIAN NATIONAL THEATRE TRUST [2008] 305 ITR 149 FOR THE PURPOSE OF CLAIMING OF EXEMPTION UNDER SECTION 11(2), THE INCOME ACCUMULATED SHOULD BE DERIVED FROM THE PROPERTY IN THE RELEVANT ASSESSMENT YEAR . THE EXEMPTION UNDER SECTION 11(1 )(A) AND SECT ION 11(2) ARE INDEPENDENT AND THE ASSESSEE CAN CLAIM EXEMPTION IN EITHER OF TWO SUB - SECTIONS OF SECTION 11. THE SAME RATIO WILL EQUALLY APPLY WHEN TRUST SEEKS EXEMPTION ON THE BASIS OF APPLICATION OF INCOME AS IT IS THE SAME INCOME WHICH IS SOUGHT TO BE AC CUMULATED. WHEN INCOME ACCUMULATED IN AN EARLIER YEAR CANNOT QUALIFY FOR EXEMPTION UNDER SECTION 11(2), THE EXCESS INCOME APPLIED IN EARLIER ASSESSMENT YEAR WILL ALSO NOT QUALIFY FOR EXEMPTION. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE CALCUTTA HIGH COUR T IN THE CASE OF RAMCHANDRA PODDAR CHARITABLE TRUST [1987] 164 ITR 666 WHEREIN IT HAS BEEN HELD THAT SECTION 11 DOES NOT PERMIT ACCUMULATION OF A LARGER AMOUNT THAN WHAT IS PRESCRIBED. IF THE ASSESSEE DOES NOT APPLY THE INCOME OF A YEAR FOR CHARITAB LE PURPOSES BUT SPENDS A LIKE AMOUNT FOR CHARITABLE PURPOSES OUT OF ITS ACCUMULATED PROFITS, THE CONDITIONS LAID DOWN IN SECTION 11(1)(A) ARE NOT FULFILLED. THE MERE FACT THAT THE ASSESSEE HAD APPLIED ITS ACCUMULATED INCOME OF THE EARLIER YEARS FOR THE PU RPOSE OF CHARITY WILL NOT ABSOLVE THE ASSESSEE OF ITS DUTY TO APPLY ITS INCOME FOR THE CURRENT YEAR FOR THE PURPOSE OF CHARITY, NOR WILL IT ENLARGE THE LIMIT OF THE AMOUNT WHICH IS PERMITTED TO BE AC CUMULATED UNDER SECTION 11(1 )(A). I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 6 THUS, DONATI ON OF SHARES PURCHASED OUT OF ACCUMULATED INCOME OF EARLIER YEAR WILL NOT AMOUNT TO APPLICATION OF INCOME FOR THE YEAR OF DONATION. THERE IS NO PROVISION UNDER SECTION 11 OF THE ACT UNDER WHICH THE ASSESSEE CAN CLAIM SET OFF OF EXCESS EXPENDITURE INCURR ED IN EARLIER YEAR AGAINST THE INCOME OF THE RELEVANT ASSESSMENT YEAR. IT IS NOT THE CASE OF ASSESSEE THAT IT HAD INCURRED DEBT IN CARRYING OUT CHARITABLE OBJECTS IN EARLIER YEARS WHICH WAS PAID OUT OF CURRENT YEAR'S INCOME AND WOULD AMOUNT TO APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST. THE INCOME OF THE TRUST IS NOT COMPUTED ON THE PRINCIPLES OF BUSINESS INCOME WHICH CONTAINS THE PROVISIONS OF CARRY FORWARD OF LOSSES OF EARLIER YEAR AND SET OFF SUCH LOSSES AGAINST INCOME OF THE CURRENT YEAR. HON'BL E CALCUTTA HIGH COURT IN THE CASE OF DIT (EXEMPTION) V. GIRDHANIAL SHEWNARAIN TANTIA TRUST [1993] 199 ITR 215 HAS HELD THAT HEADS OF INCOME UNDER SECTION 14 HAVE NO RELEVANCE AND QUESTION OF ALLOWING STATUTORY DEDUCTIONS WILL NOT ARISE. THE 'INCOME' CONTEM PLATED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR ASSESSABLE. SINCE THE INCOME FROM PROPERTY HELD UNDER TRUST HAS TO BE ARRIVED AT IN A NORMAL COMMERCIAL MANNER AND WHEN THE INCOME FROM PROPERTY HELD UNDER TRUST AS SUCH IS EXCLUDED, THERE IS NO SCOPE OF COMPUTING THE INCOME FROM PROPERTY BY APPLYING THE PROVISIONS OF SECTION 14 OF THE ACT. ACCORDINGLY HON'BLE CALCUTTA HIGH COURT HELD THAT THE QUESTION OF ALLOWING ANY STATUTORY DEDUCTIONS AS CONTEMPLATED BY THE DIFFE RENT PROVISIONS OF THE ACT DEALING WITH DIFFERENT HEADS OF INCOME IN COMPUTING THE INCOME ACCUMULATED DID NOT ARISE. THIS DECISION ALSO DOES NOT SUPPORT THE CONTENTION OF THE ASSESSEE THAT EXCESS EXPENDITURE INCURRED IN EARLIER YEAR WILL BE SET OFF AGAINST THE CURRENT YEAR'S INCOME, IN THE ABSENCE OF ANY PROVISION SIMILAR TO SET OFF OF LOSSES. 6. HON'BLE 1TAT DELHI IN THE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER, RENAL & DIGESTIVE DISEASES VS. DDIT(EXEMPTION) (2009) 29 SOT 316 HAS HELD TH AT ANY EXCESS EXPENDITURE INCURRED BY A TRUST/CHARITABLE INSTITUTION, IN EARLIER YEARS CANNOT BE ALLOWED TO BE SET OFF AGAINST INCOME OF SUBSEQUENT YEARS, BY INVOKING SECTION 11. 7. THE CARRYING FORWARD OF LOSSES MAY AMOUNT TO TRIPLE DEDUCTION BECAUSE THE LOSS ESSENTIALL Y M IGHT HAVE ARISEN BECAUSE OF CLAIM OF CAPITAL EXPENDITURE AS WELL AS DEPRECIATION ON THE CAPITAL EXPENDITURE. ALLOWING THE CONSEQUENTIAL LOSS TO BE SET OFF AGAINST FUTURE INCOME I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 7 WOULD IMPLY TRIPLE BENEFIT FOR THE SAME CAPITAL EXPENDITURE WHICH IS NOT THE INTENTION OF THE LEGISLATURE. IN THIS REGARD, IT IS SUBMITTED THAT THE HON'BLE HIGH COURT OF BOMBAY, IN THE CASE OF TH E DIRECTOR OF INCOME TAX (EXEM.) V/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) (ITA NO. 2652 OF 2011) AFTER RELYING ON THE DECISION OF CIT V/S, INSTITUTE OF BANKING (264 1TR 110) (BOMBAY HIGH COURT) HAD DISMISSED THE APPEAL FILED BY THE DEPARTMENT ON THE ISSUE OF CARRY FORWARD DEFICIT. HOWEVER, THE DEPARTMENT HAS FILED SLP BEFORE THE APEX COURT (SPL (CIVIL) 989 1 OF 2014) AND THE MATTER IS PENDING B EFORE THE HON'BLE SUPREME COURT. 3.3. IN VIEW OF THE ABOVE REASONS AND DISCUSSION, NEITHER LOSS OF EARLIER YEARS IS ALLOWED TO BE SET OFF IN THIS YEAR NOR LOSS OF CURRENT YEAR IS ALLOWED TO BE CARRIED FORWARD FOR ADJUSTMENT IN SUBSEQUENT YEARS. 4. SUBJECT TO THE ABOVE REMARKS AND DISCUSSION AND AFTER VERIFICATION OF DETAILS FURNISHED, TOTAL INCOME OF THE ASSESSEE IS BEING WORKED AS UNDER : GROSS INCOME AS PER COMPUTATION 18,77,28 122 LESS: 15% ACCUMULATION U/S.11 L(L)(A) 2,81,59,218 15,95,68,904 LESS: EXPENDITURE ON THE OBJECTS AND APPLICATION OF INCOME 24,01,21,742 - 8,05,52,838 LESS: DEFICIT OF RS. 8,05,32,41 1/ - IS NOT ALLOWED TO CARRY FORWARD AS DISCUSSED IN ORDER IN PARA NO. 3 NIL TOTAL INCOME NIL 5. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT FRAMED BY THE AO VIDE ASSESSMENT ORDER DATED 17.03.2015 PASSED U/S 143(3) FILED FIRST APPEAL BEFORE LD. CIT(A) WHO PARTLY ALLOWED THE APPEAL OF THE ASSESSEE VIDE APPELLATE ORDER DATED 28.08.2017 , WHEREIN THE ASSESSEE WAS ALLOWED BY LEARNED CIT(A) TO CARRY FORWARD AN AMOUNT OF I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 8 LOSS /DEFICIT BEING EXCESS OF EXPENDITURE OVER INCOME TO THE TUNE OF RS. 5,23,93,620/ - AS AGAINST DEFICIT O F RS. 8,05,52,838/ - CLAIMED BY THE ASSESSEE IN RETURN OF INCOME FILED WITH REVENUE WHICH STOOD EARLIER DISALLOWED BY THE AO IN ITS ENTIRETY VIDE ASSESSMENT ORDER DATED 17.03.2015 PASSED U/S 143(3) OF THE 1961 ACT . T HE LD. C IT(A) VIDE APPELLATE ORDER DATED 28.08.2017 ALLOWED PART RELIEF BY HOLDING AS UNDER: - 7. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. ON PERUSAL OF THE FACTS, I FIND THAT TH E CASE OF APPELLANT IS SQUARELY COVERED IN ITS FAVOUR BY THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL 264 ITR 110 WHEREIN THE HON. JURISDICTIONAL HIGH COURT HAS OBSERVED AS UNDER - .. .........'5. NOW COMING T O 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 INCOME IN 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 SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEET ING THE EXPENDITURE OF EARLIER Y EARS 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 IN SECTION 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 BUSINE SS' 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 OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUEN T YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME 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 AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 9 AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUS TMENT HAS BEEN MADE HAVING REGARD TO THE 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 VIEW IS ALSO SUPPORTED BY THE JUDGMENT O F THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (1995) 211 ITR 293 (GUJ). ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT.' 7.1 I FURTHER NOTE TH AT THE AO HAS HIMSELF STATED IN PARA 7 OF THE ASSESSMENT ORDER THAT THE HON'BLE HIGH COURT OF BOMBAY, IN THE CASE OF THE DIRECTOR OF INCOME TAX (EXEM.) V/S. MAHARASHTRA INDUSTRIAL DEVELOPMENT CORPORATION (MIDC) (ITA NO. 2652 OF 2011) AFTER RELYING ON THE D ECISION OF CIT V/S. INSTITUTE OF BANKING (264 ITR 110) (BOMBAY HIGH COURT) HAD DISMISSED THE APPEAL FILED BY THE DEPARTMENT ON THE ISSUE OF CARRY FORWARD DEFICIT. HOWEVER, THE DEPARTMENT HAS FILED SLP BEFORE THE APEX COURT (SPL (CIVIL) 9891 OF 2014) AND TH E MATTER IS PENDING BEFORE THE HON'BLE SUPREME COURT. IT IS, THEREFORE, CLEAR THAT AS IT STANDS, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE HON'BLE JURISDICTIONAL HIGH COURT. 7.2 HAVING HELD SO, I AM OF THE OPINION THAT ALTHOUGH THE DEFICIT OF T HE YEAR IS TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR IN VIEW OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT REFERRED TO ABOVE, THE COMPUTATION OF THE DEFICIT MADE BY THE ASSESSEE IS NOT CORRECT. I FIND THAT THE GROSS INCOME OF THE ASSESSEE AS PER THE COMPUTATION IS RS. 1 8,77,28,122/ - AND THE EXPENDITURE ON THE OBJECTS AND APPLICATION OF INCOME IS RS. 24,01,21,742/ - . THEREFORE, THE REAL DEFIC IT WORKS OUT TO RS. 5,23,93,620/ - AND NOT RS. 8,05,52,838/ - AS CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ARRIVED AT THIS FIGURE OF DEFICIT AFTER TAKING INTO CONSIDERATION THE 15 PERCENT ACCUMULATION OF INCOME ALLOWED IN CASE THE ASSESSEE IS NOT ABLE TO SPEND THE ENTIRE RECEIPTS FOR CHARITABLE PURPOSES DURING THE YEAR. THIS ACTION OF THE ASSESSEE, IN MY OPINION, IS NO T AS PER THE PROVISIONS OF LAW. THERE IS NO PROVISION IN THE ACT WHICH LAYS DOWN THAT EVEN WHEN THE ENTIRE INCOME HAS BEEN SPENT AND THERE IS EXCESS OF EXPENDITURE OVER INCOME, ACCUMULATION AT THE RATE OF 15% IS TO BE ALLOWED. THE PRESENT CASE BEFORE US IS A CASE WHERE MORE THAN THE INCOME DERIVED BY THE ASSESSEE HAS BEEN APPLIED FOR CHARITABLE PURPO SES. THE QUESTION OF ANY ACCUMUL ATION, THEREFORE, WOULD NOT ARISE. THIS IS BECAUSE IF THERE IS NO I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 10 INCOME AVAILABLE, THE QUESTION OF ACCUMULATING ANY INCOME WOUL D NOT ARISE. 7.3. MY ABOVE REASONING IS SUPPORTED BY THE DECISION OF THE HON. ITAT G' BENCH MUMBAI IN THE CASE OF DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY IN ITA NO. 4309/MUM/2005 FOR THE A.Y. 2001 - 02 DATED 30.4.2013, WHEREIN THE SAME ISSUE WAS INVOLVED. IT WAS. HELD BY THE HON. ITAT AS FOLLOWS: '5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IN THIS APPEAL IS WHETHER THE ASSESSEE CAN STILL BE ALLOWED STATUTORY ACCUMULATIO N OF 25% OF THE INCOME U /S 11 (1) (A) OF THE IT ACT EVEN IF THE ENTIRE INCOME HAS BEEN APPLIED FOR THE YEAR AND NO INCOME IS LEFT FOR ACCUMULATION. THE AUTHORITIES BELOW HAVE DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE HAD INCURRED MORE EXPENDITURE TOWARDS THE APPLICATIO N OF INCOME THAN THE INCOME EARNED. THEREFORE, THE CLAIM OF ACCUMULATION CANNOT BE ALLOWED. THE LEARNED AR FOR THE ASSESSEE HAS HOWEVER ARGUED THAT THE ASSE SSEE IS ENTITLED FOR STATUTORY ACCUMULATION OF 25% OF GROSS INCOME IRRESPECTIVE OF THE FACT WHETHER ANY INCOME IS LEFT FOR APPLICATION OR NOT. RELIANCE HAS BEEN PLACED ON THE JUDGMENTS OF THE JURISDICTIONAL HIGH AND THE SUPREME COURT AS WELL AS THE DECISION OF COORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE. WE HAVE CAREFULLY GONE THROUGH THE JUDGME NTS CITED. IN CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANIZATION ( S UPRA) , THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS WHETHER ACCUMULATION U/S 11(1)(A) HAS TO BE COMPUTED ON GROSS INCOME OR THE NET INCOME. IN THAT CASE INCOME RECEIVED BY THE TRUST WA S RS. 2,57,376/ - AGAINST WHICH A SUM OF RS. 170369/ - HAD BEEN APPLIED DURING THE YEAR LEAVING A BALANCE OF RS. 87,013/ - . THE ISSUE WAS WHETHER PERCENTAGE OF ACCUMULATION SHOULD BE COMPUTED WITH RESPECT TO THE GROSS INCOME OF RS. 2,57,376/ - OR THE NET INCO ME OF RS. 87,016/ - . THE HONBLE SUPREME COURT HELD THAT ACCUMULATION HAD TO BE COMPUTED WITH RESPECT TO GROSS INCOME. THERE WAS NO ISSUE BEFORE THE HONBLE SUPREME COURT AS TO WHETHER ACCUMULATION HAD TO BE ALLOWED OR NOT EVEN IF THE ENTIRE INCOME HAD BEEN APPLIED AND NOTHING HAD BEEN LEFT DURING THE YEAR. 5.1 THE LEARNED AR FOR THE ASSESSEE HAS ARGUED THAT ACCUMULATION U/S 11(1 )(A) WAS ABSOLUTE AND I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 11 UNFETTERED IRRESPECTIVE OF THE FACT WHETHER SOME INCOME WAS LEFT FOR APPLICATION OR NOT. RELIANCE HAS BEEN PL ACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF ADDITIONAL CIT VS. ALN RAO CHARITABLE TRUST (SUPRA) AND ON THE JUDGMENT OF HON'BLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. TRUSTEES OF BHAT FAMILY RESEARCH FOUNDATION (SUPRA). WE HAVE CAREFULLY PERUS ED THE SAID JUDGMENTS BUT DO NOT FOUND ANY RULING TO THE EFFECT THAT ACCUMULATION U/S 11 (1) (A) HAS TO BE ALLO WED EVEN IF THE ENTIRE INCOME HA S ALREADY BEEN APPLIED DURING THE YEAR. IN CASE OF ADDITIONAL CIT VS. ALN RAO CHARITABLE TRUST (SUPRA) THE ISSUE WAS WHETHER CONDITIONS PRESCRIBED U/S 11(2) HAVE TO BE FULFILLED EVEN IN RESPECT OF ACCUMU LATION MENTIONED IN SECTION 11 (1) (A). HON'BLE SUPREME COURT OBSERVED THAT IF THE ENTIRE INCOME WAS SPENT ON CHARITABLE PURPOSES, THEN IT WILL NEVER TAXABLE BUT IN CA SE THERE WAS SAVING, 25% OR TEN THOUSAND WHICHEVER WAS MORE COULD NOT BE INCLUDED IN THE TOTAL INCOME. HON'BLE SUPREME COURT ALSO OBSERVED THAT SECTION 11(2} FURTHER ENLARGED AND LIBERALIZE D THE EXEMPTION. THE SECTION 11 (2 )WAS PRESSED INTO SERVICE IF THER E WAS STILL SOME ACCUMULATED INCOME LEFT TO BE DEALT WITH I.E. BEYOND 25% OR TEN THOUSAND WHICHEVER WAS MORE. THIS ADDITIONAL INCOME COULD BE ACCUMULATED U/S 11(2) SUBJECT TO THE FULFILLMENT OF CONDITIONS MENTIONED THERE IN. BUT IN RESPECT OF ACCUMULATION OF 25% OR 10 THO USAND WHICHEVER IS MORE U/S 11(1 )(A), THE CONDITIONS MENTIONED U/S 11(2) COULD NOT BE APPLIED. IN OTHER WORDS, HON'BLE SUPREME COURT HELD THAT ACCUMULATION OF 25% OR 10 THOUSAND WHICHEVER WAS MORE WAS ABSOLUTE AND UNFETTERED WITHOUT ANY CON DITIONS. THUS OBSERVATIONS 'ABSOLUTE AND UNFETTERED EXEMPTION' WAS ONLY IN RELATION TO FULFILLMENT OF CONDITIONS MENTIONED IN SECTION 11(2}. IT WAS NOT HELD BY THE HON'BLE SUPREME COURT THAT SUCH ACCUMULATION HAD TO BE ALLOWED EVEN IF THERE WAS NO INCOME L EFT FOR APPLICATION. 5.2 SIMILA R WAS THE POSITION IN CASE OF CI T VS. TRUSTEES OF BHAT FAMILY RESEARCH FOUNDATION (SUPRA) IN WHICH THE FOUNDATION HAD EARNED INCOME OF RS. 41,513/ - AGAINST WHICH IT HAD APPLIED THE SUM OF RS. 8,150/ - LEAVING A BALANCE OF RS. 33,363/ - . THE AS SESSING OFFICER HELD THAT FOR ALLOWING EXEMPTI ON, THE ENTIRE BALANCE AMOUNT OF RS. 33363/ - HAS TO BE INVESTED IN GOVERNMENT SECURITIES AND BONDS AS PROVIDED IN SECTION 11(2}. I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 12 THE HIGH COURT HELD THAT THE CONDITIONS OF INVESTMENT IN GOVERNME NT SECURITIES AND BONDS WAS ONLY IN RELATION TO ANY ACCUMULATION BEYOND THE ACCUMULATION OF 25% OR 10 THOUSAND WHICHEVER WAS MORE AS PROVIDED IN SECTION 11(1 )(A). IT WAS THUS HELD THAT IN SO FAR AS ACCUMULATION OF 25% OF INCOME I.E. RS. 1 0 ,378/ - WAS CONCER NED, CONDITIONS FOR INVESTMENT IN GOVERNMENT SECURITIES WERE NOT REQUIRED TO BE FULFILLED AS THIS EXEMPTION WAS UNQUALIFIED AND UNCONDITIONAL. THE CONDITIONS WERE ONLY IN RESPECT OF FURTHER ACCUMULATION OF BALANCE AMOUNT I.E. THE SUM OF RS. 22,900/ - (33363 - 10378). THUS EVEN IN THIS CASE, THERE WAS NO R ULING THAT ACCUMULATION U/S 11(1 )(A) HAS TO BE ALLOWED TO THE ASSESSEE EVEN IF THERE WAS NO INCOME LEFT FOR ACCUM ULATION AND ENTIRE INCOME HAD AL READY BEEN APPLIED. 5.3 AS REGARDS, THE DECISIONS OF TRIBUNAL IN ASSESSEE'S OWN CASE, WE FIND, THAT IN ASSESSMENT YEAR 2005 - 06, THE TRIBUNAL IN ITA NO 1588/MUM/2000 IN ASSESSEE'S OWN CASE ALLOWED THE CLAIM OF THE APPLICATION WITH RESPECT TO GROSS INCOME EVEN WHEN THERE WAS NO INCOME LEFT FOR APPLICATION, FOLLOWING THE DECISION OF SPECIAL BENCH OF TRIBUNAL IN CASE OF BAI SONABAI HIRJI TRUST VS. ITO (85 TTJ 907). THE TRIBUNAL HAD NOT DISCUSSED THE ISSUE AS TO WHETHER ACCUMULATION CAN BE ALLOWED EVEN IF THERE IS NO INCOME LEFT. HOWEVER, ON PERUSAL OF DECISION OF SPECIAL BE NCH OF TRIBUNAL (SUPRA) WE FIND, THAT THE ISSUE IN THE CASE WAS NOT WHETHER THE ACCUMULATION CAN BE ALLOWED EVEN IF THE ENTIRE INCOME HAS ALREADY BEEN APPLIED, THE ISSUE WAS WHETHER THE PERCENTAGE OF ACCUMULATION HAD TO BE COMPUTED WITH RESPECT TO THE GROS S INCOME OR NET INCOME. THUS THE TRIBUNAL IN THE ASSESSEE'S OWN CASE IN ASSESSMENT YEAR 2005 - 06 HAS ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT ANY DISCUSSION ON THE ISSUE AND UNDER THE IMPRESSION THAT THE ISSUE HAD BEEN DECIDED BY THE SPECIAL BENCH OF TRIBU NAL (SUPRA), IN CASE OF BAI SONABAI HIRJI TRUST VS. ITO THE DECISION WAS THUS BASED ON INCORRECT ASSUMPTION OF FACTS. SUCH SUBSISTE NTIO ORDER OF THE TRIBUNAL CANNOT BE CONSIDERED AS BINDING PRECEDENT. THE SAID DECISION OF TRIBUNAL WAS ALSO FOLLOWED BY ANOT HER BENCH OF TRIBUNAL IN THE ASSESSEE'S OWN CAS E IN THE ASSESSMENT YEARS 97 - 98 & 98 - 99 (SUPRA) IN WHICH THE TRIBUNAL ALSO REFERRED TO THE JUDGMENT OF HON'BLE SUPREME COURT IN CASE OF PROGRAMME FOR I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 13 COMMUNITY ORGANIZATION (SUPRA) BUT AS POINTED OUT EARLIER T HE ISSUE DECIDED BY THE APEX COURT IN CASE OF PROGRAMME FOR COMMUNITY ORGANIZATION (SUPRA) WAS NOT WHETHER ACCUMULATION HAD TO BE ALLOWED EVEN IF THERE WAS NO INCOME LEFT FOR APPLICATION BUT THE ISSUE WAS WHETHER ACCUMULATION HAD TO BE COMPUTED WITH RESPEC T TO GROSS INCOME OR NET INCOME. SIMILARLY, THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT YEARS 2002 - 03 AND 2003 - 04 (SUPRA) IN THE SAME MANNER. THEREFORE, THE DECISION OF TRIBUNAL IN ASSESSEE'S OWN CASE IN EARLIER YEARS IN OUR VIEW, CANN OT BE CONSIDERED AS BINDING PRECEDENT. AS REGARDS THE DECISION OF CIT (A) IN ASSESSMENT YEAR 2004 - 05 (SUPRA) NOTHING HAS BEEN PRODUCED ON RECORD TO SHOW THAT IT WAS A CONSCIOUS DECISION OF THE GOVERNMENT TO ACCEPT THE ORDER. MERE FAILURE OF AN OFFICIAL TO NOT FILE APPEAL IN ONE YEAR COULD NOT BE THE GROUND TO MAKE A CLAIM IN THE SUBSEQUENT YEAR. THE INCOME CAN BE A CCUMULATED U/S 11(1 )(A) IF SOMETHING REMAINED UNSPENT BUT IF THE ENTIRE INCOME HAS ALREADY BEEN SPENT, THE SAME IS FULLY EXEMPT FROM TAX AND THERE IS NOTHING LEFT TO BE ACCUMULATED. WE ARE THEREFORE, UNABLE TO ACCEPT THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE THAT THE ACCUMULATION HAS TO BE ALLOWED EVEN IF THE ENTIRE INCOME HAS ALREADY BEEN SPENT BY THE ASSESSEE. WE ACCORDINGLY CONFIRM TH E ORDER OF CIT (A) DISALLOWING THE CLAIM OF THE ASSESSEE. 7.4 IN THE CASE OF DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY 116 TTJ MUM 673, THE ONLY GROUND TAKEN BY THE ASSESSEE WAS THAT THE CIT(A) HAVE ERRED IN UPHOLDING THE AO'S ORDER OF NOT ALLOWING STATUTORY DEDUCTION AT 25 PERCENT OF THE GROSS TOTAL INCOME EVEN THOUGH THE SAME WAS LEGITIMATE CLAIM OF ACCUMULATION OF INCOME, DISREGARDING THE PREVIOUS ORDERS OF THE CIT(A) AND THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. PROGRAMME FO R COMMUNITY ORGANISATION. THE HON'BLE ITAT IN PARA 13 OF THE ORDER HAVE HELD AS FOLLOWS: '13. THE ISSUE IN DISPUTE IS W HETHER THE ASSESSEE I S ENTITLED TO FIRST ACCUMULATE OR SET APART 25 PER CENT OF THE TOTAL INCOME OF THE TRUST AND THEN CLAIM A CARRY FORW ARD OF THE EXCESS AMOUNT, INCURRED ON APPLICATION FOR PURPOSES OF THE TRUST, OVER AN D ABOVE THE REMAINING INCOME I. E. 75 PER CENT OF THE TOTAL INCOME FOR ITS SET OFF AGAINST THE INCOME OF THE TRUST IN SUCCEEDING YEAR. THE CARVING OF THE FUNDS TO THE EXTENT OF 25 PER CENT OF THE TOTAL INCOME IS I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 14 HYPOTHETICAL SITUATION AND IT WAS NOT ENVISAGED BY THE LEGISLATURE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING (SUPRA) HAVE EXAMINED THE SITUATION WHERE THE ASSESSEE HAS INCURRED OR APPLIED THE EXPENDITURE MORE THAN THE TOTAL INCOME OF THE TRUST IN A PARTICULAR YEAR AND CLAIMED CARRY FORWARD OF THE EXCESS EXPENDITURE TO SUCCEEDING YEAR FOR ITS SET OFF AGAINST THE INCOME OF THE TRUST AND THEIR LORDSHIPS HAVE HELD THAT THE INCOME DERIVED FROM THE T RUST PROPERTY HAS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF THE COMMERCIAL PRINCIPLES ARE APPLIED THEN THE ADJUSTMENTS OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN EARLIER YEARS AGAINST THE INCOME EARNED BY THE T RUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN SUBSEQUENT YEARS IN WHICH THE ADJUSTMENTS HAVE BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT, BUT IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED THE ACCUMULATION OR SET APART OF 25 PER CENT OF TOTAL INCOME FIRST AND THEREAFTER CARRY FORWARD OF THE EXCESS EXPENDITURE INCURRED FOR CHARITABLE PURPOSES TO SUCCEEDING YEAR FOR ITS SET OFF AGAI NST THE INCOME OF THE TRUST. THIS PROPOSITION OF THE ASSESSEE CANNOT BE ACCEPTED AS THE EXEMPTION IS TO BE ALLOWED ON APPLICATION OF THE INCOME OF THE ASSESSEE AND NOT FOR ITS ACCUMULATION. THE ACCUMULATION OF 25 PER CENT OF THE TOTAL INCOME IS PERMISSIBLE WHEN THE ASSESSEE FAILED TO APPLY THE TOTAL INCOME OF THE TRUST IN A PARTICULAR YEAR. IF THE ASSESSEE APPLIES THE ENTIRE INCOME OF THE TRUST HE IS ENTITLED TO CLAIM 100 PER CENT EXEMPTION AND THERE IS NO QUESTION OF FURTHER ACCUMULATION OF 25 PER CENT OF THE TOTAL INCOME OF THE ASSESSEE. IF THE ASSESSEE INCURS MORE EXPENDITURE THAN THE TOTAL INCOME OF THE TRUST THE EXPENDITURE OVER AND ABOVE TO THE INCOME CAN BE CARRIED FORWARD AND IS ALLOWED TO BE SET OFF AGAINST THE INCOME IN SUCCEEDING YEAR. IN THE INST ANT CASE, THE ASSESSEE HAS INCURRED EXPENDITURE OR APPLIED FOR CHARITABLE RELIGIOUS PURPOSES RS. 58,09,87,048 AGAINST THE TOTAL INCOME OF RS. 35,60,82,101. IN THIS CASE, HE IS ENTITLED TO CLAIM THE CARRY FORWARD OF THE EXCESS EXPENDITURE BUT HE WILL NOT BE ALLOWED TO ACCUMULATE 25 PER CENT OF THE TOTAL INCOME FIRST AND THEN CLAIM THE EXCESS EXPENDITURE FOR ITS CARRY FORWARD TO SUBSEQUENT YEARS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 15 RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIRECTION TO ALLOW THE CARRY FORWARD OF THE EXCESS EXPENDITURE INCURRED BY THE ASSESSEE TO SUBSEQUENT YEAR FOR ITS SET OFF ONLY IN TERMS INDICATED ABOVE.' 7.5 IN THE CASE OF ITO(E) - II(1 ) VS LAKSHMI AND USHA MITTAL (FORMERLY KNOWN AS THE LNM FOUNDATION), THE QUESTION R AISED BY THE DEPARTMENT BEFORE THE HON. ITAT A BENCH MUMBAI IN ITA NO. 5383/MUM/2011 FOR THE AY 2005 - 06 WERE AS FOLLOWS: '3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A), MUMBAI ERRED IN DIRECTING THE AO TO CARRY FORWA RD THE DEFICIT OF RS. 2,78,81,40 9/ - TO THE SUBSEQUENT YEAR IGNORING THAT THE DEFICIT SO CLAIMED HAS ARISEN DUE TO EXCESS EXPENDITURE INCURRED BY THE ASSESSEE TRUST.' 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A), MUMBAI ERRED IN NOT APPRECIATING THAT THERE IS NO PROVISION IN THE ACT TO CARRY FORWARD THE DEFICIT WHERE THE EXPENDITURE WHICH CASES THE DEFICIT EXCEEDS THE INCOME.' 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A), MUMBAI ERRED IN APPRECI ATING THE FACT THAT THE PROVISIONS OF SEC. 11 CONTEMPLATE SUCH INCOME TO BE FROM THE CURRENT YEAR WHICH IS TO BE APPLIED ON THE OBJECTS OF THE TRUST AND THE EARLIER YEARS ACCUMULATION OR OTHERWISE CANNOT BE EXPANDED ON THE OBJECTS OF THE TRUST RESULTING IN TO DEFICIT. SUCH DEFICIT CANNOT BE ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS AS THE SAME BEING AGAINST THE PRINCIPLE AND LAW LAID DOWN UNDER THE ACT.' 6. THE APPELLANT PRAYS THAT THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - XXX, MUMBAI BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 7. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY,' 7.6 THE FACTS IN THAT CASE WERE THAT THE ASSESSEE - TRUST, FILED ITS RETURN OF INCOME AT RS. NIL ON 30 - 10 - 2005. AS PER THE CRITERIA OF CDBT CIRCULAR, THE CASE WAS SELECTED FOR SCRUTINY AND WAS FINALIZED U/S. 143(3) OF THE INCOME - TAX ACT, 1961(ACT) BY THE ASSESSING OFFICER (AO). DURING THE YEAR UNDER CONSIDERATION, ASSESSEE - TRUST HAD RECEIVED I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 16 GRO S S - RECEIPTS AMOUNTING TO RS. 10. 35 CRORES AND HAD INCURRED A SUM OF RS. 11.58 CRORES FOR THE PURPOSES OF THE TRUST. AS PER THE CLAIM MADE BY THE ASSESSEE, IT WAS PERMITTED TO ACCUMULATE/SET - ASIDE 15% OF THE GROSS - RECEIPTS FOR APPLICATION FOR THE PURPOSES OF THE TRUST. ACCORDINGLY, A CLAIM AMOUNTING TO RS. 1.55 CRORES (I.E.15% OF THE GROSS RECEIPTS) WAS MADE U/S. 11 ( 1 )(A) OF THE ACT. AS PER THE ASSESSEE, AFTER CONSIDERING THE ACCUMULATED/SET ASIDE SUM AND THE ADDITIONAL SUM SPENT BY IT OVER ACCUMULATION, IT W AS ENTITLED TO CARRY FORWARD THE DEFICIT OF RS. 2.78 CRORES FOR SETTING OFF AGAINST FUTURE RECEIPTS OF SUBSEQUENT YEARS. AO REJECTED THE CLAIM MADE BY THE TRUST FOR CARRY FORWARDING OF THE SAID DEFICIT I.E. OF RS. 2.78 CRORES. THE ASSESSEE PREFERRED AN APP EAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA HELD THAT THE ISSUE RAISED BY THE ASSESSEE - TRUST WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISIO N DELIVERED BY THE JURISDIC TIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL (264 ITR 110). HE FURTHER MENTIONED THAT IN THE ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2002 - 03, TRIBUNAL HAD DECIDED THE MATER IN FAVOUR OF THE ASSESSE E. APPEAL FILED BY THE ASSESSEE TRUST WAS ALLOWED BY THE FAA. ON FURTHER APPEAL BY THE DEPARTMENT, THE HON. ITAT HELD AS FOLLOWS: 'WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT 'A' BENCH OF ITAT, MUMBAI VIDE ITS ORDER DID. 13 - 05 - 2009 (ITA NO . 170/M/08 AY 2003 - 04) HAS DECIDED THE SAME ISSUE VIDE PARA NO. 3 OF ITS ORDER AS UNDER: LAKSHMI AND USHA MITTAL (FORMERLY KNOWN AS THE LNM FOUNDATION) 'WE HAVE HEARD BOTH THE PARTIES, PERUSE THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE WHET HER DEFICIT IN THE INCOME AND EXPENDITURE IN CASE OF CHARITABLE INSTITUTIONS CAN BE CARRIED FORWARD TO SUBSEQUENT YEAR AND ADJUSTED TOWARDS APPLICATION OF INCOME HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING (SUPRA), IN WHICH IT HAS BEEN HELD THAT EXCESS EXPENDITURE IN EARLIER YEAR CAN BE ADJUSTED AGAINST INCOME IN THE SUBSEQUENT YEAR AND SUCH ADJUSTMENT HAS TO BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR. THUS THE ASSESSES WOULD BE ENTITLED FOR CARRYING FORWARD OF DEFICIT TO SUBSEQUENT YEAR, WHICH WOULD BE TREATED AS APPLICATION OF INCOME IN THAT YEAR. HOWEVER, IN I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 17 COMPUTING THE DEFICIT, ADDITION @ 15% OF THE GROSS RECEIPT CANNOT BE ALLOWED AS SUCH ACCUMULATION IS PERMISSIBLE ONLY WHEN THE EXPENDITURE IS LESS THAN THE INCOME WHICH IS NOT SO IN THIS CASE. THEREFORE, THE DEFICIT AVAILABLE FOR CARRY FORWARD TO THE SUBSEQUENT YEAR WILL BE ONLY RS. 75,58,503 / - . THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE L.N.M. FOUNDATION IN I TA NO. 4422/M/05 IT IS, THEREFORE HELD THAT THE ASSESSES WOULD BE ENTITLED FOR CARRY FORWARD OF DEFICIT OF RS.75,58,503/ - WHICH WOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR. WE HOLD, ACCORDINGLY. ' 7.7. IN VIEW OF THE AFORESAID REASONS , AND IN VIEW OF THE DECISION OF THE HON. ITAT IN THE CASE OF LAKSHMI AND USHA MITTAL FOUNDATION AND IN THE CASE OF DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY, THROUGH HIS HOLINESS DR. SYEDNA MOHAMMED BURHANUDDIN SAHEB, ITA NO. 4309/MUM/2005 DATED 30.04.20 13, AND THE DECISION OF THE HON'BLE ITAT MUMBAI BENCH IN 116 TTJ MUM 673, I AM OF THE VIEW THAT THE ACCUMULATION OF 15% AS CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE TO IT. THEREFORE, THE DEFICIT WHICH IS ALLOWED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEAR IS RS. 5,23,93,620/ - AND NOT RS. 8,05,52,838/ - AS CLAIMED BY THE ASSESSEE. 8. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. THUS AS COULD BE SEEN ABOVE FROM THE APPELLATE ORDER DATED 28.08.2017 PASSED BY LEARNED CIT(A), THE LEARNED CIT(A) WAS PLEASED TO ALLOW CARRY FORWARD OF EXCESS OF E XPEN DITURE OVER INCOME BEING DEFICIT /LOSS TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME /SURPLUS OF SUBSEQUENT YEARS. HOWEVER BASED ON LARGE NUMBER OF JUDICIAL DECISIONS AS CITED BY LEARNED CIT(A) IN HIS APPELLATE ORDER , THE LEARNED CIT(A) WAS OF THE VIEW THAT ONCE EXPENDITURE OF ASSESSEE - TRUST IS ALREADY MORE THAN ITS INCOME AND THERE IS A DEFICIT , THEN ACCUMULATION OF INCOME @15% AS IS PROVIDED U/S 11(1)(A) CANNOT BE ALLOWED AS THE ASSESSEES EXPENDITU RE IS ALREADY HIGHER THAN INCOME, THERE SHALL BE LEFT THEREAFTER NO INCOME /SURPLUS IN THE HANDS OF THE ASSESSEE WHICH COULD BE ALLOWED TO BE ACCUMULATED AS IS PROVIDED U/S 11(1)(A) OF THE 1961 ACT, VIDE APPELLATE ORDER I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 18 DATED 28.08.2017 PASSED BY LEARNED C IT(A) AS EXTRACTED ABOVE BY US IN THIS ORDER . 6 . NOW , R EVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN GIVING PART RELIEF TO THE ASSESSEE IN ALLOWING EXCESS OF EXPENDITURE OVER INCOME BEING DEFICIT OF RS. 5,23,93,620/ - TO BE CARRIED FORWARD TO SUBSE QUENT YEARS TO BE SET OFF AGAINST SURPLUS OF SUBSEQUENT YEARS AS AGAINST DEFICIT /LOSS OF NIL ALLOWED BY THE AO TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST SURPLUS/INCOME OF SUBSEQUENT YEARS , WHILE ON THE OTHER HAND THE ASSESSEE BEING AGGRIEVED BY DECISION OF LEARNED CIT(A) IN DENYING ACCUMULATION OF 15% OF INCOME AS PROVIDED U/S 11(1)(A) DESPITE HAVING LEFT WITH NO SURPLUS AFTER SETTING OFF EXPENDITURE INCURRED WITH INCOME FOR THE IMPUGNED ASSESSMENT YEAR , HAS FILED C.O . AGAINST THE DISALLOWANCE OF ITS CLAIM OF A CCUMULATION OF 15% OF INCOME AS IS PROVIDED U/S 11(1)(A) DESPITE HAVING NO SURPLUS DURING THE IMPUGNED ASSESSMENT YEAR AS ITS EXPENDITURE HAS ALREADY EXCEEDED ITS INCOME . A T THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE FIRST ISSUE BEFORE THE BENCH WHICH IS IN - FACT AGITATED BY REVENUE IN ITS APPEAL VIZ. CLAIM OF DEFICIT /LOSS BEING EXCESS OF EXPENDITURE OVER INCOME TO BE ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME/SURPLUS OF SUBSEQUENT YEAR IS TO BE ALLOWED TO THE ASSESSEE - TRUST IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTIT UTE OF BANKING PERSONNEL SELECT ION(IBPS) (2003) 264 ITR 110 (BOM. HC) , WHEREIN HONBLE BOMBAY HIGH COURT H AS DECIDED THE ISSUE IN FAVOUR OF THE TAX - PAYER . I T WAS SUBMITTED THAT TRIBUNAL IN ASSESSE S OWN C ASE FOR AY 2010 - 11 IN ITA NO. 5442/MUM/2015 IN DCIT(E) V. THE EXECUTIVE BOARD OF TH E METHODIST CHURCH IN INDIA VIDE ORDER DATED 24.10.2017 HAS DECIDED THIS ISSUE OF ALLOWABILITY OF EXCESS OF EXPENDITURE OVER INCOME BEING DEFICIT /LOSSES TO BE CARRIED FORWARD TO SUBSEQUENT YEAR TO BE SET OFF AGAINST SURPLUS /INCOME OF SUBSEQUENT YEARS IN FA VOUR OF THE ASSESSEE . I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 19 WITH RESPECT TO SECOND ISSUE BEFORE THE BENCH WHICH IS INFACT AGITATED BY ASSESSEE IN ITS CO IS WITH RESPECT TO ALLOWABILITY OF ACCUMULATION OF 15% OF INCOME OF THE ASSESSEE WITHIN PROVISIONS OF SECTION 11(1)(A) DESPITE HAVING LEFT WITH NO SURPLUS AFTER ADJUSTING EXPENDITURE AGAINST INCOME FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS PLACED RELIANCE ON THE TRIBUNAL DECISION IN THE CASE OF LALJI VELJI CHARITABLE TRUST V. ITO(E)IN ITA NO. 5322 & 5323/MUM/2016 VIDE ORDERS DATED 28 .02.2018. 9. THE LD. DR FAIRLY AGREED THAT SO FAR AS FIRST ISSUE IS CONCERNED WHICH IS INFACT AGITATED BY REVENUE IN ITS APPEAL VIZ. EXCESS OF EXPENDITURE OVER INCOME IS CONCERNED, THE SAME IS TO BE ALLOWED TO THE ASSESSEE TO BE CARRIED FORWARD TO SUBSEQUENT YEARS FOR SET OFF AGAINST INCOME OF THE SUBSEQUENT YEAR IN VIEW OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS)(SUPRA). IT WAS ALSO FAIRLY SUBMITTED BY LEARNED DR T HAT THIS ISSUE IS ALSO COVERED BY DECISION OF TRIBUNAL IN ASSESSEES OWN CASE IN DCIT V. THE EXECUTIVE BOARD OF THE METHODIST CHURCH IN INDIA FOR AY 2010 - 11 IN ITA NO. 5442/MUM/2015. . HOWEVER SO FAR AS SECOND ISSUE IS CON CERNED WHICH IS INFACT AGITATED BY THE ASSESSEE IN ITS CO, THE LEARNED DR SUBMITTED THAT ACCUMULATION OF 15% OF INCOME U/S 11(1)(A) CANNOT BE ALLOWED AND RELIANCE IS PLACED ON THE APPELLATE ORDER OF LEARNED CIT(A). 10. WE HAVE CONSIDER ED RIVAL CONTENTION S AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS AND ORDERS OF THE AUTHORITIES BELOW. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS TRUST REGISTERED AS A CHARITABLE ORGANIZATION WITH DIT(E), MUMBAI U/S. 12A VID E REGISTRATION NO. 2362 AND IS ALSO REGISTERED WITH CHARITY CO MMISSIONER, MUMBAI VIDE REGISTRATION NO. F - 405(BOM). THE ASSESSEE - TRUST CLAIMS TO BE ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF ADVANCEMENT OF THE METHODIST CHURCH IN INDIA BY MEANS OF EVANGELISTIC, EDUCATIONAL LITERARY, MEDICAL, INDUSTRIAL, CHARITAB LE, SOCIAL AND OTHER ACTIVITIES. THE TRUST CLAIM TO BE ENGAGED IN CHARITABLE ACTIVITIES IN THE FIELD OF ADVANCEMENT OF THE METHODIST CHURCH IN INDIA I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 20 BY MEANS OF EVANGELISTIC, EDUCATIONAL LITERACY, MEDICAL, INDUSTRIAL, CHARITABLE, SOCIAL AND OTHER ACTIVITIE S. WE HAVE OBSERVED THAT THE ASSESSEE HAS AN INCOME OF RS. 18, 77,28, 122 / - AND THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE OBJECTS AND APPLICATION OF INCOME WAS TO THE TUNE OF RS. 24,01,21,742 / - AND THUS THE EXCESS OF EXPENDITURE OVER INCOME BEING DEFICIT /LOSS WORK S OUT OF RS. 5,23,93,620/ - . THE ASSESSEE HAS HOWEVER ALSO CLAIMED RS. 2,81,59,218/ - BEING 15% OF INCOME TOWARDS ACCUMULATION OF INCOME WITHIN PROVISIONS OF SECTION 11(1)(A) OF THE 1961 ACT TO BE CARRIED FORWARD FOR SETTING OFF AGAINST IN COME/SURPLUS OF SUBSEQUENT YEARS, DESPITE THE FACT THAT ITS EXPENDITURE ON THE OBJECTS OF THE TRUST WAS ALREADY HIGHER THAN INCOME FOR THE IMPUGNED ASSESSMENT YEAR AND THERE WAS DEFICIT/LOSSES LEFT IN THE HANDS OF THE ASSESSEE WITH NO SURPLUS LEFT FOR ACC UMULATION . THE AO HAS REJECTED ITS ENTIRE CLAIM FOR CARRY FORWARD TO THE TUNE OF RS. 8,05,52,838/ - , BOTH U/S 11(1)(A) TOWARDS ACCUMULATION OF INCOME BEING 15% OF TOTAL INCOME TO THE TUNE OF RS. 2,81,59,218/ - AND ALSO CARRY FORWARD OF EXCESS OF EXPENDITUR E OVER INCOME TO THE TUNE OF RS. 5,23,93,620/ - AS WAS CLAIMED BY THE ASSESSEE. THE LEARNED CIT(A) HOWEVER ALLOWED THE CLAIM OF CARRY FORWARD OF RS. 5,23,93,620/ - TOWARDS EXCESS OF EXPENDITURE OVER INCOME TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST SURPLUS/INCOME OF SUBSEQUENT YEARS , KEEPING IN VIEW DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS) (SUPRA). REVENUE IS AGGRIEVED BY THE DECISION OF LEARNED CIT(A) IN ALLOWING THIS PART RELIE F TO THE ASSESSEE. WE HAVE CONSIDERED THE ENTIRE FACTUAL MATRIX OF THE CASE AND WE ARE OF THE CONSIDERED VIEW, THAT EXCESS OF EXPENDITURE OVER INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR TO THE TUNE OF RS. 5,23,93,62 0/ - IS TO BE ALLOWED TO BE C ARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST SURPLUS OF SUBSEQUENT YEARS, KEEPING IN VIEW DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS)(SUPRA) , WHEREIN IN THE ISSUE WAS DECIDED IN FAVOUR OF TAX - PAYER , BY HOLDING AS UNDER: I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 21 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 SH OULD BE TREATED AS APPLICATION OF INCOME IN 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 SUBSEQUENT YEAR AND THAT UTILIZATION OF SUC H INCOME FOR MEETING THE EXPENDITURE OF 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 IN SECTION 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 RELEVANT. THAT, IN THE CASE OF A CHARITABLE TRUST, THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF EA RLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT INCOME 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 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 OF THE TRUST FOR CHARITABLE AND REL IGIOUS 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 THAT 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 BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MU RTI PUJAK JAIN MANDAL [1995] 21 1 ITR 293 . ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE A ND AGAINST THE DEPARTMENT. IT IS ALSO OBSERVED THAT IN A DECISION PASSED RECENTLY BY ITAT - MUMBAI WHEREIN ONE OF US ( ACCOUNTANT MEMBER) WAS PART OF THE DIVISION BENCH HAS ALLOWED THE TAX - PAYER CARRY FORWARD OF THE EXCESS OF EXPENDITURE OVER INCOME BEING D EFICIT/LOSS TO SUBSEQUENT YEARS TO BE ADJUSTED AGAINST SURPLUS /INCOME OF SUBSEQUENT YEARS IN THE CASE OF I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 22 ITO V. KAIVALYA EDUCATION FOUNDATION IN ITA NO. 5575/MUM/2017 VIDE ORDERS DATED 08 TH FEBRUARY 2019, BY HOLDING AS UNDER: 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING CITED CASE LAWS. WE HAVE OBSERVED THAT THE ASSESSEE IS A CHARITABLE TRUST WHICH IS REGISTERED WITH THE DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI U/S. 12A AND U/S. 80G OF THE ACT. THE ASSESSEE HAD CL AIMED AN AMOUNT OF RS. 2,33,03,449/ - AS EXCESS EXPENDITURE OVER INCOME BEING DEFICIT TO BE CARRIED FORWARD FOR SETTING IT OFF IN SUBSEQUENT YEARS. THE AO HAS DENIED THE SAID CARRY FORWARD OF THE EXCESS OF EXPENDITURE OF INCOME WHICH HAS BEEN LATER ALLOWE D BY THE LD. CIT(A) BASED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS)(SUPRA), WHEREIN FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS ADMITTED BY HONBLE HIGH COURT, AS UNDER: - 3. WHETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW FORWARD THE DEFICIT OF EARLIER YEAR AND SET IT OFF AGAINST THE SURPLUS OF SUBSEQUENT YEARS WHEN THE SAME WAS NOT ALLOWABLE IN THE CASE OF ASSESSEE TRUST IN WHOSE CASE IN COME EXEMPTED UNDER SECTION 11 OF THE INCOME TAX ACT, 1961. THE HONBLE BOMBAY HIGH COURT DECIDED THE AFORESAID SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE ASSESSEE IN INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) (SUPRA) , BY HOLDING 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 INCOME IN 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 SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF E ARLIER 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 TH E 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 I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 23 THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GA INS OF BUSINESS' 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 OF EXPENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT INCOME 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 T HE 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 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 THAT 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 BY T HE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293 . ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. FURTHER , WE HAVE ALSO OBSERVED THAT HONBLE BOMBAY HIGH COURT IN ITA NO.1087 OF 2014 VIDE JUDGMENT DATED 16.12.2016 IN DIT (EXEMPTIONS) V. M/S. ADITYA VIKRAM MEMORIAL TRUST HAS DECIDED THE ISSUE BY RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CI T V. INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS) (2003) 264 ITR 110(SC) THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AS THE ISSUE IS SETTLED BY DECISION OF HONBLE BOMBAY HIGH COURT IN 264 ITR 110, BY HOLDING AS UNDER: THIS APPEAL UNDER SECTION 260A OF THE INCOME TAX ACT, 1961 (THE ACT), CHALLENGES THE ORDER DATED 27TH NOVEMBER, 2013 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL (THE TRIBUNAL). THE IMPUGNED ORDER DATED 27 TH NOVEMBER,2013 RELATES TO THE ASSESSMENT YEAR 2009 - 10. 2 . THE REVENUE URGES THE FO LLOWING QUESTIONS OF LAW FOR OUR CONSIDERATION: (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 24 TRIBUNAL WAS RIGHT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE DEFICIT, AMOUNTING TO RS.3,71,9 9,050/- IGNORING THE FACT THAT THERE WAS NO EXPRESS PROVISION IN THE INCOME TAX ACT, 1961 FOR PERMITTING ALLOWANCE OF SUCH CLAIMS?. (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE DECI SION OF THE CIT(A) WHICH ALLOWED CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE AND DIRECTED THE ASSESSING OFFICER TO ALLOW CARRY FORWARD OF DEFICIT ON ACCOUNT OF EXCESS EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THIS WOULD H AVE THE EFFECT OF GRANTING DOUBLE BENEFIT TO THE ASSESSEE, FIRST AS 'ACCUMULATION' OF INCOME U/S. 11 1(A) OR AS CORPUS DONATION U/S. 11(1)(D) IN EARLIER YEARS/CURRENT YEAR AND THEN AS 'APPLICATION' OF INCOME U/S. 11(1)(A) IN THE SUBSEQUENT YEARS WHICH WERE LEGALLY NOT PERMISSIBLE?. 3 MRS. BHARUCHA, LEARNED COUNSEL APPEARING FOR THE REVENUE VERY FAIRLY STATES THAT THE ISSUES ARISING HEREIN STANDS CONCLUDED AGAINST THE REVENUE AND IN FAVOUR OF THE RESPONDENT-ASSESSEE BY THE DECISION OF THIS COURT IN CIT V /S. INSTITUTE OF BANKING 264 ITR 110. 4 IN VIEW OF THE ABOVE, THE QUESTIONS AS PROPOSED DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTIONS OF LAW. THUS, NOT ENTERTAINED. 5 ACCORDINGLY, APPEAL DISMISSED. NO ORDER AS TO COSTS. FURTHER , WE HAVE ALSO OBSERVED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMPTIONS) V. ADITYA BIRLA FOUNDATION IN ITA NO. 1497 OF 2014 VIDE JUDGMENT DATED 06.03.2017 HAS AGAIN DECIDED THE ISSUE CONCERNING CARRIED FORWARD OF DEFICIT IN FAVOUR OF THE ASSESSEE. THE SUBSTANTIAL QU ESTION OF LAW BEFORE THE HONBLE BOMBAY HIGH COURT WAS, AS UNDER: (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL WAS RIGHT IN ALLOWING THE CLAIM OF THE ASSESSEE FOR CARRY FORWARD OF THE SAID DEFICIT, IGNORING THE F ACT THAT THERE WAS NO EXPRESS PROVISION IN THE ACT PERMITTING I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 25 ALLOWANCE OF SUCH CLAIM? THE HONBLE BOMBAY HIGH COURT DECIDED THE ISSUE BY HOLDING AS UNDER: - 4. REGARDING QUESTION NO.(II):- (A) MR. KOTANGALE, THE LEARNED COUNSEL FOR THE REVENUE VERY FAIRLY STATES THAT THE ISSUE ARISE HEREIN STANDS CONCLUDED BY THE DECISION OF THIS COURT IN CIT V/S. INSTITUTE OF BANKING 264 ITR 110 AND THE ORDER OF THIS COURT IN DIRECTOR OF INCOME TAX (EXEMPTION) V/S. M/S. GEM & JEWELLERY EXPORTS PROMOTION COUNCIL (INCOME TAX APPEAL NO.610 OF 2011) DECIDED ON 15TH FEBRUARY, 2011. (B) IN VIEW OF THE ABOVE SUBMISSION, QUESTION NO.(II) AS PROPOSED ALSO DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT ENTERTAINED. FU RTHER , WE HAVE ALSO OBSERVED THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMPTION) V. MUMBAI EDUCATION TRUST IN ITA NO. 11 OF 2014 VIDE JUDGMENT DATED 03.05.2016 WHEREIN REVENUE RAISED FOLLOWING SUBSTANTIAL QUESTION OF LAW, AS UNDER: - (B) WH ETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW TO CARRY FORWARD OF DEFICIT OF EARLIER YEARS RELYING ON THE DECISION OF THIS COURT IN THE CASE OF CIT V/S. INSTIT UTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM)WHILE THE REVENUE DID NOT FILE SLP AGAINST THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM)DUE TO LOW TAX EFFECT?. THE HONBLE BOMBAY HIGH COURT DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE , BY HOLDING AS UNDER: - 3. WE FIND THAT THE IMPUGNED ORDER OF THE TRIBUNAL HAS DISMISSED THE REVENUE'S APPEAL ON BOTH THE ISSUES NAMELY ALLOWABILITY OF DEPRECIATION ON CAPITAL ASSETS ACQUIRED FOR THE PURPOSES OF CARRYING OUT CHARITABLE ACTIVITIES AND SET OFF OF DEFICIT OF EARLIER YEARS AGAINST INCOME OF THE CURRENT YEAR. THE IMPUGNED ORDER IN FACT FOLLOWED DECISION OF THIS COURT IN CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 WHILE HOLDING IN FAVOUR OF THE RESPONDENT-ASSESS EE. I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 26 4. MR. MALHOTRA, LEARNED COUNSEL APPEARING FOR THE REVENUE VERY FAIRLY STATES THAT THE ISSUE AS RAISED BY THE REVENUE STANDS CONCLUDED AGAINST REVENUE BY DECISION OF THIS COURT IN INSTITUTE OF BANKING PERSONNEL SERVICES (SUPRA). 5. IN VIEW OF THE ABOVE, THE QUESTIONS AS FRAMED DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THE MUMBAI - TRIBUNAL IN ITO(EXEMPTIONS) VS. VAIBHAV MEDICAL & EDUCATION FOUNDATION IN ITA NO. 6998/MUM/2016 FOR AY 2008 - 09, VIDE ORDER DATED 31.08.2 017 HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE , BY HOLDING AS UNDER: - 6. WE FIND THAT THE HON'BLE BOMBAY HIGH COURT SUBSEQUENT TO THE DECISION IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) CONSIDERED A SIMILAR ARGUMENT OF TH E REVENUE IN THE CASE OF M/S. MUMBAI EDUCATION TRUST, ITA NO. 11/2014 DATED 3.5.2016 AND ALLOWED THE CLAIM OF THE ASSESSEE. IN FACT, THE GROUNDS OF APPEAL URGED BY THE REVENUE BEFORE THE HON'BLE HIGH COURT, WHICH READ AS UNDER : - (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW THE CLAIM OF DEPRECIATION RELYING ON THE DECISION OF THIS COURT IN THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPOR TED IN 264 ITR 110 (BOM) IGNORING THE RATIO OF HON'BLE SUPREME COURT JUDGMENT IN THE CASE OF ESCORTS LTD. V/S. UNION OF INDIA (199 ITR 43) WHEREIN HON'BLE SUPREME COURT HAS HELD THAT DOUBLE DEDUCTION CANNOT BE PRESUMED IF THE SAME IS NOT SPECIFICALLY PROVI DED BY LAW, IN ADDITION TO NORMAL DEDUCTION? (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE AND IN LAW, THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE CIT(A) TO ALLOW TO CARRY FORWARD OF DEFICIT OF EARLIER YEARS RELYING ON THE DEC ISION OF THIS COURT IN THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR 110 (BOM) WHILE THE REVENUE DID NOT FILE SLP AGAINST THE CASE OF CIT V/S. INSTITUTE OF BANKING PERSONNEL SERVICES REPORTED IN 264 ITR110 (BOM) DUE TO LO W TAX EFFECT? I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 27 STAND ON THE SAME FOOTING AS ARE BEING CANVASSED BEFORE US IN THE INSTANT CASE. THUS, THERE IS NO ERROR ON THE PART OF THE CIT(A) IN FOLLOWING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELEC TION (SUPRA) AS WELL AS THE DECISION OF THE TRIBUNAL DATED 10.09.2013 (SUPRA) IN ASSESSEES OWN CASE AND ALLOWING THE STAND OF THE ASSESSEE. THE OTHER ARGUMENT TAKEN BY THE REVENUE THAT ITS SLP FILED BEFORE THE HON'BLE SUPREME COURT IS PENDING ON A SIMILAR ISSUE IS OF NO CONSEQUENCE INASMUCH AS THE BINDING JUDGMENTS OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION (SUPRA) AS WELL AS IN THE CASE OF M/S. MUMBAI EDUCATION TRUST (SUPRA) CONTINUE TO SUBSIST. APART FROM THE AFORESAID, THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO POINTED OUT THAT THE HON'BLE BOMBAY HIGH COURT HAS APPROVED THE STAND OF THE ASSESSEE IN THE CASE OF DIT (EXEMPTION) VS. M/S. GEM & JEWELLERY EXPORTS PROMOTION COUNCIL (ITA (LOD) NO. 1133 OF 2010) DA TED 15.02.2011 ALSO, AND THE SLP OF THE DEPARTMENT HAS ALSO BEEN DISMISSED BY THE HON'BLE SUPREME COURT IN CC 13512/2011 DATED 09.09.2011. THEREFORE, IN THIS BACKGROUND, WE FIND NO MERIT IN THE GROUND RAISED BY THE REVENUE AND THE SAME IS ACCORDINGLY DISMI SSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. FURTHER WE HAVE ALSO OBSERVED THAT MUMBAI TRIBUNAL IN DDIT V. MAHARASHTRA SAMAJ GHATKOPER IN ITA NO. 3654/MUM2013 , VIDE ORDER DATED 22.06.2016 TO WHICH ONE OF US BEING JUDICIAL MEMBER WAS PART OF THE DIVISION BENCH WHO ADJUDICATED THE APPEAL IN ITA NO. 3654/MUM/2012 , HAS AGAIN DECIDED THE ISSUE OF CARRIED FORWARD OF LOSSES IN FAVOUR OF THE TAX - PAYER , BY HOLDING AS UNDER: - 3. WE HAVE HEARD DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND AUTHORISED REPRESENTATIVE (AR) FOR ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. LD. DR ARGUED THAT LD DIT WRONGLY GIVEN THE RELIEF TO THE ASSESSEE AND PRAYED THAT ORDER OF THE AO MAY BE RESTORED. LD AR FOR ASSESSEE ARGUED THAT THIS CASE IS SQUARE LY COVERED BY THE DECISION OF BOMBAY HIGH COURT IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS)(SUPRA). WE HAVE SEEN THAT LD. CIT(A) WHILE ALLOWING THE APPEAL OF THE ASSESSEE MADE THE FOLLOWED OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE SUBM ISSIONS OF THE APPELLANT, ASSESSMENT ORDER AND FACTS OF THE CASE. I FIND THAT THE APPELLANTS CLAIM OF SETTING OFF THE EXCESS OF INCOME OVER EXPENDITURE AGAINST THE DEFICIT OF EARLIER YEAR IS CORRECT IN VIEW OF THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V/S I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 28 MAHARASHTRA OF MEWAR CHARITABLE FOUNDATION (1987) 60 CTR (RAJ) 40 : (1987) 164 ITR 439 (RAJ) WHICH WAS FOLLOWED IN CIT VS. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL 211 ITR 293 (GUJ.). THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. 4. WE HAVE GONE THROUGH THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS), WHEREIN ON IDENTICAL GROUND, THE HONBLE BOMBAY HIGH COURT HELD AS UNDER: 5. NOW COMING TO QUESTION NO.3, THE POINT WHI CH 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 INCOME IN 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 SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEAS 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 TRU ST, 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 CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH TH E 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 SUBSEQUENT YEARS. WE DO NOT FIND ANY MERI T IN THIS ARGUMENT OF THE DEPARTMENT. INCOME 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 AND RELIGIOUS PURPOS ES IN THE EARLIER YEARS AGAINST THE INCOME 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 REGAR D TO THE 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 VIEW IS ALSO I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 29 SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293. FURTHER THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF DIT VS. MUMBAI EDUCATION TRUST IN ITA NO. 11/2014 DATED 3RD MAY 2016 GIVEN THE SIMILAR RELIEF IN RESPECT OF ALLOWABILIT Y OF DEPRECIATION OF CAPITAL ASSET ACQUIRED FOR THE PURPOSE OF CARRYING OUT CHARITABLE ACTIVITIES AND SET OFF OF DEFICIT OF EARLIER YEARS AGAINST THE INCOME OF CURRENT YEAR. 5. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT, W E HOLD THAT THE ASSESSEE IS CLAIMED FOR SETTING OFF OF EXCESS INCOME OVER EXPENDITURE AGAINST THE DEFICIT OF EARLIER YEARS IS CORRECT. IN VIEW OF THE ABOVE OBSERVATION, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY DIT. WE HAVE ALSO OBSERVED THAT HONBLE BOMBAY HIGH COURT HAS DISMISSED THE APPEAL OF THE REVENUE IN DIT(E) V. GEM & JEWELLERY EXPORTS PROMOTION COUNCIL IN ITA(LOD) NO. 1113 OF 2010 VIDE JUDGMENT DATED 15.02.2011 BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS) (SUPRA) ON THE ISSUE OF SET OFF OF DEFICIT OF EARLIER YEARS AGAINST SURPLUS OF THE IMPUGNED ASSESSMENT YEAR. THE REVENUE FILED AN SLP WITH HONBLE SUPREME COURT WHICH WAS DISMISSED BY HONBLE A PEX COURT VIDE ORDERS DATED 09.09.2011 IN SLP(CIVIL) CC 13512/2011. THE AO HAS REFERRED TO IN HIS ASSESSMENT ORDERS IN THE INSTANT CASE BEFORE US THAT SLP IS FILED BY THE REVENUE AGAINST HONBLE BOMBAY HIGH COURT JUDGMENT BUT AS IS OBSERVED , THE SAID SLP ALSO STOOD DISMISSED BY HONBLE APEX COURT. THUS WE HAVE OBSERVED THAT THE HONBLE COURTS/TRIBUNAL HAD TAKEN CONSISTENT STAND THAT IN CASE OF CHARITABLE TRUST EXCESS EXPENDITURE OVER INCOME IS TO BE ALLOWED TO BE CARRIED FORWARD FOR SETTING OFF AGAINST INC OME OF SUBSEQUENT YEARS . WE DO NOT FIND ANY REASON TO DEVIATE FROM THE CONSISTENT STAND TAKEN BY THE HONBLE COURTS/ TRIBUNAL AND RESPECTFULLY FOLLOWING AFORESAID DECISION(S) AS ENUMERATED IN PRECEDING PARAS OF THIS ORDER, WE ALLOW THE CARRY FORWARD OF EXCESS EXPENDITURE OVER INCOME OF RS. 2,33,03,449/ - TO BE CARRIED FORWARD TO SUBSEQUENT YEARS . THUS, WE CONFIRM/AFFIRM DECISION OF LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. WE ORDER ACCORDINGLY. WE HAVE ALSO OBSERVED THAT THE AO HAS RELIED U PON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT(E) V. MIDC IN ITA NO. 2652/MUM/2011 WHEREIN THE HONBLE BOMBAY HIGH COURT GRANTED RELIEF TO THE TAX - PAYER BY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BA NKING PERSONNEL I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 30 SELECTION(IBPS)(SUPRA) WHEREIN THE AO NOTED THAT THE REVENUE HAS FILED AN SLP WITH HONBLE APEX COURT AGAINST DECISION OF HONBLE BOMBAY HIGH COURT. WE HAVE OBSERVED THAT THE SLP FILED BY REVENUE HA S BEEN DISMISSED BY HONBLE SUPREME COURT VIDE ORDERS DATED 13.12.2017 , IN CA NO. 009813/2014 REGISTERED ON 13.10.2014 IN SLP(C) NO. 009891/2014 IN DIT V . MIDC . IT IS ALSO NOTED THAT THE TRIBUNAL IN ASSESSES OWN CASE FOR AY 2010 - 11 IN ITA NO. 5442/MUM/2015 IN DCIT(E) V. THE EXECUTIVE BOARD OF T HE METHODIST CHURCH IN INDIA VIDE ORDER S DATED 24.10.2017 HAS DECIDED THE ISSUE OF ALLOWABILITY OF EXCESS OF EXPENDITURE OVER INCOME BEING DEFICIT TO BE CARRIED FORWARD TO SUBSEQUENT YEAR TO BE SET OFF AGAINST SURPLUS OF SUBSEQUENT YEARS IN FAVOUR OF THE ASSESSEE , BY HOLDING AS UNDER: - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND ALSO GONE THROUGH THE CASES RELIED UPON BY THE AUTHORITIES BELOW. THE ONLY ISSUE INVOLVED IN THIS CASE IS WHETHER THE LD CIT(A) HAS ERRED IN ALLOWING CARRY FORWARD OF DEFICIT IN QUESTION AND ALLOWING SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS? THE AO HAS ANSWERED THE SAID QUESTION IN AFFIRMATIVE BY FOLLOWING THE RATIO OF LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS INSTITUTE OF BANKING (SUPRA). THE OPER ATIVE PART OF THE IMPUGNED ORDER READS AS UNDER: I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, GONE THROUGH THE ASSESSMENT ORDER OF THE AO AND THE SUBMISSIONS OF THE APPELLANT AND ALSO DISCUSSED THE CASE WITH THE AR OF THE APPELLANT. THE CONTENTIONS AND SUBMISSIONS OF THE APPELLANT BEING DISCUSSED AND DECIDED HERE IN UNDER: I. DURING THE APPELLATE PROCEEDINGS IT WAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL (SUPRA). IT WAS ALSO STATED THAT THE JUDGMENT OF HONBLE BOMBAY COURT IS BINDING ON ALL AUTHORITIES UNDER ITS JURISDICTION. THE OTHER OBJECTIONS RAISED BY THE AO HAVE ALSO BEEN DEALT WITH BY THE APPELLANT IN ITS SUBMISSIONS AS REFERRED A BOVE. II. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE ISSUE IS COVERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL, 264 ITR 110. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 31 HIGH COURT, THE AO IS DIRECTED TO ALLOW THE CARRY FORWARD OF DEFICIT IN THE SUBSEQUENT YEARS. III. THIS GROUND OF APPEAL IS ALLOWED. 8. IN CIT VS. INSTITUTE OF BANKING PERSONNEL, (SUPRA), THE HONBLE BOMBAY HIGH COURT HAS DECIDED THE IDENTICAL ISSU E HOLDING AS UNDER: 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 A PPLICATION 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 SUBSEQUENT YEAR AND THAT UTILISATION OF SUCH INCOME FOR MEE TING THE EXPENDITURE OF 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 T HE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABLE TRUST, THERE 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 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 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 B E ADJUSTED AGAINST INCOME OF THE SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY HAS ALSO BOUGHT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPLES ARE APPLIED THEN ADJ USTMENT OF 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 OF THE TRUST FOR CHARITABLE RELIGIOUS PURPO SES IN THE SUBSEQUENT YEARS IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS 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 VIEW I S ALSO SUPPORTED BY THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VERSUS SRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211ITR 293. ACCORDINGLY, WE ANSWER QUESTION NUMBER 3 IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 32 9. SINCE THE ISSUE INVOLVED IN THIS CASE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT AND SINCE THE LD. CIT(A) HAS PASSED THE IMPUGNED ORDER FOLLOWING THE JUDGMENT OF THE HONBLE HIGH COURT RENDERED IN CIT VS. INSTITUTE OF BANKING PERSONNEL (SUPRA) WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). WE, THEREFORE, UPHOLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS ALL THE GROUNDS OF APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVE NUE FOR ASSESSMENT YEAR 2010 - 2011 IS DISMISSED THUS , R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONAL SERVICES (IBPS) AND DECISION OF TRIBUNAL IN ASSESSEES OWN CASE , WE ALLOW CARRY FORWARD OF EX CESS OF EXPENDITURE OVER INCOME OF THE ASSESSEE TRUST OF RS. 5,23,93,620/ - BEING DEFICIT /LOSS OF THE IMPUGNED ASSESSMENT YEAR TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE ALLOWED TO BE SET OFF AGAINST SURPLUS OF SUBSEQUENT YEARS . WE DONOT FIND ANY INFI RMITY IN THE ORDER OF LEARNED CIT(A) TO THAT EFFECT ON THIS ISSUE BEFORE US , WHICH APPELLATE ORDER OF LEARNED CIT(A) DATED 28.08.2017 STOOD CONFIRMED/AF F IRMED. THE APPEAL OF THE REVENUE IN ITA NO. 6544/MUM/2017 STOOD DISMISSED . REVENUE FAILS IN ITS APPEA L. WE ORDER ACCORDINGLY 10.2 SO FAR AS CROSS OBJECTIONS FILED BY THE ASSESSEE IS CONCERNED, THE MAIN GRIEVANCE OF THE ASSESSEE IN ITS CO IS WITH RESPECT TO NOT ALLOWING BY LEARNED CIT(A) OF THE ACCUMULATION OF INCOME TO THE TUNE OF 15% OF INCOME KEEPING IN VIEW SECOND LIMB OF SECTION 11(1)(A) OF THE 1961 ACT DESPITE THE FACT THAT THE ASSESSEE HAD INFACT INCURRED EXPENDITURE TOWARDS THE OBJECTS OF THE TRUST IN EXCESS OF ITS INCOME AND THERE BEING DEFICIT/LOSSES FOR THE IMPUGNED ASSESSMENT YEAR. THE MAIN THRUST OF RELIANCE OF THE ASSESSEE IN THIS GRIEVANCE IS THE ORDER PASSED BY TRIBUNAL IN ITA NO. 5322 & 5323 /MUM/2016 , DATED 28.02.2018 IN THE CASE OF LALJI VELJI CHARITABLE TRUST V. ITO . WE HAVE OBSERVED THAT TRIBUNAL IN THIS ORDER IN THE CASE OF LALJI VELJI CHARITABLE TRUST HAD HELD THAT THE TAX - PAYER WILL BE ENTITLED FOR ACCUMULATION OF I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 33 INCOME TO THE TUNE OF 15% OF INCOME DESPITE THE FACT THAT THERE HAS BEEN DEFICIT AND IT WAS HELD THAT THERE I S NO BAR IN LAW AND THERE I S NO SPECIFIC PROVISION IN THE 1961 A CT WHICH STIPULATES THAT SUCH DEDUCTION OF 15% OF INCOME AS ACCUMULATION WILL NOT BE ALLOWED IN CASE OF DEFICIT /LOSSES WHEREIN EXPENDITURE INCURRED TOWARDS THE OBJECTS OF THE TRUST HAS ALREADY EXCEEDED INCOME OF THE TURST . THE TRIBUNAL WHILE ADJUDICATING APPEAL IN THE CASE OF LALJI VELJI CHARITABLE TRUST(SUPRA) HELD AS UNDER: 4.WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ADMITTED FACTS ARE THAT THE ASSESSEE HAS APPLIED ITS INCOME TOWARDS CHARITABLE PURPOSES AN AMOUNT OF 4,78,14,884/ - AS AGAINST THE ASSESSEE INCOME OF 4,41,63,870/ - THEREBY LEAVING THE DEFICIT OF 36,51,014/ - . THE ASSESSEE CLAIMED ACCUMULATION UNDER SECTION 11(1)A OF T HE ACT OF 66,24,580/ - BEING 15% OF THE GROSS INCOME OF 4,41,63,870/ - . THE ASSESSEE CLAIMED THE SAME TO BE CARRIED FORWARD AND SET OFF OF THIS ACCUMULATION AGAINST THE INCOME OF THE SUBSEQUENT YEARS AS THE ENTIRE INCOME HAS BEEN SPENT ON THE OBJECT OF TH E TRUST. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 11(1)(A)WHICH READS AS UNDER: - (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF TWENTY - FIVE PER CENT OF THE INCOME FROM SUCH PROPERTY. 5.FROM THE PLAIN RE ADING OF SECTION 11(1)(A)OF THE ACT IT IS CLEAR THAT IN CASE OF WHOLLY CHARITABLE RELIGIOUS TRUST, IF THE INCOME IS TO BE ACCUMULATED FOR APPLICATION TO THE TRUST PURPOSES IN INDIA, IT MAY BE ACCUMULATED TO THE EXTENT OF 15% OF THE INCOME OF THE TRUST. THE INCOME CONTEMPLATED BY THIS PROVISION IS THE REAL INCOME AND NOT THE INCOME AS ASSESSED OR AS ASSESSABLE.IN VIEW OF THIS PROVISION, WE ARE OF THE VIEW THAT IF THE ACCOUNTS OF THE ASSESSEE TRUST ARE PROPERLY MAINTAINED ACCORDING TO THE PRINCIPLE OF ACCOUNT ANCY, THE ACCUMULATION SHALL BE UP TO 15% OF THE GROSS INCOME AS PER ACCOUNTS AND NOT APPEARING AS ASSESSMENT ORDER. WE FIND THAT EVEN CBDT HAS RECOGNIZED THIS POSITION IN VIEW OF STATUTORY LANGUAGE OF SECTION 11(1)(A)OF THE ACT AND ALSO CIRCULAR ISSUED NO . 5 - P DATED 19 - 06 - 1968, WHEREIN IT IS HELD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION AT THE RATE OF 25% (NOW AFTER AMENDMENT 15%) ON THE GROSS RECEIPTS AND NOT ON THE TOTAL INCOME AS DETERMINED BY THE AO UNDER THE ACT. WE ALSO FIND I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 34 THAT THE ISSUE IS CONFI RMED BY HONBLE SUPREME COURT IN CIT VS. PROGRAMME FOR COMMUNITY ORGANISATION(2001) 248 ITR 1 (SC),WHEREIN IT IS HELD THAT AS THE ASSESSEE TRUST HAS RECEIVED DONATION IN AGGREGATE A SUM OF 2,57,376 AND IT HAS APPLIED THROUGHOUT FOR ITS CHARITABLE PURPOSES THE AMOUNT OF RS. 1,70,369/ - LEVYING A BALANCE OF RS. 87,010/ - AND ON THIS THE HONBLE SUPREME COURT SAID AS PER SECTION 11(1)(A)THAT THE ASSESSEE TRUST WAS ENTITLED TO ACCUMULATE 25% OF THE GROSS INCOME OF RS. 2,57,376/ - AND NOT MERELY 25% OF THE BALANCE OF RS. 87,000/ - . 6.WE ARE OF THE VIEW THAT EVEN THOUGH THE ENTIRE INCOME HAS BEEN APPLIED ON THE OBJECT OF THE TRUST AS APPLICATION OF INCOME AND THERE IS NO INCOME LEFT TO BE ACCUMULATED RATHER THERE IS DEFICIT EVEN THOUGH ASSESSEE IS ENTITLED FOR ACCUMULA TION OR SETTING APART UNDER SECTION 11(1)(A)OF THE ACT AT THE RATE OF 15% OF THE GROSS INCOME. WE ARE OF THE VIEW THAT EXEMPTION AVAILABLE UNDER SECTION 11(1)(A)I.E. 15% OF INCOME IS INVESTED AND NOT SUBJECT TO ANY CONDITION. ACCORDING TO US, THERE IS NO B AR IN LAW AND THERE IS NO SPECIFIC PROVISION IN THE ACT WHICH SAYS THAT SUCH DEDUCTION OF 15% FOR ACCUMULATION WILL NOT BE ALLOWED IN CASE OF DEFICIT BUT SUCH 15% ACCUMULATION IS ALLOWABLE IRRESPECTIVE OF WHETHER 15% OF INCOME HAVE BEEN APPLIED OR NOT. SIM ILAR IS THE POSITION IN THE CASE OF ACIT VS. A.L.N. RAO CHARITABLE TRUST (1995) 216 ITR 697 (SC) HERE THE MEANING OF APPLIED IN THIS CONTEXT MEANS THAT THE INCOME IS ACTUALLY APPLIED FOR THE CHARITABLE OR RELIGIOUS PURPOSES OF THE TRUST BUT THE WORD APPLIE D NEED NOT NECESSARILY IMPLY SPENT. EVEN IF THE INCOME IS IRRETRIEVABLY EARMARKED AND ALLOCATED FOR THE CHARITABLE OR RELIGIOUS PURPOSES OR PURPOSES IT MAY BE UNDER SECTION 11 (1)(A) OF THE ACT. A SUM OF 66,24,580/ - BEING 15% OF THE GROSS INCOME EVEN THOUG H THE ENTIRE INCOME HAS BEEN APPLIED ON THE OBJECT OF THE TRUST AS AN APPLICATION OF INCOME AND THERE LEFT NO INCOME FOR ACCUMULATION. HOWEVER, AS REQUESTED BY THE LEARNED SR. DR THAT THE FACTS ARE NOT CLEARED, THE SAME CAN BE VERIFIED BY THE AO BUT ONLY V ERIFICATION OF FIGURES. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND ALLOW THE APPEAL OF THE ASSESSEE. CONSEQUENTLY, THE APPEAL FOR AY 2011 - 12 IS EXACTLY IDENTICAL AND HENCE, TAKING A CONSISTENT VIEW, WE ALLOW THIS APPEAL ALSO. THE TR IBUNAL WHILE DECIDING THE ISSUE IN THE CASE OF LALJI VELJI CHARITABLE TRUST(SUPRA) HAD REFERRED TO CBDT CIRCULAR 5 - P DATED 19.06.1968 AND TO THE JUDGMENT ( S ) OF HONBLE SUPREME COURT IN THE CASE OF CIT V PROGRAMME FOR COMMUNITY ORGANISATION(2001) 248 ITR 1(SC) AND ACIT V. A.L.N. RAO CHARITABLE TRUST (1995) 216 ITR 697(SC). PERUSAL OF CBDT CIRCULAR NO. 5 - P DATED 19.06.1968 REVEALS THAT IT STIPULATES T HAT THE DEDUCTION U/S 11(1)(A) WILL BE COMPUTED WITH I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 35 REFERENCE TO INCOME OF CHARITABLE ORGANISATION AND NOT IN CONTEXT OF TOTAL INCOME AS DEFINED U/S 2(45) OF THE 1961 ACT AS IS COMPUTED UNDER THE 1961 ACT. THE SAID CIRCULAR IS REPRODUCED HEREUNDER: CIRCULAR : NO . 5 - P(LXX - 6) OF 1968, DATED 19 - 6 - 1968 1. IN BOARD'S CIRCULAR NO. 2 - P(LXX - 5), DATED 15 - 5 - 1963, IT WAS EXPLAINED THAT A RELIGIOUS OR CHARITABLE TRUST, CLAIMING EXEMPTION UNDER SECTION 11(1), MUST SPEND AT LEAST 75 PER CENT OF ITS TOTAL INCOME FOR RELIGIOUS O R CHARITABLE PURPOSES. IN OTHER WORDS, IT WAS NOT PERMITTED TO ACCUMULATE MORE THAN 25 PER CENT OF ITS TOTAL INCOME. THE QUESTION HAS BEEN RECONSIDERED BY THE BOARD AND THE CORRECT LEGAL POSITION IS EXPLAINED BELOW. 2. SECTION 11(1) PROVIDES THAT SUBJECT T O THE PROVISIONS OF SECTIONS 60 TO 63, 'THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR. . . .' THE REFERENCE IN CLAUSE ( A ) IS INVARIABLY TO 'INCOME' AND NOT TO 'TOTAL INCOME'. THE EXPRESSION 'TOTAL INCOME' HAS BEEN SPEC IFICALLY DEFINED IN SECTION 2 (45) AS 'THE TOTAL AMOUNT OF INCOME COMPUTED IN THE MANNER LAID DOWN IN THIS ACT'. IT WOULD, ACCORDINGLY, BE INCORRECT TO ASSIGN TO THE WORD 'INCOME', USED IN SECTION 11(1)(A), THE SAME MEANING AS HAS BEEN SPECIFICALLY ASSIGNED TO THE EXPRESSION 'TOTAL INCOME' VIDE SECTION 2(45). 3 . IN THE CASE OF A BUSINESS UNDERTAKING, HELD UNDER TRUST, ITS 'INCOME' WILL BE THE INCOME AS SHOWN IN THE ACCOUNTS OF THE UNDERTAKING. UNDER SECTION 11(4), ANY INCOME OF THE BUSINESS UNDERTAKING DETER MINED BY THE ITO, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, WHICH IS IN EXCESS OF THE INCOME AS SHOWN IN ITS ACCOUNTS, IS TO BE DEEMED TO HAVE BEEN APPLIED TO PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS, AND HENCE IT WILL BE CHARGED TO TAX UNDER SUB - SE CTION (3). AS ONLY THE INCOME DISCLOSED IN THE ACCOUNT WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11(1), THE PERMITTED ACCUMULATION OF 25 PER CENT WILL ALSO BE CALCULATED WITH REFERENCE TO THIS INCOME. 4. WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERT Y INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSES OF THE TRUST OR OTHERWISE, AND A LSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX UNDER SECTION 11(3) TO THE EXTENT THAT T HEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF THE TRUST FROM OUT OF THE INCOME, COMPUTED IN THE AFORESAID MANNER, SHOULD BE I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 36 NOT LESS THAN 75 PER CENT OF THE LATTER, IF THE TRUST IS TO G ET THE FULL BENEFIT OF THE EXEMPTION UNDER SECTION 11(1). 5. TO SUM UP THE BUSINESS INCOME OF THE TRUST, AS DISCLOSED BY THE ACCOUNTS PLUS ITS OTHER INCOME COMPUTED AS ABOVE, WILL BE THE 'INCOME' OF THE TRUST FOR THE PURPOSES OF SECTION 11(1). FURTHER, THE TRUST MUST SPEND AT LEAST 75 PER CENT OF THIS INCOME AND NOT ACCUMULATE MORE THAN 25 PER CENT THEREOF. THE EXCESS ACCUMULATION, IF ANY, WILL BECOME TAXABLE UNDER SECTION 11(1). THE ABOVE CBDT CIRCULAR CLARIFIES THAT FOR CLAIMING EXEMPTION U/S 11(1)(A) , IT IS THE INCOME OF THE ASSESSEE WHICH IS RELEVANT AND NOT THE TOTAL INCOME AS DEFINED U/S 2(45) OF THE 1961 ACT. IT FURTHER PROVIDES THAT FOR BUSINESS UNDERTAKING, HELD UNDER T RUST, THE INCOME AS IS RECORDED IN THE BOOKS OF THE UNDERTAKING SHALL BE RELEVANT. THIS IS NOT THE ISSUE BEFORE US RATHER THE ISSUE BEFORE US IS THAT WHETHER IN CASE OF DEFICIT/LOSSES WHEREIN EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS ITS OBJECTS HAS ALR EADY EXCEEDED ITS INCOME , WHETHER FURTHER EXEMPTION BY RELYING ON PROVISIONS OF SECOND LIMB OF SECTION 11(1)(A) OF THE 1961 ACT CAN STILL BE CLAIMED. FURTHER , THE SAID DECISION OF TRIBUNAL IN LALJI VELJI CHARITABLE TRUST(SUPRA) RELIED UPON DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT V PROGRAMME FOR COMMUNITY ORGANISATION (SUPRA), WHICH JUDGMENT OF HONBLE SUPREME COURT IS REPRODUCED HEREUNDER: 1 . THE QUESTIONS THAT WERE REFERRED TO THE HIGH COURT FOR CONSIDERATION, AT THE INSTANCE OF THE REVENUE, READ THUS : ' 1 . WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND ON AN INTERPRETATION OF THE RELEVANT PROVISIONS OF THE INCOME - TAX ACT, 1961, THE ASSESSEE IS ENTITLED TO EXEMPTION AT 25 PER CENT ON RS. 2,57,376 OR ONLY ON RS. 87,010 ? 2. WHETHER, ON THE FAC TS AND IN THE CIRCUMSTANCES OF THE CASE, SHOULD NOT THE TRIBUNAL HAVE ACCEPTED THE VIEW OF THE REVENUE EXPRESSED IN THE CIRCULAR, THE SAME BEING CONSISTENT WITH THE RELEVANT PROVISIONS OF THE INCOME - TAX ACT, 1961 ? 3. WHETHER, ON THE FACTS AND IN THE CIRCU MSTANCES OF THE CASE, AND ALSO CONSIDERING THE SCOPE OF THE EARLIER ORDER OF I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 37 THE COMMISSIONER (APPEALS) DATED 18 - 11 - 1983 THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT THE COMMIS - SIONER (APPEALS) HAS RIGHTLY INTERFERED WITH THE ORDER OF THE INCOME - TAX OFFICE R ?' 2. THE ANSWERS BEING IN FAVOUR OF THE ASSESSEE, THE REVENUE IS IN APPEAL BY SPECIAL LEAVE. 3. THE QUESTION THAT REALLY REQUIRES CONSIDERATION IS WHETHER, FOR THE PURPOSES OF SECTION 11( 1 )( A ) OF THE INCOME - TAX ACT, 1961 ('THE ACT'), THE AMOUNT FOR THE GRANT OF EXEMPTION OF TWENTY - FIVE PER CENT SHOULD BE THE INCOME OF THE TRUST OR IT SHOULD BE ITS TOTAL INCOME DETERMINED FOR THE PURPOSES OF ASSESSMENT TO INCOME - TAX. THIS QUESTION HAS TO BE ANSWERED IN THE LIGHT OF THESE FACTS: THE ASSESSEE - TRUST RECEIVED DONATIONS IN THE AGGREGATE SUM OF RS. 2,57,376. IT APPLIED THEREOUT FOR ITS CHARITABLE PURPOSES THE AGGREGATE SUM OF RS. 1,70,369 LEAVING A BALANCE OF RS. 87,010. THE QUESTION IS WHETHER THE ASSESSEE IS ENTITLED TO ACCUMULATE TWENTY - FIVE PER CENT OF RS. 2 ,57,376, AS IT CONTENDS, OR TWENTY - FIVE PER CENT OF RS. 87,010, AS THE REVENUE APPEARED TO CONTEND. SECTION 11( 1 )( A ) READS THUS : '11. INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. ( 1 )( A ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHO LLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMU LATED OR SET APART IS NOT IN EXCESS OF TWENTY - FIVE PER CENT OF THE INCOME FROM SUCH PROPERTY;' 4. HAVING REGARD TO THE PLAIN LANGUAGE OF THE ABOVE PROVISION, IT IS CLEAR THAT A CHARITABLE OR RELIGIOUS TRUST IS ENTITLED TO ACCUMULATE TWENTY - FIVE PER CENT OF ITS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. FOR THE PRESENT PURPOSES, THE DONATIONS, THE ASSESSEE RECEIVED, IN THE SUM OF RS. 2,57,376, WOULD CONSTITUTE ITS PROPERTY AND IT IS ENTITLED TO ACCUMULATE TWENTY - FIVE PER CENT THEREOUT. IT IS UNCLEAR ON W HAT BASIS THE REVENUE CONTENDED THAT IT WAS ENTITLED TO ACCUMULATE ONLY TWENTY - FIVE PER CENT OF RS. 87,010. 5. FOR THE AFORESAID REASONS, THE CIVIL APPEAL IS DISMISSED. 6. NO ORDER AS TO COSTS. THE QUESTION BEFORE HONBLE SUPREME COURT IN THE ABOVE CASE O F CIT V PROGRAMME FOR COMMUNITY ORGANISATION(SUPRA) WAS WHETHER ACCUMULATION OF INCOME AS IS PROVIDED U/S 11(1)(A) SHALL BE 25% OF THE INCOME OF THE TRUST OR 25% OF THE INCOME COMPUTED UNDER 1961 ACT I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 38 FOR ASSESSMENT PURPOSES. THE HONBLE SUPREME COURT HELD THAT ACCUMULATION OF INCOME SHALL BE ALLOWED U/S 11(1)(A) TO THE TUNE OF 25% OF THE INCOME OF THE TRUST AND NOT ON TOTAL INCOME AS IS COMPUTED FOR ASSESSMENT OF INCOME - TAX WHICH IS REFERRED TO IN PROVISIONS OF SECTION 2(45) OF THE 1961 ACT . THIS IS NOT THE ISSUE BEFORE US RATHER THE ISSUE BEFORE US IS THAT WHETHER IN CASE OF DEFICIT/LOSSES WHEREIN EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS ITS OBJECTS HAS ALREADY EXCEEDED ITS INCOME , WHETHER FUR THER EXEMPTION BY RELYING ON PROVISIONS OF SECOND LIMB OF SECTION 11(1)(A) OF THE 1961 ACT CAN STILL BE CLAIMED. THE SECOND DECISION RELIED UPON BY TRIBUNAL IN LALJI VELJI CHARITABLE TRUST(SUPRA) IS HONBLE SUPREME COURT IN THE CASE OF ACIT V. A.L.N.RAO C HARITABLE TRUST (1995) 216 ITR 697(SC). THE HONBLE SUPREME COURT HAS IN DETAILED MANNER EXPLAINED THE INTER - P LAY BETWEEN PROVISIONS OF SECTION 11(1)(A) AND 11(2) OF THE 1961 ACT, BY HOLDING AS UNDER: 10. BEFORE WE PROCEED TO DEAL WITH THE RIVAL CONTENTIONS CENTERING ROUND THE TRUE SCOPE AND AMBIT OF SECTION 11(1)( A ) AND SECTION 11(2) AS APPLICABLE TO THE ASSESSMENT YEAR IN QUESTION, NAMELY, 1969 - 70, IT WOULD BE APPOSITE TO REFER TO THESE PROVISIONS AT THE OUTSET. THESE PROVISIONS, AS THEY STOOD AT THE RELEVANT TIME, READ AS UNDER : '11. INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME : ( A )INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED IS NOT IN EXCESS OF 25 PER CENT OF THE INCOME FROM THE PROPERTY OR RUPEES TEN THOUSAND, WHICHEVER IS HIGHER; ** ** ** (2) WHERE THE PERSONS IN RECEIPT OF THE INCOME HAVE COMPLIED WITH THE FOLLOWING CONDITIONS, THE RESTRICTION SPECIFIED IN CLAUSE ( A ) OR I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 39 CLAUSE ( B )OF SUB - SECTION (1) AS RESPECTS ACCUMULATION OR SETTING APART SHALL NOT APPLY FOR THE PERIOD DURING WHICH THE SAID CONDITIONS REMAIN COMPLIED WITH ( A ) SUCH PERSONS HAVE, BY NOTICE IN WRITING, GIVEN TO THE INCOME - TAX OFFICER IN THE PRESCRIBED MANNER, SPECIFIED THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR S ET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS; ( B ) THE MONEY SO ACCUMULATED OR SET APART IS INVESTED IN ANY GOVERNMENT SECURITY AS DEFINED IN CLAUSE (2) OF SECTION 2 OF THE PUBLIC DEBT ACT, 1944 (XVIII OF 1944), OR IN ANY OTHER SECURITY WHICH MAY BE AP PROVED BY THE CENTRAL GOVERNMENT IN THIS BEHALF.' SECTION 11 UNDERWENT AN AMENDMENT BY THE TAXATION LAWS (AMENDMENT) ACT, 1975. AS WE ARE NOT CONCERNED WITH THESE AMENDED PROVISIONS IN THE PRESENT CASE, WE NEED NOT DILATE ON THEM. 11. A MERE LOOK AT SECTION 11(1)( A ) , AS IT STOOD AT THE RELEVANT TIME, CLEARLY SHOWS THAT OUT OF TOTAL INCOME ACCRUING TO A TRUST IN THE PREVIOUS YEAR FROM PROPERTY HELD BY IT WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE, TO THE EXTENT THE INCOME IS APPLIED FOR SUCH RELIGIOUS OR CHARITABLE PURPOSE, THE SAME WILL GET OUT OF THE TAX NET BUT SO FAR AS THE INCOME WHICH IS NOT SO APPLIED DURING THE PREVIOUS YEAR IS CONCERNED AT LEAST 25 PER CENT OF SUCH INCOME OR RS. 10,000, WHICHEVER IS HIGHER, WILL BE PERMITTED TO BE ACCUMULATED FOR CHARITABLE OR RELIGIOUS PURPOSE AND IT WILL ALSO GET EXEMPTED FROM THE TAX NET. THEN FOLLOWS SUB - SECTION (2) WHICH SEEKS TO LIFT THE RESTRICTION OR THE CEILING IMPOSED ON SUCH EXEMPTED ACCUMULATED INCOME DURING THE PREVIOUS YEAR AND ALSO BRINGS SUCH FURTHER ACCUMULATED INCOME OUT OF THE TAX NET IF THE CONDITIONS LAID DOWN BY SUB - SECTION (2) OF SECTION 11 ARE FULFILLED MEANING THEREBY THE MONEY SO ACCUMULATED IS SET APART TO BE INVESTED IN THE GOVERNMENT SECURITIES, ETC., AS LAID DOWN BY C LAUSE ( B )OF SUB - SECTION (2) OF SECTION 11 APART FROM THE PROCEDURE LAID DOWN BY CLAUSE ( A ) OF SECTION 11(2) BEING FOLLOWED BY THE ASSESSEE - TRUST . TO HIGHLIGHT THIS POINT WE MAY TAKE AN ILLUSTRATION. IF RS. 1 LAKH ARE EARNED AS THE TOTAL INCOME OF THE PREVI OUS YEAR BY THE TRUST FROM PROPERTY HELD BY IT WHOLLY FOR CHARITABLE AND RELIGIOUS PURPOSES AND IF RS. 20,000 ARE ACTUALLY APPLIED DURING THE PREVIOUS YEAR BY THE SAID TRUST TO SUCH CHARITABLE OR RELIGIOUS PURPOSES THE INCOME OF RS. 20,000 WILL GET EXEMPTE D FROM BEING CONSIDERED FOR THE PURPOSE OF INCOME - TAX UNDER FIRST PART OF SECTION 11(1). SO FAR AS THE REMAINING RS. 80,000 ARE CONCERNED, IF THEY COULD NOT BE ACTUALLY APPLIED FOR SUCH RELIGIOUS OR CHARITABLE PURPOSES I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 40 DURING THE PREVIOUS YEAR THEN AS PER SECTION 11(1)( A ) AT LEAST 25 PER CENT OF SUCH TOTAL INCOME FROM PROPERTY OR RS. 10,000, WHICHEVER IS HIGHER, WILL ALSO EARN EXEMPTION FROM BEING CONSIDERED AS INCOME FOR THE PURPOSE OF INCOME - TAX, THAT IS, RS. 25,000 WILL, THUS, GET EXCLUDED FROM THE TAX N ET. THUS, OUT OF THE TOTAL INCOME OF RS. 1,00,000 WHICH HAS ACCRUED TO THE TRUST RS. 25,000 WILL EARN EXEMPTION FROM PAYMENT OF INCOME TAX AS PER SECTION 11(1)( A ) SECOND PART. THEN FOLLOWS SUB - SECTION (2) WHICH STATES THAT THE CEILING OR THE LIMIT OR THE R ESTRICTION OF ACCUMULATION OF INCOME TO THE EXTENT OF 25 PER CENT OF THE INCOME OR RS. 10,000, WHICHEVER IS HIGHER, FOR EARNING INCOME - TAX EXEMPTION AS ENGRAFTED UNDER SECTION 11(1)( A ) WILL GET LIFTED IF THE MONEY SO ACCUMULATED IS INVESTED AS LAID DOWN BY SECTION 11(2)( B ) MEANING THEREBY OUT OF THE TOTAL ACCUMULATED INCOME OF RS. 80,000 ACCRUING DURING THE PREVIOUS YEAR AND WHICH COULD NOT BE SPENT FOR CHARITABLE OR RELIGIOUS PURPOSES BY THE TRUST BALANCE OF RS. 55,000 IF INVESTED AS LAID DOWN BY SUB - SECTI ON (2) OF SECTION 11 WILL ALSO GET EXCLUDED FROM THE TAX NET. BUT FOR SUCH INVESTMENT AND IF SECTION 11(1) ALONE HAD APPLIED RS. 55,000 BEING THE BALANCE OF ACCUMULATED INCOME WOULD HAVE BEEN COVERED BY THE TAX NET. THE LEARNED COUNSEL FOR THE REVENUE SUBM ITTED THAT THE INVESTMENT AS CONTEMPLATED BY SUB - SECTION ( 2 )( B )OF SECTION 11 MUST BE INVESTMENT OF ALL ACCUMULATED INCOME IN GOVERNMENT SECURITIES, ETC., NAMELY, 100 PER CENT OF THE ACCUMULATED INCOME AND NOT ONLY 75 PER CENT THEREOF. AND IF THAT IS NOT D ONE THEN ONLY THE INVESTED ACCUMULATED INCOME TO THE EXTENT OF 75 PER CENT WILL GET EXCLUDED FROM INCOME TAX ASSESSMENT. BUT SO FAR THE REMAINING 25 PER CENT OF THE ACCUMULATED INCOME IS CONCERNED, IT WILL NOT EARN SUCH EXEMPTION. IT IS DIFFICULT TO APPREC IATE THIS CONTENTION. THE REASON IS OBVIOUS. SECTION 11(1)( A ) OPERATES ON ITS OWN. BY ITS OPERATION TWO TYPES OF INCOME EARNED BY THE TRUST DURING THE PREVIOUS YEAR FROM ITS PROPERTIES ARE GIVEN EXEMPTION FROM INCOME - TAX, ( I ) THAT PART OF THE INCOME OF PRE VIOUS YEAR WHICH IS ACTUALLY SPENT FOR CHARITABLE OR RELIGIOUS PURPOSES IN THAT YEAR; AND ( II ) OUT OF THE UNSPENT ACCUMULATED INCOME OF THE PREVIOUS YEAR 25 PER CENT OF SUCH TOTAL PROPERTY INCOME OR RS. 10,000, WHICHEVER IS HIGHER, CAN BE PERMITTED TO BE A CCUMULATED BY THE TRUST, EARMARKED FOR SUCH CHARITABLE OR RELIGIOUS PURPOSES. SUCH 25 PER CENT OF THE INCOME OR RS. 10,000, WHICHEVER IS HIGHER, WILL ALSO GET EXEMPTED FROM INCOME - TAX. THAT EXHAUSTS THE OPERATION OF SECTION 11(1)( A ). THEN FOLLOWS SUB - SECTION (2) WHICH NATURALLY DEALS WITH THE QUESTION OF INVESTMENT OF THE BALANCE OF ACCUMULATED INCOME WHICH HAS STILL NOT EARNED EXEMPTION UNDER SUB - SECTION (1)( A ). SO FAR AS THAT BALANCE OF I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 41 ACCUMULATED INCOME IS CONCERNED, THAT ALSO CAN EARN EXEMPTION FROM INCOME - TAX MEANING THEREBY THE CEILING OR THE LIMIT OF EXEMPTION OF ACCUMULATED INCOME FROM INCOME - TAX AS IMPOSED BY SUB - SECTION (1)( A ) OF SECTION 11 WOULD GET LIFTED IF ADDITIONAL ACCUMULATED INCOME BEYOND 25 PER CENT OR RS. 10,000 WH ICHEVER IS HIGHER, AS THE CASE MAY BE, IS INVESTED AS LAID DOWN BY SECTION 11(2) AFTER FOLLOWING THE PROCEDURE LAID DOWN THEREIN. THEREFORE, SUB - SECTION (2) ONLY WILL HAVE TO OPERATE QUA THE BALANCE OF 75 PER CENT OF THE TOTAL INCOME OF THE PREVIOUS YEAR O R INCOME BEYOND RS. 10,000 WHICHEVER IS HIGHER, WHICH HAS NOT GOT THE BENEFIT OF TAX EXEMPTION UNDER SUB - SECTION (1)( A ) OF SECTION 11. IF THE LEARNED COUNSEL FOR THE REVENUE IS RIGHT AND IF 100 PER CENT OF THE ACCUMULATED INCOME OF THE PREVIOUS YEAR IS TO BE INVESTED UNDER SUB - SECTION (2) OF SECTION 11 TO GET EXEMPTION FROM INCOME - TAX THEN THE CEILING OF 25 PER CENT OR RS. 10,000, WHICHEVER IS HIGHER, WHICH IS AVAILABLE FOR ACCUMULATION OF INCOME OF THE PREVIOUS YEAR FOR THE TRUST TO EARN EXEMPTION FROM INC OME - TAX AS LAID DOWN BY SECTION 11(1)( A ) WOULD BE RENDERED REDUNDANT AND THE SAID EXEMPTION PROVISION WOULD BECOME OTIOS. IT HAS TO BE KEPT IN VIEW THAT OUT OF THE ACCUMULATED INCOME OF THE PREVIOUS YEAR AN AMOUNT OF RS. 10,000 OR 25 PER CENT OF THE TOTAL INCOME FROM PROPERTY, WHICHEVER IS HIGHER, IS GIVEN EXEMPTION FROM INCOME - TAX BY SECTION 11(1)( A ) ITSELF. THAT EXEMPTION IS UNFETTERED AND NOT SUBJECT TO ANY CONDITIONS. IN OTHER WORDS, IT IS AN ABSOLUTE EXEMPTION. IF SUB - SECTION (2) IS SO READ AS SUGGESTE D BY THE LEARNED COUNSEL FOR THE REVENUE, WHAT IS AN ABSOLUTE AND UNFETTERED EXEMPTION OF ACCUMULATED INCOME AS GUARANTEED BY SECTION 11(1)( A ) WOULD BECOME A RESTRICTED EXEMPTION AS LAID DOWN BY SECTION 11(2). SECTION 11(2) DOES NOT OPERATE TO WHITTLE DOWN OR TO CUT ACROSS THE EXEMPTION PROVISIONS CONTAINED IN SECTION 11(1)( A ) SO FAR AS SUCH ACCUMULATED INCOME OF THE PREVIOUS YEAR IS CONCERNED. IT HAS ALSO TO BE APPRECIATED THAT SUB - SECTION (2) OF SECTION 11 DOES NOT CONTAIN ANY NON OBSTANTE CLAUSE LIKE 'NO TWITHSTANDING THE PROVISIONS OF SUB - SECTION (1)'. CONSEQUENTLY, IT MUST BE HELD THAT AFTER SECTION 11(1)( A ) HAS FULL PLAY AND IF STILL ANY ACCUMULATED INCOME OF THE PREVIOUS YEAR IS LEFT TO BE DEALT WITH AND TO BE CONSIDERED FOR THE PURPOSE OF INCOME - TAX E XEMPTION, SUBSECTION (2) OF SECTION 11 CAN BE PRESSED IN SERVICE AND IF IT IS COMPLIED WITH THEN SUCH ADDITIONAL ACCUMULATED INCOME BEYOND 25 PER CENT OR RS. 10,000, WHICHEVER IS HIGHER, CAN ALSO EARN EXEMPTION FROM INCOME - TAX ON COMPLIANCE WITH THE CONDIT IONS LAID DOWN BY SUB - SECTION (2) OF SECTION 11. IT IS TRUE THAT SUB - SECTION (2) OF SECTION 11 HAS NOT CLEARLY MENTIONED THE EXTENT OF THE ACCUMULATED INCOME WHICH IS TO BE INVESTED. BUT ON A CONJOINT READING OF THE AFORESAID TWO PROVISIONS OF SECTIONS 11( 1) AND 11(2) THIS IS THE ONLY RESULT WHICH CAN FOLLOW. IT IS ALSO TO BE KEPT IN VIEW THAT UNDER THE EARLIER INDIAN INCOME - TAX ACT, 1922 EXEMPTION WAS AVAILABLE TO CHARITABLE TRUSTS WITHOUT ANY RESTRICTION UPON THE ACCUMULATED INCOME. THERE WAS A CHANGE IN I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 42 THIS RESPECT UNDER THE ACT. UNDER THE ACT, ANY INCOME ACCUMULATED IN EXCESS OF 25 PER CENT OR RS. 10,000, WHICHEVER IS HIGHER, IS TAXABLE UNDER SECTION 11(1)( A ) UNLESS THE SPECIAL CONDITIONS REGARDING ACCUMULATION AS LAID DOWN IN SECTION 11(2) ARE COMPLIED WITH. IT IS CLEAR, THEREFORE, THAT IF THE ENTIRE INCOME RECEIVED BY A TRUST IS SPENT FOR CHARITABLE PURPOSES IN INDIA, THEN IT WILL NOT BE TAXABLE BUT IF THERE IS A SAVING, I.E., TO SAY AN ACCUMULATION OF 25 PER CENT OR RS. 10,000, WHICHEVER IS HIGHER, IT WILL NOT BE INCLUDED IN THE TAXABLE INCOME. SECTION 11(2) QUOTED ABOVE FURTHER LIBERALIZES AND ENLARGES THE EXEMPTION. A COMBINED READING OF BOTH THE PROVISIONS QUOTED ABOVE WOULD CLEARLY SHOW THAT SECTION 11(2) WHILE ENLARGING THE SCOPE OF EXEMPTION REMO VES THE RESTRICTION IMPOSED BY SECTION 11(1)( A ) BUT IT DOES NOT TAKE AWAY THE EXEMPTION ALLOWED BY SECTION 11(1)( A ). ON THE EXPRESS LANGUAGE OF SECTIONS 11(1) AND 11(2) AS THEY STOOD ON THE STATUTE BOOK AT THE RELEVANT TIME NO OTHER VIEW IS POSSIBLE. 12. I N THE LIGHT OF THE AFORESAID DISCUSSION AND KEEPING IN VIEW THE ILLUSTRATION WHICH WE HAVE GIVEN EARLIER THE COMBINED OPERATION OF SECTION 11(1)( A ) AND SECTION 11(2) AS APPLICABLE AT THE RELEVANT TIME WOULD YIELD THE FOLLOWING RESULT: ( I ) IF THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES DURING THE PREVIOUS YEAR IS RS. 1 LAKH AND IF RS. 20,000 THEREFROM ARE ACTUALLY APPLIED TO SUCH PURPOSES IN INDIA THEN THOSE RS. 20,000 WILL GET EXEMPTED FROM PAYMENT OF INC OME - TAX AS PER THE FIRST PART OF SECTION 11(1)( A ) . ( II ) OUT OF THE REMAINING ACCUMULATED INCOME OF RS. 80,000 FOR THE PREVIOUS YEAR , A FURTHER SUM OF RS. 25,000 WILL GET EXEMPTED FROM PAYMENT OF INCOME - TAX AS PER SECOND PART OF SECTION 11(1)( A ). THUS, OUT OF THE TOTAL INCOME DERIVED FROM PROPERTY AS AFORESAID DURING THE PREVIOUS YEAR, THAT IS, RS. 1 LAKH, RS. 45,000 IN ALL, WILL GET EXCLUDED FROM THE TAX NET ON A COMBINED OPERATION OF FIRST AND SECOND PART OF SECTION 11(1)( A ) . ( III ) THE AFORESAID CEILING OF RS. 25,000 OF ACCUMULATED INCOME FROM PROPERTY OF PREVIOUS YEAR, WILL GET LIFTED UNDER SECTION 11(2) TO THE EXTENT THE BALANCE OF SUCH ACCUMULATED INCOME IS INVESTED AS LAID DOWN BY SECTION 11(2). TO TAKE AN ILLUSTRATION IF, SAY, A N ADDITIONAL AMOUNT OF RS. 20,000 OUT OF THE BALANCE OF ACCUMULATED INCOME OF RS. 55,000 IS INVESTED AS PER SECTION 11(2) THEN I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 43 THIS ADDITIONAL AMOUNT OF RS. 20,000 OF ACCUMULATED INCOME WILL GET EXCLUDED FROM THE TAX NET AS PER SECTION 11(2). ( IV ) THE R EMAINING BALANCE OF THE ACCUMULATED INCOME OUT OF RS. 55,000, THAT IS, RS. 35,000 IF NOT INVESTED AS PER SUB - SECTION (2) OF SECTION 11 WILL BE ADDED TO THE TAXABLE INCOME OF THE TRUST AND WILL NOT GET EXEMPTED FROM THE TAX NET. ( V ) IF ON THE OTHER HAND THE ENTIRE REMAINING ACCUMULATED INCOME OF RS. 55,000 IS WHOLLY INVESTED AS PER SECTION 11(2) THE SAID ENTIRE AMOUNT OF RS. 55,000 WILL GET EXEMPTED FROM THE TAX NET. 13. WE MAY ALSO AT THIS STAGE MENTION THAT THE KERALA HIGH COURT IN H.H. MARTHANDA VARMA ELAYARAJA OF TRAVANCORE TRUST'S CASE ( SUPRA ) , THE MADHYA PRADESH HIGH COURT IN MOHANLAL HARGOVINDDAS PUBLIC CHARITABLE TRUST'S CASE ( SUPRA ) , THE BOMBAY HIGH COURT IN TRUSTEES OF BHAT FAMILY RESEARCH FOUNDATION'S CASE ( SUPRA ) AND THE MADRAS HIGH COURT IN C.M. KOTHARI CHARITABLE TRUST'S CASE ( SUPRA ) HAVE TAKEN THE SAME VIEW AS THE KARNATAKA HIGH COURT IN THE PRESENT CASE. WE APPROVE THE VIEW TAKEN IN THE AFORESAID DECISIONS. WE ALSO APPROVE THE SIMILAR VIEW TAKEN BY THE JAMMU & KASHMIR HIGH COURT IN SHRI KRISHEN CHAND CHARITABLE TRUST'S CASE ( SUPRA ) . THE LEARNED COUNSEL FOR THE REVENUE, THEREFORE, HAS MADE OUT NO CASE FOR OUR INTERFERENCE WITH THE DECISION RENDERED BY THE DIVISION BENCH OF THE KARNATAKA HIGH COURT. 14. IN THE RESULT, THIS APPEAL FAILS AND IS DISMISSED. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE WILL BE NO ORDER AS TO COSTS. THUS, THE AFORESAID JUDGMENT OF HONBLE SUPREME COURT IN A.L.N RAO CHARITABLE TRUST(SUPRA) HAS CLEARLY LAID DOWN T HAT FOR COMPUTING INCOME OF THE TRUST CHARGEABLE TO TAX, FIRST EXPENDITURE INCURRED TOWARDS THE OBJECT OF THE TRUST BY THE TAX - PAYER HAS TO BE REDUCED FROM INCOME OF THE TRUST AS PROVIDED IN THE FIRST LIMB OF SECTION 11(1)(A). THEREAFTER, OUT OF THE REMAINING UNSPENT INCOME AFTER ADJUSTING EXPENDITURE , FURTHER EXEMPTION OF ACCUMULATION OF INCOME TO T HE EXTENT OF 25% OR RS. 10000 ( NOW 15%) WHICH EVER IS HIGHER TO BE COMPUTED ON INCOME SHALL BE PROVIDED BY INVOKING SECOND LIMB OF SECTION 11(1)(A) OF THE 1961 ACT . SAY FOR EXAMPLE , INCOME DERIVED BY I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 44 TAX - PAYER FROM PROPERTY HELD UNDER CHAR ITABLE PURPOSES IS RS. 1,00,000/ - AND AN AMOUNT OF EXPENDITURE TOWARDS OBJECT OF THE TRUST WAS RS. 20,000/ - . THE UNSPENT AMOUNT IS RS. 80,000/ - , THEN IN THAT CASE FURTHER EXEMPTION SHALL BE PROVIDED TO THE TUNE OF RS. 1 5,000/ - SO AS TO REDUCE TAXABLE IN C OME TO RS. 6 5,000/ - . THUS , IT IS ONLY OUT OF THE UNSPENT AMOUNT OF INCOME AFTER EXHAUSTING FIRST LIMB OF SECTION 11(1)(A), THE SECOND LIMB OF SECTION 11(1)(A) SHALL COME INTO PLAY AND IN CASE EXPENDITURE OF THE TAX - PAYER TRUST IS ALREADY MORE THAN ITS INC OME WHICH EXHAUSTED ITS INCOME , THEN ONLY FIRST LIMB OF SECTION 11(1)(A) SHALL COME INTO PLAY AND SECOND LIMB OF SECTION 11(1)(A) CAN NEVER BE APPLIED . THIS WAS THE MANDATE OF AFORESAID DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. A.L.N.RAO CHA RITABLE TRUST(SUPRA). HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS) (SUPRA) HAS HELD THAT EXCESS OF EXPENDITURE INCURRED TOWARDS THE OBJECTS OF THE TRUST OVER ITS INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSES I .E. DEFICIT/LOSSES IS TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME/SURPLUS OF SUBSEQUENT YEARS. THE HONBLE BOMBAY HIGH COURT NEVER HELD THAT OVER AND ABOVE EXCESS OF EXPENDITURE INCURRED TOWARDS OBJECTS OF THE TRUST OVER ITS INCO ME FROM PROPERTY HELD FOR CHARITABLE PURPOSES , THERE SHALL BE AN ADDITIONAL EXEMPTION ALLOWED TO THE TUNE OF 15% OF INCOME BY WAY OF ACCUMULATION OF INCOME . THIS DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SEL E CTION (IBPS) (SUPRA) HAS BEEN FOLLOWED BY HONBLE BOMBAY HIGH COURT IN SEVERAL OTHER CASES . THESE JUDGMENTS OF HONBLE BOMBAY HIGH COURT IN OTHER CASES HAS BEEN REFERRED IN THE ORDER OF THE TRIBUNAL IN THE CASE OF ITO V. KAIVALYA EDUCATION FOUNDATION IN ITA NO. 5575/MUM/2017 VIDE ORDERS DATED 08 TH FEBRUARY 2019 WHEREIN ONE OF US(ACCOUNTANT MEMBERS) WAS PART OF THE DB ADJUDICATING THAT APPEAL AND THE OPERATIVE PART OF THE ORDER IS REPRODUCED IN PRECEDING PARAS OF THIS ORDER. THE SLP FILED BY REVENUE WITH HONBL E SUPREME COURT CHALLENGING DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. M/S. GEM & JEWELLERY I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 45 EXPORTS PROMOTION COUNCIL (ITA (LOD) NO. 1133 OF 2010) DATED 15.02.2011 HAS ALSO BEEN DISMISSED BY THE HON'BLE SUPREME COURT IN CC 135 12/2011 VIDE ORDERS DATED 09.09.2011. SIMILARLY SLP FILED BY REVENUE IN THE CASE OF MIDC(SUPRA) HAS BEEN DISMISSED BY HONBLE SUPREME COURT VIDE ORDERS DATED 13.12.2017, IN CA NO. 009813/2014 REGISTERED ON 13.10.2014 IN SLP(C) NO. 009891/2014 IN DIT V. MIDC. MIDC(SUPRA) . NONE OF THE JUDGMENTS OF HONBLE BOMBAY HIGH COURT HELD THAT 15% ACCUMULATION OF INCOME AS PROVIDED UNDER SECOND LIMB OF SECTION 11(1)(A) SHALL BE IN ADDITION TO EXCESS OF EXPENDITURE OVER INCOME WHICH WAS ALLOWED TO BE CARRIED FORWARD TO SUBSEQUENT YEARS TO BE SET OFF AGAINST INCOME/SURPLUS OF SUBSEQUENT YEARS BY INVOKING FIRST LIMB OF PROVISIONS OF SECTION 11(1)(A) OF THE 1961 ACT . WE HAVE ALSO OBSERVED THAT LEARNED CIT(A) WHILE DECIDING THIS ISSUE AGAINST ASSESSEE AND IN FAVOUR OF REVENUE HAD HELD THAT IN CASE OF DEFICIT WHEREIN EXPENDITURE INCURRED TOWARDS OBJECTS OF THE TRUST HAS EXCEEDED ITS INCOME FROM PROPERTY HELD FOR CHARITABLE PRUPOSES , NO FURTHER ACCUMULATION OF 15% OF INCOME AS IS PROVIDED IN SECOND LIMB OF PROVISIONS OF S ECTION 11(1)(A) CAN BE ALLOWED . THE LEARNED CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF REVENUE HAS RELIED UPON FOLLOWING ORDERS OF THE TRIBUNAL : A ) DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY IN ITA NO. 4309/MUM/2005 , ORDER DATED 30.04.2013 (2008) 116 TTJ 673 (MUM - TRIB.) B ) ITO(E) V. LAKSHMI AND USHA MITTAL( FORMERLY KNOWN AS LNM FOUNDATION) IN ITA NO. 5383/MUM/2011 THE TRIBUNAL IN THE CASE OF DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY (SUPRA) HAS HELD IN FAVOUR OF REVENUE BY HOLDING THAT FURTHER EXEMPTION BY WAY OF ACCUMULATION OF INCOME TO THE TUNE OF 15% OF INCOME CANNOT BE ALLOWED IN CASE EXPENDITURE OF THE TRUST HAS I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 46 ALREADY EXCEEDED ITS INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSES , BY HOLDING AS UNDER: 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM CAREFUL PERUSAL OF THE RECORD, WE FIND THAT SECTION 11 RELATES TO THE COMPUTATION OF INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. IN ORDER TO SUPPORT A CLAIM FOR EXEMPTION OF INC OME UNDER THE PROVISIONS OF THIS SECTION, THE FOLLOWING CONDITIONS MUST BE SATISFIED; (1) THE INCOME MUST BE DERIVED FROM PROPERTY; (2) SUCH A PROPERTY SHOULD BE HELD UNDER TRUST OR OTHER LEGAL OBLIGATIONS; (3) SUCH TRUST OR LEGAL OBLIGATIONS SHOULD BE WHOLLY FOR RELIGIOUS OR CHARITABLE PURPOSES; (4) SUCH INCOME IS APPLIED OR ACCUMULATED FOR THE APPLICATION TO SUCH RELIGIOUS OR CHARITABLE PURPOSES IN INDIA. 8. UNLESS THE ABOVE CONDITIONS ARE FULFILLED, THE ASSESSEE CANNOT SUCCESSFULLY CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. THE EXEMPTION UNDER THIS SECTION IS SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63 OF THE ACT WHICH DEALS WITH THE SITUATIONS WHERE IN COME FROM ESTATE IS NOT LIABLE TO TAX IN THE HANDS OF THE RECIPIENT OF THAT INCOME BUT IN THE HANDS OF ANOTHER PERSON. WE HAVE ALSO CAREFULLY EXAMINED THE PROVISIONS OF SUB - SECTION (1)( A ) OF SECTION 11 AND THE CONTROVERSY INVOLVED BEFORE US AND WE FIND THA T CLAUSE ( A ) OF SUB - SECTION (1) OF SECTION 11 DEALS WITH THE EXEMPTION OF INCOME IN TWO SITUATIONS; (1) WHERE THE INCOME DERIVED FROM SUCH PROPERTY IS APPLIED TO THE PURPOSES OF THE TRUST IN INDIA, THE ENTIRE INCOME SHALL BE EXEMPTED OR SHALL NOT BE INCLUD ED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME (2) WHERE THE ENTIRE INCOME DERIVED FROM THE PROPERTY COULD NOT BE APPLIED FOR THE PURPOSES OF THE TRUST BUT SUCH INCOME IS ACCUMULATED OR SET APART TO THE EXTENT OF 25 PER CENT OF SUCH INCOME FOR APPLICATION TO SUCH PURPOSES, THE SAID ACCUMULATED OR SET APART INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR. THE TOTAL LIMIT OF EXEMPTION IS 100 PER CENT OF THE INCOME DERIVED FROM THE PROPERTY. IT HAS NOT BEEN MENTIONED ANYWHERE IN THIS CLAUSE THAT FIRST OF ALL 25 PER CENT OF THE TOTAL INCOME IS TO BE ACCUMULATED OR SET APART FOR APPLICATION TO THE PURPOSES OF THE TRUST IN INDIA IN SUCCEEDING YEAR AND THEN THE REMAINING INCOME IS TO BE APPLIED FOR SUCH PURP OSES AND IN CASE THE APPLICATION OF INCOME IS MORE THAN THE REMAINING INCOME, I.E., 75 PER CENT OF THE TOTAL INCOME THE DEFICIT WOULD BE CARRIED FORWARD FOR ITS SET OFF IN SUCCEEDING YEAR AGAINST THE INCOME OF THE TRUST . IF THIS INTERPRETATION IS TO BE ACC EPTED IT WOULD RESULT INTO AN EXEMPTION MORE THAN THE INCOME DERIVED FROM THE PROPERTY HELD BY THE TRUST AND THIS CANNOT BE THE INTENTION OF THE LEGISLATURE. THESE PROVISIONS ARE BROUGHT TO THE STATUTE TO ENCOURAGE THE TRUST TO APPLY ITS INCOME DERIVED FRO M PROPERTY FOR THE RELIGIOUS OR CHARITABLE PURPOSES OF THE TRUST IN THE SAME YEAR AND IF NOT POSSIBLE THEY CAN ACCUMULATE OR SET APART THE INCOME BUT IT IS RESTRICTED TO 25 PER CENT OF THE TOTAL INCOME FOR ITS APPLICATION FOR THE RELIGIOUS AND CHARITABLE P URPOSES OF THE TRUST. IF ENTIRE INCOME IS APPLIED FOR THE PURPOSE OF THE TRUST AND NOTHING IS LEFT I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 47 O U T, NOTHING CAN BE ACCUMULATED OR SET APART FOR ITS APPLICATION FOR THE PURPOSES OF THE TRUST IN SUCCEEDING YEAR. WE, HOWEVER, FOR THE SAKE OF REFERENCE EXT RACT THE PROVISIONS OF SECTION 11(1)( A ) OF THE ACT AS UNDER : '11. INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES : (1) ( A ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA, AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF TWENTY - FIVE PER CENT OF THE INCOME FROM SUCH PROPERTY.' 9. WE HAVE CAREFULLY EXAMINED THE JUDGMENTS REFERRED TO BY THE PARTIES AND WE FIND THAT THE JUDGMENTS REFERRED TO BEFORE US WERE RENDERED ON DIFFERENT ISSUES AND AS SUCH THE RATIO LAID DOWN THEREIN CANNOT BE APPLIED TO THE PRESENT CASE. IN THE CASE OF PROGRA MME FOR COMMUNITY ORGANIZATION ( SUPRA ), THE ISSUE IN DISPUTE WAS WITH RESPECT TO THE PERCENTAGE OF ACCUMULATION OF INCOME; WHETHER IT SHOULD BE 25 PER CENT OF THE TOTAL INCOME OR 25 PER CENT OF THE BALANCE AMOUNT/REMAINDER AFTER APPLICATION OF THE INCOME F OR CHARITABLE PURPOSES OF THE TRUST. THE FACTS OF THAT CASE ARE THAT THE ASSESSEE - TRUST RECEIVED DONATIONS IN THE AGGREGATE OF RS. 2,57,376. IT APPLIED FOR ITS CHARITABLE PURPOSES THE AGGREGATE SUM OF RS. 1,70,369 LEAVING A BALANCE OF RS. 87,010. THE DISPU TE AROSE WHETHER THE ASSESSEE IS ENTITLED TO ACCUMULATE 25 PER CENT OF RS. 2,57,376 OR 25 PER CENT OF THE BALANCE AMOUNT OF RS. 87,010. THE APEX COURT HAS CATEGORICALLY HELD THAT THE CHARITABLE OR RELIGIOUS TRUST IS ENTITLED TO ACCUMULATE 25 PER CENT OF IT S INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST. THEIR LORDSHIPS FURTHER HELD THAT FOR THE PRESENT PURPOSES, THE DONATIONS, THE ASSESSEE RECEIVED IN A SUM OF RS. 2,57,376 WOULD CONSTITUTE ITS PROPERTY AND IS ENTITLED TO ACCUMULATE 25 PER CENT THERE OF. 10. IN BOARD'S CIRCULAR NO. 2 - P(LXX05) DATED 15 - 5 - 1963 IT WAS EXPLAINED THAT THE RELIGIOUS OR CHARITABLE TRUST, CLAIMING EXEMPTION UNDER SECTION 11(1) MUST SPEND AT LEAST 75 PER CENT OF ITS TOTAL INCOME FOR RELIGIOUS OR CHARITABLE PURPOSES. IN OTHER WO RDS, IT WAS NOT PERMITTED TO ACCUMULATE MORE THAN 25 PER CENT OF THE TOTAL INCOME. THE TOTAL INCOME OF THE TRUST FOR THE PURPOSES OF SECTION 11(1) WAS EXPLAINED BY THE BOARD BY ANOTHER CIRCULAR NO. 5 - P(LXX - 6) OF 1968 DATED 19 - 6 - 1968. 11. IN THE CASE OF MUN ISUVRAT JAIN ( SUPRA ) THE ISSUE AROSE WITH REGARD TO THE ALLOWABILITY OF DEPRECIATION UNDER SECTION 32 OF THE ACT AND THEIR LORDSHIPS OF THE BOMBAY HIGH COURT HAVE HELD THAT IN SUCH TYPE OF CASES, SECTION 32 OF THE ACT PROVIDING FOR DEPRECIATION FOR COMPUTA TION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IN RESPECT OF ASSETS SPECIFIED THEREIN WHICH ARE USED FOR BUSINESS OR PROFESSION IS NOT APPLICABLE. NEVERTHELESS, THE INCOME OF THE TRUST MUST BE COMPUTED UNDER SECTION 11 OF THE ACT AFTER PROVIDING FOR AL LOWANCE OF NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM THE GROSS INCOME OF THE TRUST. I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 48 SIMILAR VIEW WAS AGAIN EXPRESSED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION ( SUPRA ). ONE MORE ISSUE HAS BEEN RAISED BEFOR E THE JURISDICTIONAL HIGH COURT WITH REGARD TO THE CARRY FORWARD OF THE EXCESS OF THE EXPENDITURE FOR ITS SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS. THE HON'BLE HIGH COURT HAS EXAMINED THIS ISSUE IN THE LIGHT OF THE REVENUE'S ARGUMENT THAT THE EX PENDITURE INCURRED IN EARLIER YEARS CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEARS AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEAR WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES. IN T HAT 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 M ENTIONED IN SECTIONS 11 TO 13 OF THE ACT AND THAT THE INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 OF THE ACT UNDER WHICH THE PROVISION FOR CARRY FORWARD OF LOSSES WAS RELEVANT. THEIR LOR DSHIPS DID NOT AGREE WITH THE REVENUE'S CONTENTIONS AND HAVE HELD THAT THE INCOME 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 TRUS T FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST ON 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 THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)( A ) OF THE ACT. 12. THE OTHER JUDGMENTS IN THE CASE OF BHORUKA WELFARE TRUST ( SUPRA ), SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST ( SUPRA ) AND SOCIETY OF THE SISTERS OF ST. ANNE ( SUPRA ) ARE RENDERED WITH REGARD TO THE CLAIM OF DEPRECIATION WHILE COMPUTING THE INCOME OF CHARITABLE INSTITUTIONS. THE ISSUE IN D ISPUTE IS ENTIRELY DIFFERENT, AND AS SUCH THESE JUDGMENTS CANNOT BE APPLIED TO THE PRESENT CASE. THE OTHER JUDGMENT IN THE CASE OF BIRLA JANAHIT TRUST ( SUPRA ) IS ALSO RENDERED IN DIFFERENT CONTEXT HOLDING THEREIN THAT THE EXPENDITURE ON SALARY AND MISCELLA NEOUS EXPENDITURE FOR THE PURPOSES OF CARRYING OUT THE OBJECT OR PURPOSES OF THE TRUST MUST BE CONSIDERED AS APPLICATION FOR CHARITABLE PURPOSES. LIKEWISE, THE OTHER JUDGMENTS REFERRED TO BY THE ASSESSEE ARE ALSO RENDERED IN DIFFERENT CONTEXT. NONE OF THE JUDGMENTS REFERRED TO BY THE ASSESSEE IS ON THE ISSUE IN DISPUTE. 13. THE ISSUE IN DISPUTE IS WHETHER THE ASSESSEE IS ENTITLED TO FIRST ACCUMULATE OR SET APART 25 PER CENT OF THE TOTAL INCOME OF THE TRUST AND THEN CLAIMS A CARRY FORWARD OF THE EXCESS AMOUN T, INCURRED ON APPLICATION FOR PURPOSES OF THE TRUST, OVER AND ABOVE THE REMAINING INCOME, I.E., 75 PER CENT OF THE TOTAL INCOME FOR ITS SET OFF AGAINST THE INCOME OF THE TRUST IN SUCCEEDING YEAR. THE CARVING OF THE FUNDS TO THE EXTENT OF 25 PER CENT OF TH E TOTAL INCOME IS HYPOTHETICAL SITUATION AND IT WAS NOT ENVISAGED BY THE LEGISLATURE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING ( SUPRA ) HAVE EXAMINED THE SITUATION WHERE THE ASSESSEE HAS INCURRED OR APPLIED THE EXPENDITURE MORE THAN THE TOTAL INCOME OF THE TRUST IN A PARTICULAR YEAR AND CLAIMED CARRY I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 49 FORWARD OF THE EXCESS EXPENDITURE TO SUCCEEDING YEAR FOR ITS SET OFF AGAINST THE INCOME OF THE TRUST AND THEIR LORDSHIPS HAVE HELD THAT THE INCOME DERIVED FROM THE TRUST PROPERTY HAS ALS O GOT TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF THE COMMERCIAL PRINCIPLES ARE APPLIED THEN THE ADJUSTMENTS OF EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSEQUEN T YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN SUBSEQUENT YEARS IN WHICH THE ADJUSTMENTS HAVE BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT, BUT IN TH E INSTANT CASE, THE ASSESSEE HAS CLAIMED THE ACCUMULATION OR SET APART OF 25 PER CENT OF TOTAL INCOME FIRST AND THEREAFTER CARRY FORWARD OF THE EXCESS EXPENDITURE INCURRED FOR CHARITABLE PURPOSES TO SUCCEEDING YEAR FOR ITS SET OFF AGAINST THE INCOME OF THE TRUST. THIS PROPOSITION OF THE ASSESSEE CANNOT BE ACCEPTED AS THE EXEMPTION IS TO BE ALLOWED ON APPLICATION OF THE INCOME OF THE ASSESSEE AND NOT FOR ITS ACCUMULATION. THE ACCUMULATION OF 25 PER CENT OF THE TOTAL INCOME IS PERMISSIBLE WHEN THE ASSESSEE FA ILED TO APPLY THE TOTAL INCOME OF THE TRUST IN A PARTICULAR YEAR. IF THE ASSESSEE APPLIES THE ENTIRE INCOME OF THE TRUST HE IS ENTITLED TO CLAIM 100 PER CENT EXEMPTION AND THERE IS NO QUESTION OF FURTHER ACCUMULATION OF 25 PER CENT OF THE TOTAL INCOME OF T HE ASSESSEE. IF THE ASSESSEE INCURS MORE EXPENDITURE THAN THE TOTAL INCOME OF THE TRUST THE EXPENDITURE OVER AND ABOVE TO THE INCOME CAN BE CARRIED FORWARD AND IS ALLOWED TO BE SET OFF AGAINST THE INCOME IN SUCCEEDING YEAR. IN THE INSTANT CASE, THE ASSESSE E HAS INCURRED EXPENDITURE OR APPLIED FOR CHARITABLE RELIGIOUS PURPOSES RS. 58,09,87,048 AGAINST THE TOTAL INCOME OF RS. 35,60,82,101. IN THIS CASE, HE IS ENTITLED TO CLAIM THE CARRY FORWARD OF THE EXCESS EXPENDITURE BUT HE WILL NOT BE ALLOWED TO ACCUMULAT E 25 PER CENT OF THE TOTAL INCOME FIRST AND THEN CLAIM THE EXCESS EXPENDITURE FOR ITS CARRY FORWARD TO SUBSEQUENT YEARS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ALLOW THE CARRY FORWARD OF THE EXCESS EXPENDITURE INCURRED BY THE ASSESSEE TO SUBSEQUENT YEAR FOR ITS SET OFF ONLY IN TERMS INDICATED ABOVE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AS INDICATED ABOVE. T HE LD. CIT(A) HAS ALSO RELIED UPON WHILE DECIDING THIS ISSUE IN FAVOUR OF REVENUE ON THE DECISION OF TRIBUNAL IN ITA NO. 5383/MUM/2011 IN ITO (E) V. LAKSHMI AND USHA MITTAL (FORMERLY KNOWN AS THE LNM FOUNDATION) , DATED 23.10.2012 WHEREIN TRIBUN AL HELD AS UNDER: 4........WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED MATERIAL PLACED BEFORE US. WE FIND THAT A BENCH O F ITAT, MUMBAI VIDE ITS ORDER DTD.13 - 05 - 2009 ( ITA NO. 170/M/08 AY 2003 - 04) HAS DECIDED THE SAME ISSUE VIDE PARA NO.3 OF ITS ORDER AS UNDER: WE HAVE HEARD BOTH THE PARTIES, PERUSE THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE ISSUE WHETHER DEFICIT I N THE I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 50 INCOME AND EXPENDITURE IN CASE OF CHARITABLE INSTITUTIONS CAN BE CARRIED FORWARD TO SUBSEQUENT YEAR AND ADJUSTED TOWARDS APPLICATION OF INCOME HAS BEEN DECIDED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF INSTITUTE OF BANKING (SUPRA), IN WHICH IT HAS BEEN HELD THAT EXCESS EXPENDITURE IN EARLIER YEAR CAN BE ADJUSTED AGAINST INCOME IN THE SUBSEQUENT YEAR AND SUCH ADJUSTMENT HAS TO BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR. THUS THE ASSESSEE WOULD BE ENTITLED FOR CARRYING FORWARD OF D EFICIT TO SUBSEQUENT YEAR, WHICH WOULD BE TREATED AS APPLICATION OF INCOME IN THAT YEAR. HOWEVER, IN COMPUTING THE DEFICIT, ADDITION @ 15% OF THE GROSS RECEIPT CANNOT BE ALLOWED AS SUCH ACCUMULATION IS PERMISSIBLE ONLY WHEN THE EXPENDITURE IS LESS THAN THE INCOME WHICH IS NOT SO IN THIS CASE. THEREFORE, THE DEFICIT AVAILABLE FOR CARRY FORWARD TO THE SUBSEQUENT YEAR WILL BE ONLY RS. 75,58,503/ - . THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE L.N.M. FOUNDATION IN ITA NO. 4422/M /05 IT IS, THEREFORE HELD THAT THE ASSESSEE WOULD BE ENTITLED FOR CARRY FORWARD OF DEFICIT OF RS.75,58,503/ - WHICH WOULD BE TREATED AS APPLICATION OF INCOME IN THE SUBSEQUENT YEAR. WE HOLD, ACCORDINGLY. KEEPING IN VIEW OUR DETAILED DISCUSSIONS IN THE PRECEDING PARAS OF THIS ORDER AND RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT V. A.L.N.RAO CHARITABLE TRUST(SUPRA), HONBLE BOMBAY HIGH COURT DECISION IN THE CA SE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS)(SUPRA) AND DECISIONS OF MUMBAI TRIBUNAL IN THE CASE OF DAWAT INSTITUTE OF DAWOODI BOHRA COMMUNITY (SUPRA) AND ITO(E) V. LAKSHMI AND USHA MITTAL (FORMERLY KNOWN AS THE LNM FOUNDATION) (SUPRA), WE HOLD THAT UNDER FACTUAL MATRIX OF THE CASE BEFORE US, THE ASSESSEE TRUST SHALL NOT BE ALLOWED EXEMPTION OWING TO ACCUMULATION OF INCOME TO THE TUNE OF 15% OF ITS INCOME AS IS PROVIDED UNDER SECOND LIMB OF SECTION 11(1)(A) OF THE 1961 ACT AS ITS EXPENDITURE TOWARDS THE OBJECTS OF THE TRUST HAS ALREADY EXCEEDED ITS INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSES. HOWEVER, AS PROVIDED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION(IBPS)(SUPRA), THE ASSESSEE WILL BE ENTITLED FOR C ARRY FORWARD OF EXCESS OF EXPENDITURE INCURRED TOWARDS OBJECTS OF THE TRUST IN EXCESS OF INCOME FROM PROPERTY I.T.A. NO.6544/MUM/2017 CO. NO.354 /MUM/2018 51 HELD FOR CHARITABLE PURPOSES , AS IS ALLOWABLE AS PROVIDED UNDER FIRST LIMB OF PROVISIONS OF SECTION 11(1)(A) . BOTH REVENUE APPEAL AS WELL ASSESSE ES CO STOOD DISMISSED. WE ORDER ACCORDINGLY. 1 1. IN THE RESULT, APPEAL OF THE R EVENUE IN ITA NO. 6544 /MUM/2017 AND CO NO.354/MUM/2018 FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR 2012 - 13 STOOD DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 .02.2019. 13 .02.2019 SD/ - SD/ - ( MAHAVIR SINGH ) (RAMIT KOCHAR) JUDICIA L MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13 .02.2019 NISHANT VERMA SR. PRIVATE SECRETARY COPY TO 1 . THE APPELLANT 2 . THE RESPONDENT 3 . THE CIT(A) CONCERNED, MUMBAI 4 . THE CIT - CONCERNED, MUMBAI 5 . THE DR BENCH, 6 . MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI