Assistant Commissioner of Income Tax, (Exemptions), Circle-1, Mangaluru V. M/s. Dr. T. M. A. Pai Foundation, Manipal

ITA 783/BANG/2018

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 8948 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 13-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINANDINI DAS
• Keywords: Capital asset; Depreciation; Charitable institution; Retrospective amendment; Cost of acquisition; Revenue expenditure; Capital expenditure
• Section: 32; 28; 15; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 783 / BANG/201 8 ASSESSMENT YEAR : 2009 - 10 THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE 1, MANGALURU. VS. M/S. DR. T.M.A. PAI FOUNDATION, SYNDICATE HOUSE, MANIPAL 576 104. PAN: AAATD1327M APPELLANT RESPONDENT ASSESSEE BY : SMT. SHEETAL BORKAR, ADVOCATE REVENUE BY : SMT. SRI NANDINI DAS, ADDL. CIT (DR) DATE OF HEARING : 10 . 10 .2018 DATE OF PRONOUNCEMENT : 12 . 10 .2018 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-10, BANGALORE DATED 27.12.2017 FOR ASSES SMENT YEAR 2009-10. 2. THE GROUNDS RAISED BY THE REVENUEARE AS UNDER. I. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) IS RIGHT IN NOT APPRECIATING THE FA CT THAT THE NORMAL COMPUTATION OF INCOME UNDER RESPECTIVE HEADS AS ENV ISAGED U/S 15 TO 59 ARE NOT APPLICABLE TO THE COMPUTATION OF INCOME IN RESPECT OF CHARITABLE TRUST/INSTITUTION FOR THE PURPOSE OF CLA IMING EXEMPTION UNDER SECTION 11, 12 AND 13 AND, THEREFORE, THE PRO VISIONS RELATING TO SET-OFF OF LOSS FROM ONE SOURCE AGAINST THE INCOME FROM ANOTHER SOURCE, SET-OFF OF LOSS FROM ONE HEAD AGAINST INCOM E FROM ANOTHER HEAD AND CARRY FORWARD AND SETOFF OF LOSS AGAINST T HE INCOME OF SUBSEQUENT YEARS AS ENVISAGED U/S70 TO 79 ARE ALSO NOT APPLICABLE TO THE CHARITABLE TRUSTS/INSTITUTIONS. II. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A) IS RIGHT IN NOT APPRECIATING THE FA CT THAT THE ISSUE OF APPLICATION OF INCOME MORE THAN THE INCOME COMPUTED DOES NOT ARISE EXCEPT IN A CASE WHERE THE ASSESSEE HAS INCURRED HU GE AMOUNT OF CAPITAL EXPENDITURE SOURCED OUT OF BORROWED OR CORP US DONATIONS OR 15% OF INCOME SET APART OVER A PERIOD OF TIME? (EXP ENDITURE INCURRED OUT OF THE ABOVE SOURCES HOWEVER CANNOT BE TERMED A SS APPLICATION OF FUNDS OUT OF THE INCOME EARNED IN A PARTICULAR ASSE SSMENT YEAR INASMUCH AS LOAN BORROWED DOES NOT FALL UNDER THE C ATEGORY OF INCOME EARNED BY THE ASSESSEE, CORPUS FUND DONATION DOES N OT COME UNDER ITA NO. 783/BANG/2018 PAGE 2 OF 10 INCOME BY VIRTUE OF SECTION 11(1)(D) AND 15% OF INC OME SET APART IN EARLIER ASSESSMENT YEAR CANNOT BE CONSTRUED AS INCO ME OF THE CURRENT YEAR AND 15% SET APART OUT OF THE CURRENT YEAR INCO ME IS ALSO EXCLUDED FROM INCOME AVAILABLE FOR APPLICATION. AS SUCH, THE CONCEPT OF APPLICATION IS ONLY TO SHOW THAT THE INCOME IS F ULLY UTILIZED RATHER THAN CLAIMING EXCESS EXPENDITURE EITHER REVENUE OR CAPITAL OVER AND ABOVE THE INCOME SO AS TO CLAIM EXCESS APPLICATION OR DEFICIT/LOSS TO BE CARRIED FORWARD TO SUBSEQUENT ASSESSMENT YEARS. EVE N IN THE CASE OF EXCESS APPLICATION BY VIRTUE OF BORROWED FUNDS/CORP US FUND DONATIONS/ 15% SET APART OF EARLIER YEARS, THE INCOME OF THE A SSESSEE CANNOT BE CONVERTED TO LOSS BUT AT BEST IT CAN BE MADE NIL. H ENCE, THE CARRY FORWARD OF EXCESS APPLICATION OF INCOME AS CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED)? 3. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT O RDER WHEREAS THE LD. AR OF ASSESSEE SUPPORTED THE ORDER OF CIT(A). SHE ALSO S UBMITTED A COPY OF TRIBUNAL ORDER RENDERED IN THE CASE OF ACIT(EXEMPTIONS) VS. DR. T.M.A. PAI FOUNDATION IN ITA NOS. 1968 & 1969/BANG/2016 DATED 03.02.2017 AND SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL ORDER IN WHICH THE TRIBUNAL HAS FOLLOWED T HE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS . KARNATAKA REDDY JANASANGHA AS REPORTED IN 389 ITR 229 AND HAS REPRO DUCED THE RELEVANT PARAS OF THIS JUDGEMENT DECIDING THE ISSUE IN RESPECT OF ALLOWABILITY OF DEPRECIATION. REGARDING THE SECOND ISSUE I.E. BENEFIT OF SET OFF OF CARRY FORWARD DEFICIT OF EARLIER YEARS, THE TRIBUNAL IN THAT CASE HAS FOLLOW ED THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT VS. I NSTITUTE OF BANKING PERSONNEL SELECTION (IBPS) AS REPORTED IN 264 ITR 1 10. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT ON BOTH THE ISSUES, THE MATTER IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL ORDER ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSEE. IN RESPECT OF FIRST ISSUE I.E. REGARDING ALLOWABILITY OF DEPRECIATION, THE ISSUE W AS DECIDED BY THE TRIBUNAL AS PER PARA 9 OF THIS TRIBUNAL ORDER AND FOR THE SECON D ISSUE, PARAS 11 AND 12 OF THIS TRIBUNAL ORDER ARE RELEVANT AND HENCE, FOR THE SAKE OF READY REFERENCE, WE REPRODUCE PARAS 9,11 AND 12 FROM THIS TRIBUNAL ORDE R. THESE PARAS ARE AS UNDER. 9. WE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE OF ALLOWANCE OF DEPRECIATION, WHERE THE COST OF ACQUISITION OF WHICH WAS ALLOWED AS APPLICATION OF INCOME IS NO MO RE RES INTEGRA AS THE HONBLE JURISDICTIONAL HIGH COURT IN PLETHORA O F DECISIONS HELD THAT THE ALLOWANCE OF DEPRECIATION IN RESPECT OF WH ICH COST WAS ITA NO. 783/BANG/2018 PAGE 3 OF 10 ALLOWED AS APPLICATION OF INCOME U/S 11, DOES NOT A MOUNT TO DOUBLE TAXATION AND THE PROVISIONS OF SUB-SECTION (6) OF S ECTION 11 WERE INSERTED ONLY W.E.F. 1/4/2015 BY THE FINANCE ACT NO .2 OF 2014 AND THE PROVISIONS CANNOT BE APPLIED RETROSPECTIVELY. THE RELEVANT PART OF THE LATEST JUDGMENT IN THE CASE OF CIT VS. KARNATAKA RE DDY JANASANGHA (389 ITR 229) IS AS UNDER: 15. THE QUESTION INVOLVED IN THIS CASE IS NO MORE RES INTEGRA. THIS QUESTION WAS CONSIDERED BY THIS COURT AS FAR BACK A S IN THE YEAR 1984, IN THE CASE OF SOCIETY OF THE SISTER'S OF ST.ANNE (SUP RA) WHEREIN THE DIVISION BENCH OF THIS COURT HAS HELD THUS: '9. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNOT BE THE TOTAL INCOM E BECAUSE S. 11(1) SAYS THAT THE FORMER SHALL NOT BE INCLUDED IN THE L ATTER, OF THE PERSON IN RECEIPT OF THE INCOME. THE EXPRESSION 'TOTAL INCOME ' HAS BEEN DEFINED UNDER S. 2(45) OF THE ACT TO MEAN 'THE TOTAL AMOUNT OF INCOME REFERRED TO IN S. 5 COMPUTED IN THE MANNER LAID DOWN IN THIS AC T'. THE WORD 'INCOME' IS DEFINED UNDER S. 2(24) OF THE ACT TO IN CLUDE PROFITS AND GAINS, DIVIDENDS, VOLUNTARY PAYMENT RECEIVED BY TRU ST, ETC. IT MAY BE NOTED THAT PROFITS AND GAINS ARE GENERALLY USED IN TERMS OF BUSINESS OR PROFESSION AS PROVIDED U/S. 28. THE WORD 'INCOME', THEREFORE, IS A MUCH WIDER TERM THAN THE EXPRESSION 'PROFITS AND GAINS O F BUSINESS OR PROFESSION'. NET RECEIPT AFTER DEDUCTING ALL THE NE CESSARY EXPENDITURE OF THE TRUST (SIC). 10. THERE IS A BROAD AGREEMENT ON THIS PROPOSITION. BUT STILL THE CONTENTION FOR THE REVENUE IS THAT THE DEPRECIATION ALLOWANCE BEING A NOTIONAL INCOME (EXPENDITURE?) CANNOT BE ALLOWED TO BE DEBITED TO THE EXPENDITURE ACCOUNT OF THE TRUST. THIS CONTENTION A PPEARS TO PROCEED ON THE ASSUMPTION THAT THE EXPENDITURE SHOULD NECESSAR ILY INVOLVE ACTUAL DELIVERY OF OR PARTING WITH THE MONEY. IT SEEMS TO US THAT IT NEED NOT NECESSARILY BE SO. THE EXPENDITURE SHOULD BE UNDERS TOOD AS NECESSARY OUTGOINGS. THE DEPRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE AND ALL OWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING, ACCOUNTANCY, ETC. IN SPICER & PEGLER'S BOOK-KEEPING AND ACCOUNTS, 17TH EDN., PP. 44, 45 & 46, IT HAS BEEN NOTED AS FOLLOWS : 'DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LI FE OF A FIXED ASSET OWING TO 'USE' OR OBSOLESCENCE. IT MAY BE COM PUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE REC OVERED WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJECT OF PROV IDING FOR DEPRECIATION IS TO SPREAD THE EXPENDITURE, INCURRED IN ACQUIRING THE ASSET, OVER ITS EFFECTIVE LIFETIME; THE AMOUNT OF THE PROVISION, MADE IN RESPECT OF AN ACCOUNTING PERIOD, IS INTENDE D TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE, WHICH HAS EXPIR ED DURING THAT PERIOD.' 16. SIMILAR VIEW IS TAKEN BY THE OTHER HIGH COURTS VIZ., GUJARAT, PUNJAB AND HARYANA, DELHI, MADRAS, CALCUTTA AND MADHYA PRA DESH IN THE FOLLOWING JUDGMENTS. ITA NO. 783/BANG/2018 PAGE 4 OF 10 (1) COMMISSIONER OF INCOME-TAX, V. FRAMJEE CAWASJEE INSTITUTE , 109 CTR 463 [GUJ.] ; (2) COMMISSIONER OF INCOME-TAX, V. RAIPUR PALLOTTINE SOCIETY,.[1989] 180 ITR 579 [MP] (3) COMMISSIONER OF INCOME-TAX, V. SETH MANILAL RANCHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 [GUJ.] ; (4) COMMISSIONER OF INCOME-TAX, V. BHORUKA PUBLIC WELFARE TRUST [1999] 240 ITR 513 [CAL.] ; (5) COMMISSIONER OF INCOME-TAX, V. RAOBAHADUR CALAVALA CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD.) ] (6) COMMISSIONER OF INCOME-TAX V. MARKET COMMITTEE, PIPLI[(2011) 238 CTR (P&H) 103 ALLOWING DEPRECIATION IN SUBSEQUENT YEARS, ON THE C APITAL ASSET, WHICH HAS ALREADY AVAILED THE BENEFIT OF DEDUCTION IN COM PUTING THE INCOME OF THE TRUST IN THE YEAR OF ITS ACQUISITION IS CONSIDE RED BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI (SUPRA) AND HELD THUS: '9. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMI NG DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LE ARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMP T, THE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED F ROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF T HE HON'BLE SUPREME COURT IN ESCORTS LTD., &ANR. (SUPRA) IS DISTINGUISH ABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS G IVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAIN ST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' 17. HIGH COURT OF BOMBAY IN THE CASE OF INSTITUTE O F BANKING (SUPRA) AFTER PLACING RELIANCE ON THE JUDGMENT OF CIT V. MUNISWAR AT JAIN (1994 TLR 1084) ON AN IDENTICAL ISSUE, HELD: 'IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEP RECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE I NCOME TAX ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED TH IS ARGUMENT. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSES SEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT. THE COURT REJECTED THE ARGUMENT ON BEHALF OF THE REVENUE THAT SECTION 32 OF THE ITA NO. 783/BANG/2018 PAGE 5 OF 10 INCOME TAX ACT WAS THE ONLY SECTION GRANTING BENEFI T OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURN ITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANNER ALTHOUGH TH E TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPE CT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING FOR DEPR ECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQ UIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PRO VIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESTATED JUDGMENT OF THE B OMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., I N FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT.' 18. THE JUDGMENT IN ESCORTS LIMITED (SUPRA) WAS REN DERED BY THE APEX COURT IN THE CONTEXT OF SECTION 10(2)(VI) AND SECTI ON 10(2)(XIV) OF THE 1922 ACT OR UNDER SECTION 32(1)(II) AND SECTION 35(2)(IV ) OF THE 1965 ACT. IT WAS THE CASE OF THE ASSESSEE CLAIMING A SPECIFIED PERCE NTAGE OF THE WRITTEN DOWN VALUE OF THE ASSET AS DEPRECIATION BESIDES CLAIMING DEDUCTION IN 5 CONSECUTIVE YEARS OF THE EXPENDITURE INCURRED ON TH E ACQUISITION OF THE CAPITAL ASSET USED FOR SCIENTIFIC RESEARCH. IN SUCH CIRCUMSTANCES, THE APEX COURT HELD THUS: 'THERE IS AN APPARENT PLAUSIBILITY ABOUT THESE ARGU MENTS, PARTICULARLY IN THE CONTEXT OF THE ALLEGED DEPARTURE IN THE LANGUAG E USED BY S. 10(2)(XIV) FROM THAT EMPLOYED IN S. 20 OF THE U.K. FINANCE ACT , 1944. WE MAY, HOWEVER, POINT OUT THAT THE LAST FEW UNDERLINED WOR DS OF THE ENGLISH STATUTE SHOW THAT THERE IS REALLY NO DIFFERENCE BET WEEN THE ENGLISH AND INDIAN ACTS; THE FORMER ALSO IN TERMS PROHIBITS DEP RECIATION ONLY SO LONG AS THE ASSETS ARE USED FOR SCIENTIFIC RESEARCH. IN OUR OPINION, THE OTHER PROVISIONS OF THE ACT TO WHICH REFERENCE HAS BEEN M ADE - SOME OF WHICH WERE INSERTED AFTER THE PRESENT CONTROVERSY STARTED - ARE NOT HELPFUL AND WE HAVE TO CONSTRUE THE REAL SCOPE OF THE PROVISION S WITH WHICH WE ARE CONCERNED. WE THINK THAT ALL MISCONCEPTION WILL VAN ISH AND ALL THE PROVISIONS WILL FALL INTO PLACE, IF WE HEAR IN MIND A FUNDAMENTAL, THROUGH UNWRITTEN, AXIOM THAT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING, AND IF IT IS INTENDED IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE A BSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STATUTE S HOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS BOTH UNDER S. 10(2)(VI) AND S. 10(2)(XIV) UNDER THE 1922 ACT OR UNDER S. 32(1)(II) AND 35(2)(IV) OF THE 1922 ACT - QUA THE SAME EXPENDITURE. IS THEN THE US E OF THE WORDS 'IN RESPECT OF THE SAME PREVIOUS YEAR' IN CLAUSE (D) OF THE PROVISO TO S. 10(2)(XIV) OF THE 1922 ACT AND S. 35(2)(IV) OF THE 1961 ACT CONTRA- INDICATION WHICH PERMITS A DISALLOWANCE OF DEPRECIA TION ONLY IN THE PREVIOUS YEARS IN WHICH THE OTHER ALLOWANCE IS ACTU ALLY ALLOWED. WE THINK THE ANSWER IS AN EMPHATIC 'NO' AND THAT THE P URPOSE OF THE WORDS ABOVE REFERRED TO IS TOTALLY DIFFERENT. IF, AS CONT ENDED FOR BY THE ASSESSEES, THERE CAN BE NO OBJECTION IN PRINCIPLE T O ALLOWANCES BEING MADE UNDER BOTH THE PROVISIONS AS THEIR NATURE AND PURPOSE ARE ITA NO. 783/BANG/2018 PAGE 6 OF 10 DIFFERENT, THEN THE INTERDICT DISALLOWING A DOUBLE DEDUCTION WILL BE MEANINGLESS EVEN IN RESPECT OF THE PREVIOUS YEARS F OR WHICH DEDUCTION IS ALLOWED UNDER S. 10(2)(XIV)/S. 35 IN RESPECT OF THE SAME ASSET. IF THAT WERE THE CORRECT PRINCIPLE, THE ASSESSEE SHOULD LOG ICALLY BE ENTITLED TO DEDUCTION BY WAY OF DEPRECIATION FOR ALL PREVIOUS Y EARS INCLUDING THOSE FOR WHICH ALLOWANCE HAVE BEEN GRANTED UNDER THE PRO VISION RELATING TO SCIENTIFIC RESEARCH. THE STATUTE DOES NOT PERMIT TH IS. THE RESTRICTION IMPOSED WOULD, THEREFORE, BE ILLOGICAL AND UNJUSTIF IED ON THE BASIS SUGGESTED BY THE ASSESSEES. ON THE OTHER HAND, IF W E ACCEPT THE PRINCIPLE WE HAVE OUTLINED EARLIER VIZ. THAT, THERE IS A BASI C LEGISLATIVE SCHEME, UNSPOKEN BUT CLEARLY UNDERLYING THE ACT, THAT TWO A LLOWANCES CANNOT BE, AND ARE NOT INTENDED TO BE, GRANTED IN RESPECT OF T HE SAME ASSET OR EXPENDITURE, ONE WILL EASILY SEE THE NECESSITY FOR THE LIMITATION IMPOSED BY THE QUOTED WORDS. FOR, IN THIS VIEW, WHERE THE C APITAL ASSET IS ONE OF THE NATURE SPECIFIED, THE ASSESSEE CAN GET ONLY ONE OF THE TWO ALLOWANCES IN QUESTION BUT NOT BOTH.' 19. SECTION 11 OF THE ACT DEALS WITH APPLICATION OF INCOME DIFFERENT FROM REVENUE EXPENDITURE OR ALLOWANCE. THUS, THE JUDGMEN T OF THE APEX COURT IN THE CASE OF ESCORTS LTD., (SUPRA) IS DISTINGUISHABL E AND AS SUCH IS NOT APPLICABLE TO THE CHARITABLE TRUSTS WHERE INCOME IS TO BE COMPUTED UNDER CHAPTER III OF THE ACT. ACCORDINGLY, THE JUDGMENT O F LISSIE MEDICAL INSTITUTIONS (SUPRA) BASED ON ESCORTS LTD., (SUPRA) , IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 20. IT IS ALSO TO BE NOTICED THAT WHILE IN THE YEAR OF ACQUIRING THE CAPITAL ASSET, WHAT IS ALLOWED AS EXEMPTION IS THE INCOME O UT OF WHICH SUCH ACQUISITION OF ASSET IS MADE AND WHEN DEPRECIATION DEDUCTION IS ALLOWED IN THE SUBSEQUENT YEARS, IT IS FOR THE LOSSES OR EXPEN SES REPRESENTING THE WEAR AND TEAR OF SUCH CAPITAL ASSET INCURRED IF, NOT ALL OWED THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING IT S INCOME AS HELD IN SOCIETY OF SISTERS OF ST. ANNE (SUPRA). THIS JUDGMENT OF CO -ORDINATE BENCH OF THIS COURT IS BINDING ON US AND WE HAVE NO REASONS TO DI STURB THE SETTLED POSITION OF LAW AT THIS LENGTH OF TIME/DEPART FROM THE SAID REASONING. AS SUCH, THE ARGUMENTS ADVANCED BY THE REVENUE APPREHE NDING DOUBLE DEDUCTION IS TOTALLY MISCONCEIVED. 21. SECTION 11[6] INSERTED WITH EFFECT FROM 1.4.201 5 BY FINANCE ACT NO. 2/2014, READS AS UNDER: '(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR.' 22. THE PLAIN LANGUAGE OF THE AMENDMENT ESTABLISHES THE INTENT OF THE LEGISLATURE IN DENYING THE DEPRECIATION DEDUCTION I N COMPUTING THE INCOME OF CHARITABLE TRUST IS TO BE EFFECTIVE FROM 1.4.2015. THIS VIEW IS FURTHER SUPPORTED BY THE NOTES ON CLAUSES IN FINANC E [NO. 2] BILL, 2014, ITA NO. 783/BANG/2018 PAGE 7 OF 10 MEMO EXPLAINING PROVISIONS AND CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES IN THIS REGARD. CLAUSE NO. 7 OF THE NOTES ON CLAUSES READS THUS: 'CLAUSE 7.OF THE BILL SEEKS TO AMEND SECTION 11 OF THE INCOME-TAX ACT RELATING INCOME FROM PROPERTY HELD FOR CHARITABLE O R RELIGIOUS PURPOSES. THE EXISTING PROVISIONS OF THE AFORESAID SECTION CO NTAIN A PRIMARY CONDITION THAT FOR GRANT OF EXEMPTION IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, SUCH INCOME SHOULD BE AP PLIED FOR THE CHARITABLE PURPOSES IN INDIA, AND WHERE SUCH INCOME CANNOT BE SO APPLIED DURING THE PREVIOUS YEAR, IT HAS TO BE ACCU MULATED IN THE PRESCRIBED MODES. IT IS PROPOSED TO INSERT SUB-SECT IONS (6) AND (7) IN THE SAID SECTION SO AS TO PROVIDE THAT (I) WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT, ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN ANY PREVIOUS YEAR, AND (II) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB- SECTION (1) OF SECTION 12AA OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE IS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996] AND THE SAID REGISTRATION IS IN FORCE FOR ANY PREVIOUS YEAR, THEN, NOTHING CONTAINED IN SECTION 10 [OTHER THAN CLAUSE (1) AND CLAUSE (23C) THEREOF] SHALL OPERATE TO EXCLUDE ANY INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST FROM THE TOTAL INCOME OF THE PERSON IN RECEIPT THEREOF FOR THAT PREVIOUS YEAR. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2015-16 AN D SUBSEQUENT YEARS'. THE MEMO EXPLAINING THE PROVISIONS IN FINANCE [NO. 2] BILL, 2014 READS THUS: 'THE SECOND ISSUE WHICH HAS ARISEN IS THAT THE EXIS TING SCHEME OF SECTION 11 AS WELL AS SECTION 10(23C) PROVIDES EXEMPTION IN RE SPECT OF INCOME WHEN IT IS APPLIED TO ACQUIRE A CAPITAL ASSET. SUBSEQUENTLY , WHILE COMPUTING THE INCOME FOR PURPOSES OF THESE SECTIONS, NOTIONAL DED UCTION BY WAY OF DEPRECIATION ETC. IS CLAIMED AND SUCH AMOUNT OF NOT IONAL DEDUCTION REMAINS TO BE APPLIED FOR CHARITABLE PURPOSE. THEREFORE, DO UBLE BENEFIT IS CLAIMED BY THE TRUSTS AND INSTITUTIONS UNDER THE EXISTING L AW. THE PROVISIONS NEED TO BE RATIONALIZED TO ENSURE THAT DOUBLE BENEFIT IS NO T CLAIMED AND SUCH NOTIONAL AMOUNT DOES NOT EXCLUDED FROM THE CONDITIO N OF APPLICATION OF INCOME FOR CHARITABLE PURPOSE'. ITA NO. 783/BANG/2018 PAGE 8 OF 10 23. PARAGRAPHS 7.5, 7.5.1, 7.6 OF CENTRAL BOARD OF DIRECT TAXES CIRCULAR REPORTED IN 371 ITR 22 MAKES IT CLEAR THAT THE SAID AMENDMENT SHALL TAKE EFFECT FROM 1.4.2015 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2015-16 AND SUBSEQUENT ASSESSMENT Y EARS. 24. THE CONSTITUTION BENCH OF THE APEX COURT IN VAT IKA TOWNSHIP (P.) LTD.'S CASE (SUPRA), HAD LAID DOWN GENERAL PRINCIPLES CONC ERNING RETROSPECTIVITY IN PARAGRAPHS 33 AND 34, AND THE SAME IS EXTRACTED HEREUNDER: '33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE OF COMPLETENESS, THAT WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE AGAINST A RETROSPECTIVE CONSTRUCTION IS DIFFERENT. IF A LEGIS LATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPOND ING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY, AND W HERE TO CONFER SUCH BENEFIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECT , THEN THE PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPO SIVE CONSTRUCTION, WOULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT . THIS EXACTLY IS THE JUSTIFICATION TO TREAT PROCEDURAL PROVISIONS AS RET ROSPECTIVE. IN GOVERNMENT OF INDIA &ORS. V. INDIAN TOBACCO ASSOCIA TION, THE DOCTRINE OF FAIRNESS WAS HELD TO BE RELEVANT FACTOR TO CONST RUE A STATUTE CONFERRING A BENEFIT, IN THE CONTEXT OF IT TO BE GIVEN A RETRO SPECTIVE OPERATION. THE SAME DOCTRINE OF FAIRNESS, TO HOLD THAT A STATUTE W AS RETROSPECTIVE IN NATURE, WAS APPLIED IN THE CASE OF VIJAY V. STATE O F MAHARASHTRA &ORS. IT WAS HELD THAT WHERE A LAW IS ENACTED FOR THE BENEFI T OF COMMUNITY AS A WHOLE, EVEN IN THE ABSENCE OF A PROVISION THE STATU TE MAY BE HELD TO BE RETROSPECTIVE IN NATURE. HOWEVER, WE ARE CONFRONTED WITH ANY SUCH SITUATION HERE. 34. IN SUCH CASES, RETROSPECTIVELY IS ATTACHED TO B ENEFIT THE PERSONS IN CONTRADISTINCTION TO THE PROVISION IMPOSING SOME BU RDEN OR LIABILITY WHERE THE PRESUMPTION ATTACHES TOWARDS PROSPECTIVIT Y. IN THE INSTANT CASE, THE PROVISO ADDED TO SECTION 113 OF THE ACT I S NOT BENEFICIAL TO THE ASSESSEE. ON THE CONTRARY, IT IS A PROVISION WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A CASE LIKE THIS, WE HAVE T O PROCEED WITH THE NORMAL RULE OF PRESUMPTION AGAINST RETROSPECTIVE OP ERATION. THUS, THE RULE AGAINST RETROSPECTIVE OPERATION IS A FUNDAMENT AL RULE OF LAW THAT NO STATUTE SHALL BE CONSTRUED TO HAVE A RETROSPECTIVE OPERATION UNLESS SUCH A CONSTRUCTION APPEARS VERY CLEARLY IN THE TERMS OF THE ACT, OR ARISES BY NECESSARY AND DISTINCT IMPLICATION. DOGMATICALLY FR AMED, THE RULE IS NO MORE THAN A PRESUMPTION, AND THUS COULD BE DISPLACE D BY OUTWEIGHING FACTORS'. 25. THE APEX COURT IN THE SAID JUDGMENT, WHILE INTE RPRETING THE PROVISO, WHETHER TO BE APPLIED RETROSPECTIVELY OR PROSPECTIV ELY, HAS CONSIDERED THE NOTES ON CLAUSES APPENDED, THE FINANCE BILL AND THE UNDERSTANDING OF THE CENTRAL BOARD OF DIRECT TAXES IN THIS REGARD . THE APEX COURT HAS ALSO TAKEN COGNIZANCE OF THE FACT THAT THE LEGISLAT URE IS FULLY AWARE OF 3 CONCEPTS INSOFAR AS AMENDMENTS MADE TO A STATUTE: ( I ) PROSPECTIVE AMENDMENTS WITH EFFECT ITA NO. 783/BANG/2018 PAGE 9 OF 10 FROM A FIXED DATE; (II) RETROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIXED ANTERIOR DATE; AND (III) CLARIFICATORY AMENDMENTS WHICH ARE PROSPECTIVE IN NATURE. KEEPING IN VIEW, THE AFORESAID PRINCIPLES ENUNCIATE D BY THE APEX COURT, IN VATIKA TOWNSHIP (P.) LTD.'S CASE (SUPRA), IT WOU LD BE SAFELY HELD THAT SECTION 11(6) OF THE ACT IS PROSPECTIVE IN NATURE A ND OPERATES WITH EFFECT FROM 01.04.2015. THIS IS FURTHER CLARIFIED WHEN COM PARED WITH CERTAIN OTHER PROVISIONS WHICH HAVE BEEN MADE RETROSPECTIVE LY IN THE SAME FINANCE ACT. SIMILAR VIEW WAS TAKEN BY THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX(EXEMPTIONS) VS. AL-AMEEN CHA RITABLE FUND TRUST(383 ITR 517). 11. AS REGARDS THE SECOND ISSUE, WHETHER BENEFIT OF SET OFF OF CARRIED FORWARD DEFICIT OF EARLIER YEARS TO BE ALLOWED AGAINST CUR RENT YEAR, THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINAT E BENCHES OF THE TRIBUNAL WHEREIN THE CO-ORDINATE BENCHES HAD HELD FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION (IBPS)(264 ITR 110) WHEREIN IT WAS HELD A S FOLLOWS: 5. NOW COMING TO QUESTION NO. 3, THE POINT WHICH ARIS ES FOR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YE AR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED AS APPLICATION OF INCO ME IN SUBSEQUENT YEAR FOR CHARITABLE PURPOSES? IT WAS ARGUED ON BEHA LF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANN OT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF EARLIER YEARS WOULD NOT AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS P URPOSES. IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT ALLOW C ARRY FORWARD OF THE EXCESS OF EXPENDITURE TO BE SET OFF AGAINST THE SUR PLUS OF THE SUBSEQUENT YEARS ON THE GROUND THAT IN THE CASE OF A CHARITABL E TRUST, THEIR INCOME WAS ASSESSABLE UNDER SELF-CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME-TAX ACT AND THAT THE INCOM E OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION FOR CARRY F ORWARD 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 E ARLIER 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 O F EXPENSES INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN THE SUBSE QUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUS T FOR CHARITABLE AND ITA NO. 783/BANG/2018 PAGE 10 OF 10 RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CON TAINED 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 A CT. OUR VIEW IS ALSO 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 . ACCORDINGLY, WE ANSWER QUESTION NO. 3 IN THE AFFIRM ATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 12. RESPECTFULLY FOLLOWING THE RATIO OF THE HON BLE BOMBAY HIGH COURT, WE HOLD THAT THE ASSESSE IS ENTITLED TO THE BENEFIT OF SET OFF OF EXCESS INCOME APPLIED IN EARLIER ASSESSMENT YEARS AGAINST INCOME OF THE CURR ENT YEAR. WE DO NOT FIND ANY FALLACY IN THE ORDER OF THE LD.CIT(A) IN ALLOWING T HE CLAIM OF THE ASSESSE. HENCE, GROUNDS OF APPEAL RAISED IN THIS BEHALF BY THE REVE NUE ARE DISMISSED. 5. SINCE NO DIFFERENCE IN FACTS OR IN LAW COULD BE POINTED OUT BY THE LEARNED DR OF THE REVENUE, BY RESPECTFULLY FOLLOWING THIS TRIBUNA L ORDER, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON BOTH THESE ISSUES. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (N.V. VASUDEVAN) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 12 TH OCTOBER, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.