Income Tax Officer (Exemptions) Ward-1 , Mangalore V. M/s Coondapur Education Society , Udupi

ITA 857/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7735 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 20-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P V PRADEEP KUMAR
• Assessee Lawyers: SHAMBHU SHARMA
• Keywords: Depreciation; Charitable institution
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, B E NGAL U R U BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI LALI E T KUMAR, JUDICIAL MEMBER ITA NO. 857 / BANG/ 201 8 (ASSESSMENT YEAR : 20 1 4 - 15 ) INCOME - TAX OFFICER (EXEMPTIONS), WARD - 1, MANGALURU. VS. APPELLANT M/S. COONDAPUR EDUCATION SOCIETY, KUNDAPUR. UDUPI - 576201 PAN: AAATC 5441 K RESPONDENT APPELLANT BY : DR. P.V.PRADEEP KUMAR, ADDL.CIT(DR) RESPONDENT BY : SHRI SHAMBHU SHARMA, CA . DATE OF HEARING : 02 /0 7 /2018 DATE OF PRONOU NCEMENT : 06 /0 7 /2018 O R D E R PER I NTURI RAMA RAO, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) - 10, BENGALURU, DATED 2 9 /12/2017 FOR THE ASSESSMENT YEAR 201 4 - 15 . 2. THE REVENUE RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL: ITA NO.857 /BANG/2018 PAGE 2 OF 4 3. T HE RESPONDENT - ASSESSEE IS A TRUST REGISTERED UNDER THE PROVISIONS OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT ] ENGAGED IN THE ACTIVITY OF RUNNING EDUCATIONAL INSTITU TION . THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 201 4 - 15 WAS FILED ON 06 /09/201 4 . AFTER PROCESSING THE RETURN OF INCOME UNDER THE PROVISIONS OF SECTION 143(1) OF THE ACT, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 29 /0 7 /201 6 . WH ILE DOING SO, THE AO HA D NOT ALLOWED CARRY FORWARD OF EXCESS APPLICATION OF INCOME TO FUTUR E YEARS . 4. BEING AGGRIEVED, AN APPEAL WAS FILED BEFORE THE LD.CIT(A), WHO VIDE IMPUGNED ORDER, DIRECTED THE AO TO ALLOW SET OFF OF EXCESS ITA NO.857 /BANG/2018 PAGE 3 OF 4 EXPENDITURE WITH CUR RENT YEAR S INCOME AND ALLOW CARRY FORWARD OF EXCESS APPLICATION TO SUBSEQUENT YEARS. 5. BEING AGGRIEVED BY THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE I SSUE RAISED IN THE PRESENT APPEAL IS COVERED AGAINST THE REVENUE BY CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF DEPUTY DIRECTOR OF INCOME - TAX VS. JYOTHY CHARITABLE TRUST (60 TAXMANN.COM 165). THE RELEVANT PART OF THE ORDER IS REPRODUCED BELOW: 14. WE H AVE CONSIDERED HIS SUBMISSION. SECTION 11(1)(A) DOES NOT CONTAIN ANY WORDS OF LIMITATION TO THE EFFECT THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSE ONLY IN THE YEAR IN WHICH THE INCOME HAS ARISEN. THE APPLICATION FOR CHARITA BLE PURPOSES AS CONTEMPLATED IN SECTION 11(1)(A) TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITABLE OR RELIGIOUS PURPOSES. HENCE, EVEN IF THE EXPENSES FOR SUCH PURPOSES HAVE BEEN INCURRED IN THE EARLIER YEA RS AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR, THE INCOME OF SUCH SUBSEQUENT YEAR CAN BE SAID TO BE APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES IN THE YEAR IN WHICH SUCH ADJUSTMENT TAKES PLACE. IN OTHER WORDS, THE SET - OFF O F EXCESS OF EXPENDITURE INCURRED OVER THE INCOME OF EARLIER YEARS AGAINST THE INCOME OF A LATER YEAR WILL AMOUNT TO APPLICATION OF INCOME OF SUCH LATER YEAR. THE ABOVE IS THE POSITION OF LAW AS HELD IN THE CASE OF CIT V. MAHARANA OF MEWAR CHARITABLE FOUNDA TION [1987] 164 ITR 439/[1986] 29 TAXMAN 476 (RAJ) AND CIT V. PLOT SWETAMBER MURTI PUJAK JAIN MANDAL [1995] 211 ITR 293 (GUJ.) . IN CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION [2003] 264 ITR 110/131 TAXMAN 386 (BOM.) IT WAS HELD THAT IN CASE OF CHARITABLE TRUST WHOSE INCOME IS EXEMPT UNDER S. 11, EXCESS OF EXPENDITURE IN THE EARLIER YEARS CAN BE ADJUSTED AGAINST INCOME OF SUBSEQUENT YEARS AND SUCH ADJUSTMENT WOULD BE APPLICATION OF INCOME FOR SUBSEQUENT YEARS AND THAT DEPRECIATION IS ALLOWABLE ON THE ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER S. 11 IN PAST YEARS. IN GOVINDU NAICKER ESTATE V. ASSTT. DIT [2001] 248 ITR 368/[1999 ] 105 TAXMAN 719 (MAD.) , THE HON'BLE MADRAS HIGH COURT HELD THAT THE INCOME OF THE TRUST HAS TO BE ARRIVED AT HAVING DUE REGARD TO THE COMMERCIAL PRINCIPLES, THAT S. 11 IS A BENEVOLENT PROVISION, AND THAT THE EXPENDITURE INCURRED ON RELIGIOUS OR CHARITABL E PURPOSES IN EARLIER YEAR OR YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THE PRINCIPLE THAT THE LOSS INCURRED UNDER ONE HEAD CAN ONLY BE SET OFF AGAINST THE INCOME FROM THE SAME HEAD IS NOT OF ANY RELEVANCE, IF THE EXPENDITURE INCURRE D WAS FOR RELIGIOUS OR CHARITABLE PURPOSES, AND THE EXPENDITURE ADJUSTED AGAINST THE ITA NO.857 /BANG/2018 PAGE 4 OF 4 INCOME OF THE TRUST IN A SUBSEQUENT YEAR, WOULD NOT AMOUNT TO AN INCIDENCE OF LOSS OF AN EARLIER YEAR BEING SET OFF AGAINST THE PROFIT OF A SUBSEQUENT YEAR. THE OBJECT OF THE RELIGIOUS AND CHARITABLE TRUST CAN ONLY BE ACHIEVED BY INCURRING EXPENDITURE AND IN ORDER TO INCUR THAT EXPENDITURE, THE TRUST SHOULD HAVE AN INCOME. SO LONG AS THE EXPENDITURE INCURRED IS ON RELIGIOUS OR CHARITABLE PURPOSES, IT IS THE EXPENDITURE PROP ERLY INCURRED BY THE TRUST, AND THE INCOME FROM OUT OF WHICH THAT EXPENDITURE IS INCURRED, WOULD NOT BE LIABLE TO TAX. THE EXPENDITURE, IF INCURRED IN AN EARLIER YEAR IS ADJUSTED AGAINST THE INCOME OF A LATER YEAR, IT HAS TO BE HELD THAT THE TRUST HAD INCU RRED EXPENDITURE ON RELIGIOUS AND CHARITABLE PURPOSES FROM THE INCOME OF THE SUBSEQUENT YEAR, EVEN THOUGH THE ACTUAL EXPENDITURE WAS IN THE EARLIER YEARS, IF IN THE BOOKS OF ACCOUNT OF THE TRUST SUCH EARLIER EXPENDITURE HAD BEEN SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEAR. THE EXPENDITURE THAT CAN BE SO ADJUSTED CAN ONLY BE EXPENDITURE ON RELIGIOUS AND CHARITABLE PURPOSES AND NO OTHER. THE HIGH COURT RELIED ON THE DECISION IN THE CASE OF SOCIETY OF SISTERS OF ST. ANNE ( SUPRA ). RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION WE DISMISS THE GROUND S OF APPEAL RAISED BY THE REVENUE . 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 6 TH JULY 2018. S D/ - S D/ - ( LALI E T KUMAR ) (INTURI RAMA RAO) JUDICIAL MEMB ER ACCOUNTANT MEMBER PLACE : B EN GAL URU D A T E : 06 /0 7 2018 SRINIVASULU, SPS COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) 4 CIT 5 DR, ITAT, BANGALORE. 6 GUA RD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME - TAX APPELLATE TRIBUNAL BANGALORE