M/s Karnataka Fransalian Society, Bangalore V. DDIT, Bangalore

ITA 972/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1525 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 17-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 54; 12; 28

Judgement Text

ITA.972/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NO.972/BANG/2015 (ASSESSMENT YEAR : 2011-12) M/S. KARNATAKA FRANSALIAN SOCIETY, VINAYALAYA, P. B. NO.5557, MALLESWARAM WEST, BANGALORE 560 084 .. APPELLANT PAN : AAATK1206E V. DEPUTY COMMISSIONER OF INCOME-TAX (EXEMPTION), CIRCLE -17(2), BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. SURESH MUTHUKRISHNAN, CA REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 16.11.2015 PRONOUNCED ON : 18.11.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT IS AGGRIEVED T HAT CLAIM FOR CARRY FORWARD OF DEFICIT OF RS.2,15,68,002/- RESULTING OU T OF EXCESS APPLICATION OVER INCOME WAS NOT ALLOWED. ITA.972/BANG/2015 PAGE - 2 02. FACTS APROPOS ARE THAT ASSESSEE, A TRUST REGIST ERED U/S.12A OF THE INCOME TAX ACT, 1961 (THE ACT IN SHORT), HAD FILE D ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR CLAIMING EXEMPTION U/S.11 & 12 OF THE ACT. IN THE COMPUTATION OF INCOME FILED, ASSESSEE CLAIMED C ARRY FORWARD OF A DEFICIT OF RS.2,15,68,002/-. AO DENIED THE CLAIM F OR A REASON THAT COMPUTATION OF LOSS UNDER VARIOUS HEADS OF INCOME A ND CARRY FORWARD OF SUCH LOSS TO SUBSEQUENT ASSESSMENT YEARS FOR SET OF F WAS APPLICABLE FOR ONLY ASSESSES OTHER THAN THOSE WHICH WERE COVERED U/SS.1 1,12, 13 AND SEC.10(23)(C) OF THE ACT. HE DENIED THE CLAIM FOR CARRY FORWARD. 03. ASSESSEES APPEAL BEFORE THE CIT (A) DID NOT ME ET WITH ANY SUCCESS. CIT (A) RELYING ON THE JUDGMENT OF HONBLE DELHI HI GH COURT IN THE CASE OF INDIAN NATIONAL THEATRE TRUST [(2008) 305 ITR 14 9], HELD THAT CLAIM OF THE ASSESSEE COULD NOT BE ALLOWED. AS PER THE CIT (A), DEFICIT AROSE ON ACCOUNT OF EXCESS APPLICATION FOR CHARITABLE PURPOS E AND SUCH EXCESS COULD NOT BE TREATED ON PAR WITH TOTAL INCOME / LOSS. HE CONFIRMED THE ORDER OF AO. 04. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF LOWER AUTHORITIES SUBMITTED THAT COORDINATE BENCH IN THE CASE OF M/S. ST. FRANCIS SALES EDUCATIONAL & CHARITABLE TRUST V. ACIT [ITA.3 65/BANG/2015, DT.10.07.2015], HAD CONSIDERED THE JUDGMENT OF HON BLE DELHI HIGH COURT ITA.972/BANG/2015 PAGE - 3 IN THE CASE OF INDIAN NATIONAL THEATRE TRUST (SUPRA ) AND HELD THAT A DEFICIT ARISING ON ACCOUNT OF APPLICATION OF FUNDS COULD BE CONSIDERED FOR CARRY FORWARD. 05. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWE R AUTHORITIES AND ALSO STATED THAT MUMBAI BENCH OF THIS TRIBUNAL IN THE CA SE OF ITO V. TRUSTEES OF SRI SATHYA SAI TRUST [(1990) 33 ITD 320] TOOK A VIE W WHICH WAS IN CONSONANCE WITH THAT HELD BY THE AO AND LD. CIT (A) . 06. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF INDIAN NATIONAL THEATRE TRUST (SUPRA), RELIED ON BY THE CIT (A) FOR CONFIRMING THE VIEW TAKEN BY THE AO WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF M/S. ST. FRANCIS SALES EDUCATIONAL & CHARITABLE TRUST (SUPRA ). SAME VIEW HAS BEEN TAKEN BY US IN THE CASE OF DCIT V. M/S. RASHTROTHAN A PARISHAT [ITA NOS.896 & 897/BANG/2014, DT.14.08.2015]. IN PARA 9 OF THE LATTER ORDER IT WAS HELD AS UNDER : 09.COMING TO THE ASPECT OF ELIGIBILITY FOR CARRY FO RWARD OF SUCH DEFICIT, COORDINATE BENCH OF THIS TRIBUNAL IN THE C ASE OF RAJARAJESHWARI DEVASTHANA TRUST V. ITO (EX), IN ITA NO.116/BANG/2015, DT.11.06.2015, HAD CONSIDERED THI S ISSUE. IT WAS HELD AT PARA 7 OF THE ORDER AS UNDER: 07. IN SO FAR AS THE ISSUE RELATING TO CARRY FORWAR D OF DEFICIT, IT WAS HELD AS UNDER AT PARAS 11 TO 13 OF THE ORDER DT. 16.02.2009 ITA.972/BANG/2015 PAGE - 4 OF THIS TRIBUNAL IN THE CASE OF TMA PAI FOUNDATIONS S CASE (SUPRA) : 11. WITH REGARD TO THE SECOND ISSUE, THE LEARNED C OUNSEL SUBMITTED THAT THE STAND OF THE REVENUE THAT THE AS SESSEE DID NOT CLAIM THE CARRY FORWARD IN THE ORIGINAL RETURN AND THE CLAIM WAS MADE FOR THE FIRST TIME THROUGH APPLICATION U/S.154 OF THE ACT WHICH WAS TIME BARRED AND THERE IS NO PROVISION UND ER THE INCOME TAX TO ALLOW CARRY FORWARD OF THE LOSS OF TH E PRECEDING YEARS ANY EXCESS EXPENDITURE/APPLICATION OF THE PRE CEDING YEARS WERE NOT TO BE SET OFF AGAINST THE SUBSEQUENT YEARS ' SURPLUS. THOUGH THE ASSESSEE HAS NOT SPECIFICALLY SOUGHT FOR ANY CARRY FORWARD BENEFIT, FOR THE ASSESSMENT YEARS UP TO 200 5-06 THE ASSESSEE FILED THE RETURN OF INCOME WHERE THE SURPL US WAS DETERMINED AND THE APPLICATION WAS MADE DURING THE YEARS HAVE BEEN DECLARED. IN THE EARLIER YEARS THE ASSESSEE HA D NOT SPECIFICALLY SOUGHT FOR ANY CARRY FORWARD BENEFIT. SURPLUS IS BEING DETERMINED FOR THE PURPOSE OF SECTION 11 AND NOT U/ S.28. WHILE PROCESSING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2 006-07 THE ASSESSING OFFICER RAISED THE ISSUE AND IN ORDER TO ENABLE THE ASSESSING OFFICER TO ASCERTAIN THE EXCESS APPLICATI ON IN THE PRECEDING YEAR THE ASSESSEE FILED APPLICATION U/S.1 54 TO ENABLE THE ASSESSING OFFICER TO QUANTIFY SUCH EXCESS APPLI CATION IN THE RELEVANT YEAR. THE ASSESSEE FILED THE APPLICATION U /S.154 UP TO ASSESSMENT YEARS 2004-05 IN FACT TO ENABLE THE OFFI CER TO ASCERTAIN THE ACTUAL SURPLUS OF THE APPLICATION WHI CH WAS REQUIRED TO BE SET OFF AGAINST THE SURPLUS AGAINST THE ASSESSMENT YEAR 2006-07. FOR ASSESSMENT YEARS 2004-05 AND 2005 -06 IN THE RETURNS ITSELF THE CLAIM WAS MADE AND THE EXCESS SU RPLUS WAS SHOWN. FOR THIS ASSESSMENT YEAR THE ASSESSMENT HAS BEEN COMPLETED ACCORDINGLY ACCEPTING THE RETURN THOUGH I N THE INTIMATION, THE ASSESSED INCOME HAS SHOWN AS NIL. T HE ASSESSEE'S COUNSEL WITHOUT PREJUDICE TO THE CLAIM OF THE ASSES SEE, SUBMITTED THAT THE EXCESS APPLICATION AS CLAIMED FOR THE EARL IER YEARS UP TO 2004-05 CUMULATIVELY WAS TO BE CONSIDERED FOR SET O FF AGAINST THE SURPLUS FOR THE ASSESSMENT YEAR 2006-07. THE COUNSE L FOR THE ASSESSEE SUBMITTED SURPLUS FOR THE PURPOSE OF SECTI ON 11 IS REQUIRED TO BE CONSIDERED AFTER ALLOWING APPLICATIO N TOWARDS OBJECTS OF THE TRUST. IT IS ONLY THE SURPLUS OVER T HE EXPENDITURE IS ITA.972/BANG/2015 PAGE - 5 REQUIRED TO BE ASSESSED. UNDISPUTEDLY IN THE INSTAN T CASE OF THE ASSESSEE, THE TRUST HAD EXCESS APPLICATION OVER THE INCOME IN THE PAST YEARS WHICH WAS REQUIRED TO BE CONSIDERED AGAI NST ITS INCOME IN ORDER TO ASCERTAIN THE SURPLUS LEFT FOR T HE PURPOSE OF TAX AFTER ALLOWING THE EXEMPTION U/S.11(1) OF THE ACT. 12. THE COUNSEL FOR THE ASSESSEE SUBMITTED THE HON' BLE BOMBAY HIGH COURT IN INSTITUTE OF BANKING (SUPRA) HAD OBSE RVED THAT SECTION 11 TO 13 ARE SELF CONTAINED CODE FOR THE PU RPOSE OF DETERMINATION OF THE INCOME OF THE CHARITABLE TRUST AND THE CHARITABLE TRUST IS NOT ASSESSABLE UNDER THE HEAD P ROFIT AND GAINS OF THE BUSINESS U/S.28 FOR WHICH PROVISION THE BENE FIT OF CARRY FORWARD LOSS WAS RELEVANT. THE ASSESSEE IS A CHARIT ABLE TRUST FOR EDUCATION PURPOSE AND HAS NO PROFIT MOTIVE. SURPLUS IS REQUIRED TO BE DETERMINED FOR THE PURPOSE OF SECTION 11 AND THE PROVISIONS OF SECTION 28 HAS NO APPLICATION SIGNIFICANTLY THE PROVISIONS OF SECTION 70 OF THE ACT ALSO CANNOT BE BROUGHT IN. TH E SURPLUS IS COMPUTED AFTER TAKING INTO ACCOUNT THE NET OUTGOING OF THE RELEVANT YEAR AND EARLIER YEARS. THE BOMBAY HIGH CO URT TOOK SUPPORT OF THE DECISION OF THE GUJARAT HIGH COURT I N SHRI PLOT SWETAMBER MURTI PUJAK JAIN MANDAL (SUPRA). THE LEAR NED COUNSEL SUBMITTED THAT THE COMMISSIONER OF INCOME-T AX(A) DECIDED THE ISSUE IN ASSESSEE'S FAVOUR FOLLOWING TH E ABOVE DECISION OF THE BOMBAY HIGH COURT. THE HON'BLE MADR AS HIGH COURT DECISION REPORTED IN GOVINDU NAICKER ESTATE ( SUPRA) ALSO SUPPORTS THE CASE OF THE ASSESSEE HE SUBMITTED. THE ASSESSEE IS ENJOYING EXEMPTION U/S.10(23C)(VI). THUS NO INCOME FOR THE RELEVANT ASSESSMENT YEAR IS LIABLE TO BE TAXED AS E XEMPTION CONTINUES TO BE IN OPERATION FOR THE RELEVANT ASSE SSMENT YEARS. HENCE THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THE APPEAL BY THE REVENUE IS TO BE DISMISSED. 13. CONSIDERING THE RIVAL SUBMISSIONS WE ARE OF TH E VIEW THAT ALL THE APPEALS PREFERRED BY THE REVENUE IS TO BE ALLOW ED. THE ASSESSEE IS RELYING ON THE DECISION OF THE BOMBAY H IGH COURT IN THE CASE OF INSTITUTE OF BANKING (SUPRA) WHEREAS TH E REVENUE IS RELYING ON THE DECISION OF THE TRIBUNAL, BOMBAY BEN CH IN VII ITO V. TRUSTEES OF SATHYA SAI TRUST IN (1990) 33 ITD 32 0. IN THIS CASE THE TRIBUNAL HELD THE DEFICIT ARISING AS A RESULT O F EXCESS SPENDING FOR CHARITABLE PURPOSES WILL NOT FORM PART OF THE I NCOME AND THE ITA.972/BANG/2015 PAGE - 6 SAME CANNOT BE CARRIED FORWARD. WITH REGARD TO THE POINT WHETHER EXCESS SPENDING WILL FORM OR NOT FORM PART OF THE TOTAL INCOME AND, THEREFORE, IT COULD BE CARRIED FORWARD OR NOT IS DECIDED BY THE HON'BLE BOMBAY HIGH COURT IN THE CAS E INSTITUTE OF BANKING (SUPRA) IN ASSESSEE'S FAVOUR. IN THAT CA SE, HOWEVER, IT WAS A REGULAR ASSESSMENT AND NOT 154 ORDER AS IN TH E INSTANT CASE OF THE ASSESSEE. THERE WAS NO SPECIFIC CLAIM AS SUC H BY THE ASSESSEE IN THE INSTANT CASE. THEREFORE, THE FACTS ARE DISTINGUISHABLE. NO DOUBT IN THE ABOVE CASE, REVENUE SUCCEEDED FOR A REASON THAT THE ORDER ASSAILED BY THE ASSESSEE WAS ONE U/S.154 OF THE ACT AND TRIBUNAL HELD THAT ALLOWING OR NOT ALLOWING CARRY F ORWARD DEFICIT ADJUSTMENT WAS NOT SOMETHING WHICH WOULD FALL WITHI N THE PARAMETERS OF A RECTIFICATORY PROCEEDINGS U/S.154 O F THE ACT. HOWEVER IN PRINCIPLE, THE CLAIM OF THE ASSESSEE THA T DEFICIT FROM EARLIER YEARS CAN BE SET-OFF AGAINST CURRENT YEARS INCOME FOR WORKING OUT THE UTILISATION, FOUND APPROVAL FROM TH E COORDINATE BENCH. IN VIEW OF THIS, WE ARE OF THE VIEW THAT ASSESSEE I S ELIGIBLE FOR CLAIMING CARRY FORWARD OF THE DEFICIT, AND CIT (A) WAS JUSTIFIED IN DIRECTING SO. 07. ACCORDINGLY WE ARE OF THE OPINION THAT ASSESSEE COULD NOT HAVE BEEN DENIED THE CLAIM OF CARRY FORWARD OF RS.2,15,68,002 /-. AO IS DIRECTED TO ALLOW CARRY FORWARD CLAIMED BY THE ASSESSEE. 08. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. DATE : 18.11.2015 SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN ITA.972/BANG/2015 PAGE - 7 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR