Income Tax Appellate Tribunal - Ahmedabad
The Dcit (Exemptions), Circle-1., ... vs Nirman Foundation Charitable Trust,, ... on 4 March, 2021
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH, AHMEDABAD (Convened through Virtual Court) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 470/Ahd/2018 ( नधा रण वष / Assessment Year : 2014-15) The Dy. Commissioner of बनाम/ Nirman Foundation Income-tax (Exemptions) Vs. Charitable Trust Circle-1, Ahmedabad C/o. H. B. Kapadia Charitable Trust, Panchvati, C. G. Road, Ahmedabad 380009 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AABTN0243R (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri S. S. Shukla, Sr.DR यथ क ओर से / Shri Ankit Talsania, A.R. Respondent by :
सन ु वाई क तार ख / Date of 10/02/2021 Hearing घोषणा क तार ख /Date of 04/03/2021 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Revenue against the order of the Commissioner of Income Tax (Appeals)-9, Ahmedabad ('CIT(A)' in short), dated 11.12.2017 arising in the assessment order dated 23.12.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15.
I T A N o . 4 7 0 / Ah d / 1 8 ( D C I T ( E x e m p . ) v s . N i r m a n F o u n d a t i o n c h a r i t a b l e T r u s t . ) A. Y . 2 0 1 4 - 1 5 - 2 -
2. The ground of appeal raised by Revenue reads hereunder:
"1. The Ld. CIT(A ) has erred in th e law and on fac ts in a llow ing the benefit o f the de ficit o f Rs.1,30 ,49,125 /- for earlie r years against the inc ome of subseq ue nt year in absence o f any express prov ision in the Ac t rega rding th e same and also by ove rlook ing the dec isions in favour of reve nue in this regard."
3. Briefly stated, the assessee, a public charitable trust, has been formed for the purposes of education and is running School at Vastrapur, Ahmedabad. The trust has been granted registration under s.12A(a) of the Act. In the course of scrutiny proceedings, it was noticed by the AO that during the F.Y. 2013-14 under consideration, the assessee has claimed set off of unabsorbed/excess application of earlier years amounting to Rs.5,66,96,948/-. The AO while passing the assessment order under s.143(3) of the Act denied the carry forward of excess application over contributions received being 'deficit' for the purposes of set off of against contributions to be received in the subsequent assessment years.
4. In the first appeal, the CIT(A), however, reversed the action of the AO and restored the claim of carry forward of excess application of funds by the assessee. The relevant operative para of the order of the CIT(A) is reproduced hereunder:
"5.2 I have c are fu lly considere d riva l con ten tio ns and ob serva tions made by the A.O, in the asse ssment o rder. It is seen from the o rd er of assessment tha t A.O. has disa llowed carry fo rward of de fic it of Rs.1,30,49, 125/- to b e set off ag ain st curren t year's in come. The app ellant has relied upon th e order of ju risdictiona l High Court in the case of CIT vs Shri Plo t Shwe tambar Murtipuja k Ja in Ma ndal 211 ITR 293(Gu j. ), CIT vs Maha rana o f Mewa r Charitab le Founda tion (1987 ) 164 ITR 43 9 476 (Raj) etc . Hon'ble Guja rat High Cou rt in the c ase of Sh ri Plo t Shweta mbar Murtipu jak J ain Manda l has he ld as fo llows :-
"A bare perusa l of sec tion 11 of the Income-tax Act, 1961, show s that the income de rive d from prop erty he ld u nder trust wholly for charitab le o r re lig iou s purpose s to the extent to which suc h inc ome is app lie d to such pu rpose s in Ind ia is to be excluded for th e purpose s of computing the income of the tru st for the pu rpose o f assessment. The re are no words of limitatio n in th is sec tion provid ing tha t the inco me should have b een a pplied for charita ble or re ligious p urposes only in the yea r in w hich the in come had I T A N o . 4 7 0 / Ah d / 1 8 ( D C I T ( E x e m p . ) v s . N i r m a n F o u n d a t i o n c h a r i t a b l e T r u s t . ) A. Y . 2 0 1 4 - 1 5 - 3 -
arisen. The word "ap ply" means " to pu t to use" or " to turn to use"
or " to make use" or " to pu t to prac tica l u se ". Having reg ard the provisions o f sec tion 1 1 of th e Act, it is clear that when the income of a tru st is used or p ut to use to meet the expense s incurred fo r relig ious or charitab le purposes, it is applied fo r charitab le or relig ious pu rpose s. Th e applica tion o f the in come for cha ritab le or relig ious pu rpose s ta k es plac e in the yea r in which th e income is adjusted to meet the e xpenses incu rre d fo r c haritab le or re lig iou s purpose s. In o the r words, ev en if expe nse s for charita ble an d relig ious purpose s hav e been incu rred for th e earlier y ear and the said expen ses are adju sted ag ain st th e income of a subsequen t ye ar, the income of tha t ye ar can be sa id to ha ve been app lied fo r charitab le and re lig iou s purpose s in the yea r in which the exp ense s incurred for Cha ritab le and re ligiou s pu rposes had be en ad justed. There is noth ing in th e lang uage o f sec tio n 11(1)(a) of th e Ac t to indicate th at the expen ditu re incu rred in the earlie r yea r canno t be met ou t o f the in come o f the subsequen t ye ar a nd utilization of su ch income fo r meeting the expenditure o f th e ea rlier yea r, would no t amount to such inc ome being app lied fo r c haritab le o r re ligiou s purpose s. Income de riv ed from trust pro perty has to be d ete rmined on commercia l p rinc iples and if comme rcia l p rin cip les fo r determ inin g the inco me are applied, it is but natu ral tha t the adjustment o f the expe nses incu rre d by th e trust fo r ch aritab le and relig ious pu rpose s in the earlie r yea r aga inst income earn ed by the tru st in the sub sequen t year w ill hav e to be re garded a s app lica tion of income o f the trust for cha ritab le and re ligious pu rpose s in the subseque nt yea r in wh ich such ad ju stmen t h as been made having regard to the bene vole nt prov ision s 'con taine d in se ction 11 o f the Act and will have to be excluded from the inco me of the tru st unde r section 11(1 )(a )."
I agree with the con ten tion of the appe llan t a s well as the re lian ce placed on the dec ision of Jurisd ic tional Gujarat High Court and h ereby direc t th e A.O to allo w the set off of ex cess expenditure incurred during the e arlie r y ears to be se t o ff aga inst the income of the yea r under consid era tio n and fu tu re income. While g iv in g effec t o f th is orde r, AO is direc ted to allow deficit o f earlier yea rs first. The reafte r the exc e ss of expenditu re o f curren t ye ar wou ld be a llo wed. No accumu latio n u/s 11(1)(a) @ 15 % and u/s. 11(2 ) o f the Act would be allowed alo ngwith carry forward o f de ficit. Accord ing ly, g round of appea l is allowed su bjec t to these remark s."
5. The Revenue has preferred appeal against the aforesaid directions of the CIT(A).
6. We have carefully considered the rival submissions on the legal controversy on whether a charitable institution is allowed to carry forward and set off of deficit (that is excess to expenses over income) and set it off against income of subsequent year. I T A N o . 4 7 0 / Ah d / 1 8 ( D C I T ( E x e m p . ) v s . N i r m a n F o u n d a t i o n c h a r i t a b l e T r u s t . ) A. Y . 2 0 1 4 - 1 5 - 4 -
7. The issue of allowability of claim of loss under s.11 of the Act and carry forward of the same to subsequent year to be set off against income of subsequent year by the charitable trust is no longer res integra. The CIT(A) has correctly applied the law laid down in CIT vs. Shri Plot Shwetamber Murti Pujak Jain Mandal (1995) 211 ITR 0293 (Guj). The Hon'ble Supreme Court in the case of CIT(Exemption) vs. Subros Education Society (2018) 303 CTR 1 (SC) has dismissed the SLP of the Revenue against the order of the Hon'ble High Court where identical issue was adjudicated in favour of assessee by the Hon'ble Delhi High Court in IT No. 382 of 2015 dated 23.09.2015.
8. We thus see no error in the order of the CIT(A). We thus endorse the view of the CIT(A) that excess expenses incurred in earlier years have to be adjusted against the income of subsequent year and it will have to be regarded as application of income in the subsequent year, in which, such adjustment has been made having regard to benevolent provisions contained in Section 11 of the Act. We thus decline to interfere.
9. In the result, the appeal of the Revenue is dismissed.
This Order pronounced on 04/03/2021
Sd/- Sd/-
(RAJPAL YADAV) (PRADIP KUMAR KEDIA)
VICE PRESIDENT ACCOUNTANT MEMBER
Ah med ab ad : Da ted 0 4 /0 3 /2 0 2 1
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आय,
ु त / Concerned CIT
4. आयकर आयु,त- अपील / CIT (A)
I T A N o . 4 7 0 / Ah d / 1 8 ( D C I T ( E x e m p . ) v s . N i r m a n F o u n d a t i o n c h a r i t a b l e T r u s t . ) A. Y . 2 0 1 4 - 1 5 - 5 -
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।