ITO, Ludhiana v. M/s Bhartiya Vidya Mandir Trust, Ludhiana

ITA 1093/CHANDI/2013 | 2010-2011
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 109321514 RSA 2013
Assessee PAN AAATB4880H
Bench Chandigarh
Appeal Number ITA 1093/CHANDI/2013
Duration Of Justice 1 year(s) 5 month(s)
Appellant ITO, Ludhiana
Respondent M/s Bhartiya Vidya Mandir Trust, Ludhiana
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-04-2015
Date Of Final Hearing 27-04-2015
Next Hearing Date 27-04-2015
Assessment Year 2010-2011
Appeal Filed On 29-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI T.R.SOOD ACCOUNTANT MEMBER ITA NO. 1093/CHD/2013 (ASSESSMENT YEAR : 2010-11) THE INCOME TAX OFFICER VS. BHARTIYA VIDYA MANDIR TRUST WARD VI(1) NEW ROSE GARDEN LUDHIANA. UDHAM SINGH NAGAR LUDHIANA. PAN: AAATB4880H AND C.O.NO.2/CHD/2014 IN ITA NO. 1093/CHD/2013 (ASSESSMENT YEAR : 2010-11) BHARTIYA VIDYA MANDIR TRUST VS. THE INCOME TAX OFFICER NEW ROSE GARDEN WARD VI(1) UDHAM SINGH NAGAR LUDHIANA. LUDHIANA. PAN: AAATB4880H (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI KUMAR DEPARTMENT BY : SHRI MANJIT SINGH DR DATE OF HEARING : 27.04.2015 DATE OF PRONOUNCEMENT : 30.04.2015 O R D E R PER BHAVNESH SAINI J.M. : THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER 2 OF LEARNED CIT (APPEALS)-II LUDHIANA DATED 11.9.20 13 FOR ASSESSMENT YEAR 2010-11. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON R ECORD. 3. THE ASSESSEE IN CROSS OBJECTION HAS CHALLENGED THE ORDER OF THE LEARNED CIT (APPEALS) IN UPHOLDING THE DISALLOWANCE OF CLAIM OF RS.2 57 90 420/- MADE BY T HE TRUST IN RESPECT OF EXCESS UTILIZATION MADE IN THE EARLIE R YEARS. 4. THE BRIEF FACTS ARE THAT ASSESSEE SOCIETY WAS FORMED ON 7.12.1968 AND REGISTERED WITH THE REGISTR AR OF FIRMS AND SOCIETIES ON 17.12.1968. THE SOCIETY WAS REGISTERED UNDER SECTION 12AA OF THE INCOME TAX ACT VIDE ORDER DATED 4.3.1976. THE SOCIETY IS ALSO APPROVED UNDER SECTION 10(23C) BY THE CHIEF COMMISSIONER OF INCOM E TAX. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AS SESSING OFFICER NOTED THAT THE GROSS RECEIPTS DECLARED BY THE ASSESSEE WERE RS. 9 85 33 522/-. AS PROVIDED UNDER SECTION LL(L)(B) OF THE INCOME TAX ACT 85% OF THIS AMOUNT WAS REQUIRED TO BE APPLIED FOR CHARITABLE PURPOSES DURI NG THE YEAR. THUS THE ASSESSEE WAS REQUIRED TO APPLY AN A MOUNT OF RS.8 37 53 494/- FOR CHARITABLE PURPOSES TOWARDS TH E OBJECTS OF THE SOCIETY. AS AGAINST THIS THE ASSESS EE HAD APPLIED AN AMOUNT OF RS.7 39 11 839/-. THE ASSE SSING OFFICER FURTHER NOTED THAT AN AMOUNT OF RS.60 14 3 98/- WAS DEBITED TO THE PROFIT & LOSS ACCOUNT ON ACCOUNT OF DEPRECIATION. AFTER EXCLUDING THIS AMOUNT OF 3 DEPRECIATION FROM THE AMOUNT SHOWN AS EXP ENDITURE THE TOTAL AMOUNT APPLIED DURING THE YEAR WAS ONLY RS.6 78 97 441/-. THERE WAS THUS A SHORT FALL OF RS.1 58 56 053/- TOWARDS THE APPLICATION OF INCOME AS REQUIRED UNDER THE INCOME TAX ACT. THE ASSESSING O FFICER FURTHER OBSERVED THAT NO INTIMATION IN FORM NO. 10 WAS GIVEN BY THE ASSESSEE TO THE ASSESSING OFFICER BE FORE THE DUE DATE OF FILING OF RETURN WITH REGARD TO ACCUMUL ATION OF INCOME. IN THESE CIRCUMSTANCES THE ASSESSING OFFI CER ASKED THE ASSESSEE TO EXPLAIN WHY THE SHORT FALL I N APPLICATION AMOUNTING TO RS.1 58 56 0537- MAY NOT B E TAXED. THE ASSESSEE VIDE HIS REPLY DATED 6.11.2012 SUBMITTED THAT THE SHORT FALL HAD BEEN COMPUTED WRO NGLY BY THE ASSESSEE IN AS MUCH AS THE AMOUNT OF DEPRECIAT ION AMOUNTING TO RS.60 14 3987- ALTHOUGH DEBITED TO THE PROFIT & LOSS ACCOUNT HAD NOT BEEN TAKEN IN THE COMPUTATI ON. THEREFORE THE SHORT FALL IN APPLICATION OF INCOME WOULD AMOUNT TO RS.98 41 655/- AND NOT RS. 1 58 56 053/-. THE ASSESSEE FURTHER SUBMITTED THAT THE DEPRECIATION T HOUGH NOT CLAIMED IN THE RETURN OF INCOME WAS ALLOWABLE I N VIEW OF THE JUDGEMENT OF THE HON'BLE PUNJAB AND HARYANA HIG H COURT IN THE CASE OF CIT VS. TINY TOTS EDUCATION SOCIETY 330 ITR 21 (P&H) AND CIT VS. MARKET COMMITTEE PIPL I (2011) 238 CTR 103 (P&H). THE ASSESSEE SUBMITTED THAT EVEN IF THERE WERE TWO VIEWS ON THIS ISSUE AS THE FINAL VERDICT OF THE APEX COURT IS NOT THERE. THE VIEW O F THE JURISDICTIONAL HIGH COURT IS TO BE CONSIDERED. WITH REGARD TO THE SHORT FALL IN APPLICATION OF INCOME THE ASS ESSEE 4 SUBMITTED THAT THERE WAS EXCESS UTILIZATION OF INCO ME DURING THE EARLIER YEARS WHICH HAD BEEN ADJUSTED AGAINST T HE SHORT FALL IN THE UTILIZATION DURING CURRENT YEAR. IN THI S REGARD THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS:- - CIT VS. TRUSTEE OF SETH MERWARJEE FRAMJI PANDEY CHARITABLE TRUST (2003) 177 TAXMAN 19 (BOM) AND CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 164 ITR 439 5. THE ASSESSING OFFICER WAS NOT SATISFIED WITH T HE ASSESSEES SUBMISSIONS. WITH REGARD TO THE ISSUE OF DEPRECIATION THE ASSESSING OFFICER REFERRED TO THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. CIT 348 ITR 344 (K ER) WHEREIN THE HON'BLE KERALA HIGH COURT HELD THAT DEPRECIATION IS NOT CONSIDERED TO BE APPLICATION OF INCOME ONCE THE ENTIRE COST OF ASSET HAS BEEN TREATED AS A PPLICATION UNDER SECTION LL(L)(B) OF THE INCOME TAX ACT. IN VI EW OF THIS DECISION THE ASSESSING OFFICER HELD THAT TO KEEP THE ISSUE ALIVE THE DEPRECIATION IS NOT TO BE CONSIDERED AS APPLICATION OF INCOME. REGARDING THE ISSUE OF EXCESS UTILIZATIO N IN THE EARLIER YEARS THE ASSESSING OFFICER DISCUSSED THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (SU PRA) AND POINTED OUT THAT THE EXPENSES INCURRED BY THE A SSESSEE IN THE CASE OF MAHARANA OF MEWAR CHARITABLE FOUNDAT ION WERE MORE THAN THE RECEIPTS I.E. THERE WAS ACTUAL L OSS. THE ASSESSING OFFICER OBSERVED THAT THE FACTS IN THE A SSESSEES CASE ARE DIFFERENT IN AS MUCH AS THE ASSESSEE HAD CLAIMED CARRY FORWARD OF EXPENSES IN EXCESS OF 85% OF RECEI PTS WHICH IS NOT PROVIDED IN THE ACT. THE ASSESSING OFFICER THEREAFTER 5 DISCUSSED IN DETAIL THE QUANTUM OF RECEIPTS AND EXP ENSES INCURRED BY THE ASSESSEE OVER THE YEARS AND POINTED OUT THAT ACTUALLY THERE WAS NO SET OFF AVAILABLE WITH T HE ASSESSEE IF THE WORKING WAS MADE IN ACCORDANCE WITH THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDA TION (SUPRA). THE ASSESSING OFFICER DID THE WORKING IN THIS CASE AND ESTABLISHED THAT THERE WAS NO LOSS AVAILABLE TO THE ASSESSEE FOR SET OFF IN THE CURRENT YEAR. THIS WOR KING HAS BEEN DONE IN PARA 4.4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER ALSO REFERRED TO THE CASE OF PUSHPAWATI SINGHANIA RESEARCH INSTITUTE FOR LIVER RENAL & DIG ESTIVE DISEASE VS. DDIT (EXEMPTION) BY DELHI BENCH OF ITAT -29 SOT 316 ON THIS ISSUE. IN VIEW OF THESE FACTS AND CASE LAWS THE ASSESSING OFFICER ONCE AGAIN ISSUED A SHOW CAUS E NOTICE TO THE ASSESSEE ON 20.12.2012 WHEREIN THE TOTAL I NCOME NOT APPLIED TOWARDS THE OBJECTS OF THE TRUST WAS WO RKED OUT AT RS.2 46 21 6837- AS UNDER:- I) TOTAL INCOME I.E. RECEIPTS OF THE TRUST RS.9 85 33 522/- II) INCOME APPLIED TOWARDS OBJECTS OF THE TRUST RS.7 39 11 839/- III) AMOUNT OF INCOME NOT APPLIED TOWARDS OBJECTS OF THE TRUST/SET APART RS.2 46 21 683/ - IV) 85% OF THE TOTAL INCOME OF THE TRUST RS.8 37 53 500/- 6. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY THIS AMOUNT MAY NOT BE TAXED. THE ASSES SEE VIDE HIS REPLY DATED 28.12.2012 REQUESTED THE ASSES SING OFFICER TO ALLOW THE DEPRECIATION IN THE LIGHT OF T HE JUDGEMENT OF THE HON'BLE PUNJAB AND HARYANA HIGH CO URT IN THE CASE OF CIT VS. TINY TOTS EDUCATION SOCIETY. THE 6 ASSESSEE ALSO RELIED UPON THE CASE OF A.L.N RAO CHARITABLE TRUST REPORTED IN 216 ITR 697(SC) WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT THERE WAS A BLANKET EXE MPTION OF 25% OF TOTAL INCOME FROM THE UNSPENT AMOUNT OF T HE TRUST. THE ASSESSEE CLAIMED THAT IN VIEW OF THIS JU DGEMENT 15% OF ITS TOTAL INCOME FROM UNSPENT AMOUNT WAS EXE MPT. THE ASSESSING OFFICER ONCE AGAIN FOUND THE ASSESSEE 'S SUBMISSIONS UNSATISFACTORY. REGARDING THE CLAIM OF DEPRECIATION THE ASSESSING OFFICER HELD THAT THE SAME IS NOT ACCEPTABLE BECAUSE THE CLAIM HAS NOT BEEN MADE IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND TIME FOR FILING REVISED RETURN HAS EXPIRED. REGARDING THE ISSUE OF DEFICIT THE ASSESSING OFFICER OBSERVED THAT NO COURT HAD A LLOWED DEFICIT OUT OF 85% OF INCOME TO BE ADJUSTED AGAINST INCOME OF THE FOLLOWING YEARS AS CLAIMED BY THE ASSESSEE I N THE RETURN OF INCOME. IN VIEW OF THESE FACTS AND CIRCUM STANCES TOTAL INCOME OF THE ASSESSEE WAS COMPUTED AT RS.2 46 21 680/-. 7. THE ASSESSEE CHALLENGED THE ADDITION BEFORE THE LEARNED CIT (APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE APPELLATE ORDER WHIC H READS AS UNDER : VIDE THE NEXT GROUND OF APPEAL THE APPELLANT IS AGITATING AGAINST THE SET OFF OF EXCESS EXPENDITURE INCURRED DURING THE PREVIOUS YEARS AGAINST THE SURPLUS FOR THE YEAR UND ER APPEAL. AS PER THE PROVISIONS OF SECTION 11 OF THE INCOME T AX ACT 1961 A TRUST HAS TO APPLY ITS INCOME UP TO 85% TOW ARDS THE OBJECTIVES OF THE TRUST TO GET ACCUMULATION / SET A PART OF INCOME OF THE REMAINING 15% OF THE INCOME. BY TAKING THIS INTO 7 CONSIDERATION THE APPELLANT IS CLAIMING EXCESS UTI LIZATION OF INCOME OVER AND ABOVE THE EXPENDITURE INCURRED BY 8 5% OF THE INCOME OF A PARTICULAR YEAR AND THE RETURNS WERE BE ING FILED ACCORDINGLY. THE ASSESSMENTS FOR ALL THE YEARS FRO M A/Y 2006- 07 HAVE BEEN FRAMED UNDER SECTION 143(3) OF THE INC OME TAX ACT 1961. COPIES OF COMPUTATION CHARTS OF INCOME A LONGWITH COPIES OF ASSESSMENT ORDERS FOR A/YS 06-07 TO 09-10 ARE ENCLOSED. THE RETURNED INCOME FILED BY THE APPELLAN T IN ALL THE RESPECTIVE YEARS HAVE BEEN ACCEPTED BY THE DEPARTM ENT. AS ON THE FIRST DAY OF THE PREVIOUS YEAR THE APPELLANT HAS EXCESS UTILIZATION OF EXPENDITURE IN EARLIER YEARS AMOUNTI NG TO RS.2 57 90 420/-. OUT OF WHICH A SUM OF RS.98 41 655/- WAS ADJUSTED AGAINST THE SHORT UTILIZATION OF INCOME FO R THE YEAR UNDER APPEAL AND THE BALANCE HAS BEEN TAKEN/CARRIED TO NEXT YEAR. FOR THE PURPOSE OF THE ADJUSTMENT OF EXCESS U TILIZATION OF INCOME IN EARLIER YEARS AGAINST THE SURPLUS FOR THE CURRENT YEAR VARIOUS HON'BLE COURTS HAVE DECIDED/HELD THE ISSUE IN FAVOUR OF THE APPELLANT. YOUR HONOUR'S KIND ATTENTION IS INVITED TO THE RATI O OF CIT VS MAHARANA MEWAR CHARITABLE FOUNDATION REPORTED IN 164 ITR PAGE 439 (RAJ.) WHEREIN THEIR LORDSHIPS HAVE HELD THAT THE ANOMALY WHICH HAS ARISEN THAT IF THE TRUST TAKES A L OAN FOR THE PURPOSES OF INCURRING EXPENDITURE FOR CHARITABLE AND RELIGIOUS PURP OSES IN A PARTICULAR YEAR AND THE SAID LOAN IS REPAID OUT OF THE INCOME O F THE SUBSEQUENT YEAR THE SAID REPAYMENT WOULD BE ENTITLED TO THE EXEMPTION FROM TAX U/S 11(1) (A) OF THE ACT. BUT IF THE TRUST INSTEAD OF TAKING A LOAN INCURS THE EXPENDITURE FOR CHARITABLE AND RELIGIOUS PURPOSES OUT OF THE CORPUS OF THE TRUST AND SEEKS TO REIMBURSEMENT OF THE SAID AMOUNT OUT OF TH E INCOME OF THE SUBSEQUENT YEAR THE TRUST WOULD NOT BE ENTITLED TO CLAIM EXEMPTION IN RESPECT OF SUCH REIMBURSEMENT U/S 11(1) (A) OF THE A CT. A CONSTRUCTION WHICH LEADS TO SUCH ANOMALY SHOULD BE AVOIDED. THE ADJUSTMENT OF THE EXPENDITURE INCURRED BY THE TRUST FOR CHARITABLE OR RELIGIOUS PUR POSES IN EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN SUBSEQUENT YEAR WOULD AMOUNT TO APPLYING THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAD BEEN M ADE AND WOULD HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST U/S 11(1 ) (A) OF THE ACT. THE SIMILAR ISSUE OF ADJUSTMENT OF EXPENDITURE INCUR RED EARLIER AGAINST THE SURPLUS OF THE SUBSEQUENT YEAR HAS ALSO C OME BEFORE THE HON 'BLE MUMBAI HIGH COURT IN THE CASE OF CIT VS INSTIT UTE OF BANKING REPORTED IN 264 ITR P. 110 (BOM.) WHEREIN THE ASSESSING OFFICER DID 8 NOT ALLOW CARRY FORWARD OF EXCESS EXPENDITURE TO BE SET OFF AGAINST THE SURPLUS OF SUBSEQUENT YEAR ON THE GROUND THAT IN THE CASE OF CHARITABLE TRUST THEIR INCOME WAS ASSESSABLE UNDER SELF CONTA INED CODE MENTIONED IN SECTION 11 TO 13 OF THE INCOME TAX ACT AND THAT TH E INCOME OF THE CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS PROFESSION' U/S 28 IN WHICH THE PROVI SIONS OF CARRY FORWARD OF LOSSES WAS RELEVANT. THAT IN A CASE OF CHARITABLE TRUST THERE WAS NO PROVISION FOR CARRY FORWARD OF THE EXCESS OF EXP ENDITURE OF EARLIER YEARS TO BE ADJUSTED AGAINST INCOME OF THE SUBSEQUE NT YEARS. THEIR LORDSHIPS HAVE HELD THAT THERE IS NO MERIT IN THIS ARGUMENT OF THE DEPARTMENT. INCOME DERIVED FROM THE TRUST PROPERTY H AS ALSO GOT TO BE COMPUTED ON COMMERCIAL PRINCIPALS AND IF COMMERCIAL PR INCIPALS ARE APPLIED THEN ADJUSTMENT OF THE EXPENDITURE INCURRED BY THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES IN EARLIER YEARS AGAINS T THE INCOME EARNED BY THE TRUST IN SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES IN SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE HA VING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SECTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EXCLUDED FROM THE I NCOME OF THE TRUST U/S 11(1) (A) OF THE ACT. FURTHER YOUR HONOUR'S KIND ATTENTION IS DRAWN TO T HE RATIO OF CIT VS TRUSTEE OF SETH MERWARJEE FRAMJI PANDEY CHAR ITABLE TRUST [2003] 177 TAXMAN P. 19 (BOM) WHEREIN THEIR LORDSHIP HAVE HELD THAT IF A TRUST HAS INCURRED A DEFICIT DURING A PARTICULA R YEAR THE SURPLUS MADE BY IT IN A SUBSEQUENT YEAR TO MAKE UP FOR THE P AST DEFICIT SHOULD BE SET OFF AGAINST SUCH DEFICIT. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF CIT VS MAHARANA OF MEWAR CHARITABLE FOUNDATION [ 1987) 164 ITR P. 439 (RAJ) AND ALSO IN THE CASE CIT VS INSTITUTE OF BANKING PERSONNEL SELECTION 264 ITR P. 110 (BOM) WHEREIN THE AO HAS DISALLOWED THE CLAIM FOR CARRY FORWARD OF DEFICIT OF EARLIER YEARS FOR ADJUSTMENT AGAINST THE SURPLUS OF THE SUBSEQUENT YEA RS ON THE GROUND THAT SUCH CARRY FORWARD WAS APPLICABLE ONLY IN THE CA SE OF INCOME UNDER THE HEAD BUSINESS OR PROFESSION AND WAS NOT PERMISS IBLE IN THE CASE OF INCOME ASSESSABLE U/S 11 TO 13 OF THE ACT. THE HON'B LE HIGH COURT HELD THAT INCOME DERIVED FROM THE TRUST PROPERTY IS TO B E COMPUTED ON COMMERCIAL PRINCIPLES. ACCORDINGLY EXCESS OF EXPENDITU RE INCURRED BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN EARLIER YEARS AGAINST THE INCOME EARNED BY THE TRUST IN SUBSEQUENT YEAR WOULD HAVE TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST IN SU BSEQUENT YEAR. THE COURT ALSO HELD THAT SECTION 11 BEING THE BENEVOLENT PROVISION AND HAD TO BE LIBERALLY CONSTRUED. 9 FROM THE ABOVE CITATIONS IT IS VERY MUCH CLEAR THAT TH E APPELLANT HAS RIGHTLY CLAIMED THE SET OFF OF EXTRA EXPENDITUR E THAN THE INCOME OF EARLIER YEARS AGAINST THE SURPLUS FOR THE YEAR UNDE R APPEAL AND THIS GROUND OF APPEAL BE ADJUDICATED ACCORDINGLY. 8. THE SUBMISSIONS OF THE ASSESSEE WERE FORWARDED TO THE ASSESSING OFFICER WHO HAS SUBMITTED HIS REPORT DATED 30.8.2013 WHICH READS AS UNDER : VIDE HIS LETTER DATED 18.06.2013 THE COUNSEL OF T HE ASSESSEE HAS SUBMITTED THAT INCOME WAS ASSESSED AT THE RS.2 4 6 21 680/- AS AGAINST NIL INCOME WHEREIN THE AO NEGATED THE CLAIM OF THE APPELLANT OF EXCESS UTILIZATION OF INCOME IN EARLIER YEARS AGA INST SURPLUS OF THE YEAR. IN SUPPORT OF HIS CLAIM HE CITED THE RATIO OF JUDGMENT OF THE HON'BLE RAJASTHAN IN THE CASE OF CIT VS MAHARANA MEWAR CHAR ITABLE FOUNDATION REPORTED IN 164 ITR PAGE 439 (RAJ.) WHERE IN THEIR LORDSHIPS HAVE HELD THAT THE ANOMALY WHICH HAS ARISEN THAT IF THE TRUST T AKES A LOAN FOR THE PURPOSES OF INCURRING EXPENDITURE FOR CHARITABLE AND RELIGIOUS PURPOSES IN A PARTICULAR YEAR AND THE SAID LOAN IS R EPAID OUT OF THE INCOME OF THE SUBSEQUENT YEAR THE SAID REPAYMENT WOULD BE E NTITLED TO THE EXEMPTION FROM TAX U/S 11(1) (A) OF THE ACT. THE JUDGMENT OF THE HON'BLE HIGH COURT OF RAJAS THAN DOES NOT FAVOUR THE ASSESSEE AS ALREADY DISCUSSED IN THE ASSE SSMENT ORDER IN DETAIL RELYING ON THE DECISION IN THE CASE OF LISSI C MEDICAL INSTITUTION VS CIT HON 'BLE KERALA HIGH COURT (348ITR 344). THE REASON B EING FACTS OF THE PRESENT CASE ARE DIFFERENT FROM THE CASE AS CITIED A BOVE BECAUSE IN THE SAID CASE THE EXPENSES WERE MORE THAN THE RECEIPTS I. E. THERE WAS ACTUAL LOSS. WHEREAS IN THE PRESENT CASE THE ASSESSEE IS CLAIMING EXCESS OF APPLICATION OF INCOME ABOVE 85% IN EARLIER YEARS AGAINST THE CUR RENT YEAR INCOME WHICH IS NOT ACCORDING TO LAW. AS SUCH THIS CLAIM OF THE ASSESSEE MAY NOT BE ENTERTAINED. THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGMENT O F THE HON'BLE MUMBAI HIGH COURT IN THE CASE OF CIT VS INSTITUTE OF BANKING REPORTED IN 264 ITR P.110 (BOM.). THE FACTS OF THIS CASE ARE ALS O DIFFERENT FROM THAT THE PRESENT CASE OF THE ASSESSEE. IN THE PRESENT CAS E THE ASSESSEE IS CLAIMING EXCESS OF 85% OF INCOME APPLICATION IN PREV IOUS YEAR AGAINST THE INCOME OF THE SUBSEQUENT YEAR WHEREAS IN THE CAS E CITIED ABOVE THE ASSESSEE HAS INCURRED DEBT IN CARRYING OUT CHARITABLE OBJECTS IN EARLIER YEARS. 10 8.1 COPY OF THE ASSESSING OFFICER'S REPORT WAS PROVIDED TO THE ASSESSEE. THE LEARNED COUNSEL FOR ASSESSEE ONCE AGAIN PLACED RELIANCE UPON THE SUBMISSIONS DAT ED 18.06.2013. 9. THE LEARNED CIT (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE MAT ERIAL ON RECORD CONFIRMED THE ADDITION AND DISMISSED THIS GR OUND OF APPEAL OF THE ASSESSEE. THE FINDINGS OF THE LEARN ED CIT (APPEALS) IN PARAS 4.5 TO 4.9 OF THE APPELLATE ORDE R ARE REPRODUCED AS UNDER : 4.5 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. THE APPELLANT HAD CLAIMED THAT THERE WAS EXCESS UTILIZATION DURIN G THE EARLIER YEARS OVER AND ABOVE THE AMOUNT APPLIED UPTO 85% OF THE INCOME IN THOSE YEARS AND THIS EXCESS APPLICATION OF INCOME HAD BEEN CLAIM ED TO BE CARRIED FORWARD TO THE SUBSEQUENT YEARS. THE APPELLA NT HAS CLAIMED THAT THE SHORT FALL IN THE APPLICATION OF INCOME IN THE CURRENT YEAR IS ADJUSTABLE AGAINST CARRY FORWARD OF EXPENSES FROM T HE EARLIER YEARS. IN ORDER TO APPRECIATE THE FULL FACTS OF THE CASE DUR ING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT WAS REQUESTED TO FILE EVIDENCE OF EXCESS UTILIZATION BROUGHT FORWARD WHIC H WAS CLAIMED TO BE SET OFF AGAINST SHORT FALL DURING THE CURRENT YEAR. THE APPELLANT VIDE HIS REPLY DATED 05.07.2013 SUBMITTED THE FOLLOWING DET AILS:- INCOME EXPENDITURE % REQUIRED TO BE INCURRED EXCESS DEPRECIA TION O/BALANCE EXCESS C/F A.Y. 01 - 02 28728418 22197779 77.27 75% 651466 NIL 1884141 2535607 A.Y. 02 - 03 36850001 40351003 109.5 75% 12713502 NIL 2535607 15249109 A.Y. 03 - 04 46552799 44821832 96.28 85% 5251953 NIL 15249109 20501062 A.Y. 04 - 05 55789036 49101523 88.01 85% 1680842 NIL 20501065 22181904 A.Y. 05 - 06 62925625 54785893 87.06 85% 1299112 NIL 22181904 23481016 A.Y. 06 - 07 69119941 72972492 105.46 85% 14159342 NIL 23481016 37640358 A.Y. 07 - 08 71646870 63035045 87.98 85% 4564198 NIL 37640358 42204716 11 A.Y. 08 - 09 85439902 66264816 77.56 85% (-) 6359101 NIL 42204716 35845615 A.Y. 09 - 10 92001695 68146246 74.07 85% (-) 10055195 6771010 35845615 25790420 A.Y. 10-11 98533522 73911839 75.01 85% (-) .9841655 6014398 25790420 15948765 PERUSAL OF THESE DETAILS CLEARLY SHOW THAT EXCEPT F OR THE A/YS 2002-03 AND 2006-07 THE INCOME OF THE APPELLANT IN EACH OF T HE YEARS WAS MORE THAN THE AMOUNT APPLIED BY THE APPELLANT IN THAT YEAR ON CHARITABLE PURPOSES. THERE WAS NO DEFICIT OF INCOME OVER APPLIC ATION IN ANY OF THE YEARS EXCEPT THESE TWO YEARS. THE APPELLANT HAD WORK ED OUT THE DEFICIT ON THE BASIS OF INCOME REQUIRED TO BE APPLIED WITH REGARD TO SECTION LL(L)(B) OF THE INCOME TAX ACT AND NOT ON THE BASIS OF TOTAL INCOME. THE EXCESS AMOUNT OF APPLICATION OVER AND ABOVE THIS REQU IREMENT WAS CLAIMED TO BE ELIGIBLE FOR CARRY FORWARD EVEN THOUGH THE TOTAL EXPENDITURE WAS LESS THAN THE TOTAL INCOME IN EACH YEAR. 4.6 THE ACTUAL EXCESS AMOUNT APPLIED IN THESE YEARS WORKS O UT AS UNDER:- INCOME EXPENDITURE % EXCESS A.Y. 01 - 02 28728418 22197779 77.27 NIL A.Y. 02 - 03 36850001 40351003 109.5 3501002 A.Y. 03 - 04 46552799 44821832 96.28 NIL A.Y. 04 - 05 55789036 49101523 88.01 NIL A.Y. 05 - 06 62925625 54785893 87.06 NIL A.Y. 06-07 69119941 72972492 105.46 3780551 A.Y. 07-08 71646870 63035045 87.98 NIL A.Y. 08 - 09 85439902 66264816 77.56 ( - ) 6359101 A.Y. 09 - 10 92001695 68146246 74.07 ( - ) 10055195 A.Y. 10-11 98533522 73911839 75.01 (-) 9841655 FROM THE AFORESAID DETAILS IT IS EVIDENT THAT DURING THE ASSESSMENT YEAR UNDER REFERENCE THE APPELLANT HAD NO EXCESS AP PLICATION OF INCOME OR EXPENDITURE WHICH COULD HAVE BEEN CARRIED FORWARD F ROM THE EARLIER YEARS AND WHICH COULD HAVE BEEN ADJUSTED AGAINST THE SHOR T FALL IN APPLICATION OF INCOME OF THE CURRENT YEAR. EVEN IF THE CLAIM OF CA RRY FORWARD OF EXCESS APPLICATION OF INCOMEDURINGAY02-03AND06-07 IS CONSID ERED THE SAME WOULD AMOUNT TO RS.72 81 553/-.THIS EXCESS APPLICATI ON CAN AT BEST BE SET OFF AGAINST SHORTFALL OF APPLICATION IN THE AY 08 -09 (RS 6359101) AND SHORTFALL TO THE EXTENT OF RS 9.22.4S2/- OUT OF TOTA L SHORTFALL OF RS 10055195/- DURING AY 09-10. THERE WOULD STILL BE A SHORTFALL O F RS.91 32 643/- IN THE AY 2009-2010. THEREFORE THE CLAIM OF THE APPELLANT FOR SET OFF OF SHORTFALL IN APPLICATION OF INCOME DURING AY 2010-2011 AGAINST CA RRY FORWARD OF EXCESS EXPENDITURE OF EARLIER YEARS IS NOT TENABLE. 12 4.7 THE APPELLANT'S RELIANCE ON THE CASE OF CIT VS. MAHARANA OF MEWAR CHARITABLE FOUNDATION (SUPRA) IS MISPLACED. IN THIS CASE THE FACTS WERE AS UNDER: 'DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1970-71 THE ASSESSEE SPENT A SUM OF RS. 95 863 TOWARD S THE AIMS AND OBJECTS OF THE TRUST AND THE INCOME OF THE ASSE SSEE DURING THE SAID YEAR WAS ONLY RS. 36 093 AND THUS A SUM OF RS. 59 770 WAS SPENT IN EXCESS OF THE INCOME DURING THE PERIOD REL EVANT TO THE ASSESSMENT YEAR 1970-71. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1971-72 THE ASSESSEE CLAIMED ADJUS TMENT OF THE SUM OF RS. 59 770 AGAINST THE SURPLUS OF INCOME OVER E XPENDITURE DURING THE ASSESSMENT YEAR 1971-72. ' THE HON'BLE HIGH COURT HELD AS UNDER: 'THE AFORESAID DISCUSSION LEADS TO THE CONCLUSION T HAT THE TRIBUNAL WAS RIGHT IN DIRECTING THAT THE DEFICIT OF RS. 59 7 70 ARISING OUT OF THE EXCESS OF EXPENDITURE OVER INCOME DURING THE PREVIO US YEAR RELEVANT TO THE ASSESSMENT YEAR 1970-71 SHOULD BE SET OFF AG AINST THE SURPLUS OF INCOME OVER EXPENDITURE RELATING TO THE ASSESSME NT YEAR 1971-72 IN COMPUTING THE TAXABLE INCOME OF THE LATTER ASSESSME NT YEAR. ' 4.8 SIMILARLY IN THE CASE OF CIT VS. INSTITUTE OF BANKING REPORTED 264 ITR 110 THE FACTS WERE AS UNDER: 'THE ASSESSEE IS A CHARITABLE TRUST. FOR THE ACCOUNTI NG YEAR ENDING DECEMBER 31 1984 (ASSESSMENT YEAR 1984-85) A R ETURN OF INCOME WAS FILED ON JUNE 28 1985 BY THE ASSES SEE D ECLARING A DEFICIT OF RS. 74.97 LAKHS. IN THE REVISED RETURN FILED BY THE ASSES SEE ON APRIL 3 1986 THE DEFICIT WAS INCREASED TO RS. 89.1 8 LAKHS. DURING THE ASSESSMENT YEAR IN QUESTION THE ASSESSEE HAD CAR RIED FORWARD THE DEFICIT OF THE EARLIER YEARS AND HAD ADJUSTED THE DE FICIT OF THE EARLIER YEARS AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS WH ICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THA T SUCH CARRY FORWARD WAS APPLICABLE ONLY TO INCOME ASSESSABLE UND ER THE HEAD 'PROFITS AND GAINS OF BUSINESS' AND SUCH CARRY FORW ARD AND ADJUSTMENT WAS NOT PERMISSIBLE IN CASE OF INCOME ASSESSABLE UNDE R SECTION 11 TO SECTION 13 OF THE INCOME-TAX ACT AS THE INCOME OF TH E CHARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS'. 13 HON'BLE HIGH COURT HELD AS UNDER: 'NOW COMING TO QUESTION NO. 3 THE POINT WHICH ARISES F OR CONSIDERATION IS : WHETHER EXCESS OF EXPENDITURE IN TH E EARLIER YEARS CAN BE ADJUSTED AGAINST THE INCOME OF THE SUBS EQUENT YEAR AND WHETHER SUCH ADJUSTMENT SHOULD BE TREATED A S APPLICATION OF INCOME IN THE SUBSEQUENT YEAR FOR CHARI TABLE PURPOSES? IT WAS ARGUED ON BEHALF OF THE DEPARTMENT THAT EXPENDITURE INCURRED IN THE EARLIER YEARS CANNOT BE ME T OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND THAT UTILISATION OF SUCH 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 B E SET OFF AGAINST THE SURPLUS OF THE SUBSEQUENT YEARS ON THE G ROUND THAT IN THE CASE OF A CHARITABLE TRUST THEIR INCOME WAS A SSESSABLE UNDER SELF-CONTAINED CODE MENTIONED IN SECTION 11 TO SECTION 13 OF THE INCOME-TAX ACT AND THAT THE INCOME OF THE CH ARITABLE TRUST WAS NOT ASSESSABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS' UNDER SECTION 28 IN WHICH THE PROVISION F OR 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 THE SUBSEQUENT YEARS. WE DO NOT FIND ANY MERIT IN THIS AR GUMENT 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 TRUS T IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARDED AS APPLICA TION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PU RPOSES IN THE SUBSEQUENT YEAR IN WHICH ADJUSTMENT HAS BEEN MADE H AVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SE CTION 11 OF THE ACT AND THAT SUCH ADJUSTMENT WILL HAVE TO BE EX CLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1) (A) OF THE ACT. OUR VIEW IS ALSO SUPPORTED BY THE JUDGMENT OF THE GUJAR AT HIGH COURT IN THE CASE OF CIT V. SHRI PLOT SWETAMBER MUR TI PUJAK JAIN MANDAL [1995] 211 ITR 293. ACCORDINGLY WE ANSWER QUESTION NO. 3 IN THE AFFIRMATIVE I.E. IN FAVOUR OF THE AS SESSEE AND AGAINST THE DEPARTMENT. ' 4.9 IN BOTH THE CASES THERE WAS ACTUAL DEFICIT I. E. EXPENDITURE WAS MORE THAN THE INCOME. AS DISCUSSED ABOVE IN THE AP PELLANT'S CASE THERE 14 IS NO ACTUAL DEFICIT. IT IS THUS EVIDENT THAT THE A PPELLANT'S CLAIM OF CARRY FORWARD OF EXCESS UTILIZATION PERTAINING TO T HE EARLIER YEARS FOR SET OFF AGAINST INCOME OF CURRENT YEAR IS NOT IN AC CORDANCE WITH THE PROVISIONS OF LAW AND IS NOT SUPPORTED BY ANY OF TH E CASE LAWS RELIED UPON BY THE APPELLANT. THIS GROUND OF APPEAL IS ACC ORDINGLY DISMISSED. 10. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF CROSS OBJECTION OF THE ASSESSEE. THE ASSESSEE CLAIMED BEFORE THE LEARNED CIT (APPEALS) THAT THERE WAS EXCESS UTILIZATION DURING THE EARLIER YEARS OVER AND ABOVE THE AMOUNT APPLIED UPTO 85% OF THE INCOME IN THOSE YEARS AND EXCESS APPLICATION OF INC OME HAD BEEN CLAIMED TO BE CARRY FORWARD TO THE SUBSEQUENT YEARS. THE ASSESSEE FURTHER CLAIMED THAT THE SHORT FALL IN THE APPLICATION OF INCOME IN THE CURRENT YEAR IS ADJUST ABLE AGAINST CARRY FORWARD OF EXPENSES FROM THE EARLIER YEARS. THE LEARNED CIT (APPEALS) DIRECTED THE ASSESSEE TO FILE EVIDENCE OF EXCESS UTILIZATION BROUGHT FORWARD WHIC H WAS CLAIMED TO BE SET OFF AGAINST SHORT FALL DURING THE YEAR. THE DETAILS FROM ASSESSMENT YEAR 2001-02 TO 2010-11 ARE REPRODUCED ABOVE. THE LEARNED CIT (APPEALS) ON PE RUSAL OF THESE DETAILS NOTED THAT EXCEPT FOR THE ASSESSMENT YEARS 2002-03 AND 2006-07 THE INCOME OF THE ASSESSEE IN EACH OF THE OTHER YEARS WAS MORE THAN THE AMOUNT APPLIED BY THE ASSESSEE IN THAT YEAR ON CHARITABLE PURPOSES. THE REFORE THERE WAS NO DEFICIT OF INCOME OVER APPLICATION IN ANY OF THE YEARS EXCEPT THESE TWO YEARS. THE ACTUAL EXCESS AM OUNT APPLIED WAS ALSO WORKED OUT AND IT WAS FOUND THAT T HE ASSESSEE HAD NO EXCESS APPLICATION OF INCOME OR EXP ENDITURE WHICH COULD HAVE BEEN CARRIED FORWARD FROM THE EARL IER 15 YEARS AND WHICH COULD HAVE BEEN ADJUSTED AGAINST TH E SHORT FALL IN APPLICATION OF INCOME OF THE CURRENT YEAR. THE LEARNED CIT (APPEALS) TAKING THE TOTAL OF EXCESS AP PLICATION OF INCOME FOR THESE TWO ASSESSMENT YEARS 2002-03 AN D 2006-07 FOUND THAT THE AMOUNT COULD BE SET OFF AGAI NST SHORT FALL OF APPLICATION IN ASSESSMENT YEARS 2008- 09 AND 2009-10. THEREFORE THE CLAIM OF THE ASSESSEE FO R SET OFF OF SHORT FALL IN APPLICATION OF INCOME DURING THE ASSE SSMENT YEAR UNDER APPEAL I.E. 2010-11 AGAINST CARRY FORWAR D OF EXCESS EXPENDITURE OF EARLIER YEARS WAS NOT FOUND T ENABLE. THE LEARNED CIT (APPEALS) THEREFORE NOTED THAT IN ASSESSEES CASE THERE IS NO ACTUAL DEFICIT. THERE FORE THERE IS NO QUESTION OF ALLOWING CARRY FORWARD OF EXCESS UTILIZATION OF EARLIER YEARS. THE FINDINGS OF FACT RECORDED B Y THE LEARNED CIT (APPEALS) ARE BASED ON THE FACTUAL DETA ILS PROVIDED BY THE ASSESSEE. THEREFORE NO INFIRMIT Y HAS BEEN POINTED OUT DURING THE COURSE OF ARGUMENTS. SINCE THE FINDINGS OF FACT RECORDED BY THE LEARNED CIT (APPEA LS) HAVE NOT BEEN REBUTTED THROUGH ANY MATERIAL ON RECORD THEREFORE IN THE ABSENCE OF ANY SPECIFIC ARGUMENTS AGAINST THE LEARNED CIT (APPEALS) NO INTERFERENCE IS REQUI RED IN THE MATTER. THE LEARNED COUNSEL FOR ASSESSEE RELIED U PON THE ORDER OF THE I.T.A.T. AGRA BENCH IN THE CASE OF J CIT VS. SEWA EDUCATION TRUST 40 TAXMANN.COM 143. THE FAC TS OF THIS CASE ARE CLEARLY DISTINGUISHABLE FROM THE FACT S OF THE PRESENT CASE AND THE ISSUE IS ALTOGETHER DIFFERENT. THEREFORE THE SAME ORDER WOULD NOT SUPPORT THE CAS E OF THE ASSESSEE. 16 11. CONSIDERING THE FACTUAL FACTS RECORDED BY THE LEARNED CIT (APPEALS) AGAINST THE ASSESSEE AND FIN DING NO CASE OF ACTUAL DEFICIT THERE IS NO QUESTION OF ALL OWING CARRY FORWARD AS CLAIMED BY THE ASSESSEE. THEREFORE W E DO NO FIND ANY MERIT IN THIS GROUND OF CROSS OBJECTION OF THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED. 12. IN THE RESULT THE CROSS OBJECTION OF THE ASSE SSEE IS DISMISSED. 13. IN THE DEPARTMENTAL APPEAL THE REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT (APPEALS) I N ALLOWING CREDIT FOR 15% OF THE GROSS RECEIPTS IN WORKING THE SHORT FALL OF THE AMOUNTS SPENT WHEN THE ASSESSEE HAD NOT FULF ILLED THE REQUIREMENTS BY GIVING A NOTICE UNDER SECTION 1 1(2)(A) OF THE INCOME TAX ACT FOR ACCUMULATION OF INCOME INTEN DED TO BE APPLIED FOR CHARITABLE PURPOSES IN FUTURE YEARS. 14. THE ASSESSEE CHALLENGED THE ORDER OF THE ASSES SING OFFICER BEFORE THE LEARNED CIT (APPEALS) AGAINST TH E DENIAL OF CREDIT FOR 15% OF THE GROSS RECEIPTS I.E. AN AMO UNT OF RS.1 47 80 028/-. THE FACTS ARE SAME AS NOTED ABO VE WHILE DISPOSING OF THE CROSS OBJECTION OF THE ASSESSEE. IT WAS SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 11 OF THE ACT IF A CHARITABLE TRUST INCURRED 85% OF ITS INC OME FOR THE OBJECTIVES OF THE TRUST THE BALANCE 15% IS FREE TO BE SET APART/ACCUMULATED WITHOUT ANY CONDITIONS AND NOTHIN G IS TAXABLE. THE ASSESSEE EXPLAINED THAT AS PER SECT ION 11 OF THE ACT A CHARITABLE INSTITUTION IS NOT CHARGED TO TAX TO THE 17 EXTENT OF 15% OF ITS INCOME AND RELIED UPON THE DEC ISION OF THE HON'BLE APEX COURT IN THE CASE OF ADDL.CIT VS. A.L.N. RAO CHARITABLE TRUST 216 ITR 697. IT WAS SUBMITT ED THAT FROM THE ABOVE JUDGMENT IT IS CLEAR THAT AN AMOUNT UPTO 15% OF THE INCOME IS EXEMPT FROM INCOME TAX AND CAN BE ACCUMULATED. THE ASSESSING OFFICER REITERATED THE FACTS STATED IN THE ASSESSMENT ORDER. THE LEARNED CIT ( APPEALS) FOLLOWING THE PROVISIONS OF SECTION 11 OF THE ACT A ND THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F A.L.N. RAO CHARITABLE TRUST (SUPRA) DIRECTED THAT T HE ASSESSEE IS ELIGIBLE FOR EXEMPTION OF 15% OF THE GR OSS RECEIPTS AND ALLOWED THIS GROUND OF APPEAL OF THE A SSESSEE. THE FINDING OF THE LEARNED CIT (APPEALS) IN PARAS 5 .5 TO 5.12 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 5.5 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE APPELLANT VIDE HI S SUBMISSIONS DATED 28.12.2012 HAD CLAIMED THAT THERE IS A BLANKET EXEMPTION OF 15% OF THE TOTAL INCOME FROM THE UNSPENT AMOUNT OF T HE TRUST. IN THIS REGARD THE APPELLANT HAD RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF A.L.N. RAO CHARITABLE TR UST REPORTED IN 216 ITR 697. THE AO DID NOT DISCUSS THIS ISSUE IN THE ASSE SSMENT ORDER WHILE REJECTING THE APPELLANT'S CLAIM. DURING THE COURSE OF A PPELLATE PROCEEDINGS THE APPELLANT ONCE AGAIN REFERRED TO T HE PROVISION OF SECTION 11 OF THE INCOME TAX ACT AND REITERATED HIS RELIANC E ON THE CASE OF A.L.N. RAO CHARITABLE TRUST(SUPRA). THE APPELLANT ONCE AGAIN CLAIMED THAT THERE IS BLANKET EXEMPTION OF 15% OF TOTAL INCOME FROM TH E UNSPENT AMOUNT FOR CHARITABLE PURPOSES OUT OF THE INCOME OF THE TRUST FOR THAT PREVIOUS YEAR. THE AO IN HIS COUNTER COMMENTS DATED 30.08.2013 MERELY MENTIONED THAT THE DETAILS HAD ALREADY BEEN CONSIDERE D IN THE ASSESSMENT ORDER AT PAGE-11. NO SUBMISSIONS WERE GI VEN BY THE AO AS TO WHY THIS CASE IS NOT APPLICABLE IN THE APPELLANT'S C ASE. THE HON'BLE SUPREME COURT IN THE CASE OF A.L.N. RAO CHARITABLE TRUST HAS HELD AS UNDER:- 18 'A MERE LOOK AT SECTION 11(1) (A) AS IT STOOD AT TH E RELEVANT TIME CLEARLY SHOWS THAT OUT OF THE TOTAL INCOME ACCRUING TO A TRUST IN THE PREVIOUS YEAR FROM PROPERTY HELD BY IT WHOLLY F OR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT THE INCOME IS APP LIED FOR SUCH RELIGIOUS OR CHARITABLE PURPOSES THE SAME WILL GET OUT OF THE TAX NET BUT SO FAR AS THE INCOME WHICH IS NOT SO APPLIE D 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 SECT ION 11 ARE FULFILLED MEANING THEREBY THE MONEY SO ACCUMULA TED IS SET APART TO BE INVESTED IN THE GOVERNMENT SECURITIES ETC. AS LAID DOWN BY CLAUSE (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 P OINT WE MAY TAKE AN ILLUSTRATION. IF RS. 1 00 000 ARE EARNED AS THE TOTAL INCOME OF THE PREVIOUS YEAR BY THE TRUST FROM PROPE RTY HELD BY IT WHOLLY FOR CHARITABLE AND RELIGIOUS PURPOSES AND IF RS. 20 000 ARE ACTUALLY APPLIED DURING THE PREVIOUS YEAR BY TH E SAID TRUST TO SUCH CHARITABLE OR RELIGIOUS PURPOSES THE INCOME OF RS.20 000 WILL GET EXEMPTED FROM BEING CONSIDERED F OR THE PURPOSE OF INCOME-TAX UNDER THE FIRST PART OF SECTI ON 11(1). SO FAR AS THE REMAINING RS. 80 000 ARE CONCERNED IF TH EY COULD NOT BE ACTUALLY APPLIED FOR SUCH RELIGIOUS OR CHARITABL E PURPOSES 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 NET. THU S OUT OF THE TOTAL INCOME OF RS. 1 00 000 WHICH HAS ACCRUED TO T HE TRUST RS. 25 000 WILL EARN EXEMPTION FROM PAYMENT OF INCOME-T AX AS PER SECTION 11(1) (A) SECOND PART. THEN FOLLOWS SUB-SE CTION (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 EARN ING INCOME- TAX EXEMPTION AS ENGRAFTED UNDER SECTION 11(1) (A) WILL GET LIFTED IF THE MONEY SO ACCUMULATED IS INVESTED AS LAID DOW N BY SECTION LL(2)(B) MEANING THEREBY OUT OF THE TOTAL ACCUMULA TED INCOME 19 OF RS. 80 000 ACCRUING DURING THE PREVIOUS YEAR AND WHICH COULD NOT BE SPENT FOR CHARITABLE OR RELIGIOUS PURPOSES B Y THE TRUST THE BALANCE OF RS. 55 000 IF INVESTED AS LAID DOWN BY S UB-SECTION (2) OF SECTION 11 WILL ALSO GET EXCLUDED FROM THE TAX N ET. BUT FOR SUCH INVESTMENT AND IF SECTION 11(1) ALONE HAD APPLIED R S. 55 000 BEING THE BALANCE OF THE ACCUMULATED INCOME WOULD H AVE BEEN COVERED BY THE TAX NET. LEARNED COUNSEL FOR THE REV ENUE SUBMITTED THAT THE INVESTMENT AS CONTEMPLATED BY SU B-SECTION (2)(B) OF SECTION 11 MUST BE INVESTMENT OF ALL THE ACCUMULATED INCOME IN GOVERNMENT SECURITIES ETC. NAMELY 100 PER CENT OF THE ACCUMULATED INCOME AND NOT ONLY 75 PER CENT THEREO F. AND IF THAT IS NOT DONE THEN ONLY THE INVESTED ACCUMULATE D INCOME TO THE EXTENT OF 75 PER CENT WILL GET EXCLUDED FROM I NCOME-TAX ASSESSMENT. BUT SO FAR AS THE REMAINING 25 PER CENT OF THE ACCUMULATED INCOME IS CONCERNED IT WILL NOT EARN S UCH EXEMPTION. IT IS DIFFICULT TO APPRECIATE THIS CONTE NTION. THE REASON IS OBVIOUS. SECTION 11 SUBSECTION (L)(A) OP ERATES ON ITS OWN. BY ITS OPERATION TWO TYPES OF INCOME EARNED BY THE TRUST DURING THE PREVIOUS YEAR FROM ITS PROPERTIES ARE GI VEN EXEMPTION FROM INCOME-TAX: (I) THAT PART OF THE INCOME OF THE PREVIOUS YEAR WH ICH IS ACTUALLY SPENT FOR CHARITABLE OR RELIGIOUS PURPOSES IN THAT YEAR; AND II) OUT OF THE UNSPENT ACCUMULATED INCOME OF THE PR EVIOUS YEAR 25 PER CENT OF SUCH TOTAL PROPERTY INCOME OR RS. 1 0 000 WHICHEVER IS HIGHER CAN BE PERMITTED TO BE ACCUMUL ATED BY THE TRUST EARMARKED FOR SUCH CHARITABLE OR RELIGIOUS P URPOSES. SUCH 25 PER CENT OF THE INCOME OR RS. 10 000 WHICHEVER IS HIGHER WILL ALSO GET EXEMPTED FROM INCOME-TAX. THAT EXHAUSTS TH E OPERATION OF SECTION 11(1) (A). THEN FOLLOWS SUB-SECTION (2) WHI CH NATURALLY DEALS WITH THE QUESTION OF INVESTMENT OF THE BALANC E OF ACCUMULATED INCOME WHICH HAS STILL NOT EARNED EXEMP TION UNDER SUBSECTION (L)(A). SO FAR AS THAT BALANCE OF THE AC CUMULATED INCOME IS CONCERNED THAT ALSO CAN EARN EXEMPTION F ROM INCOME- TAX MEANING THEREBY THE CEILING OR THE LIMIT OF EXE MPTION OF ACCUMULATED INCOME FROM INCOME-TAX AS IMPOSED BY SU BSECTION (I) (A) OF SECTION 11 WOULD GET LIFTED IF ADDITIONA L ACCUMULATED INCOME BEYOND 25 PER CENT OR RS. 10 000 WHICHEVER IS HIGHER AS THE CASE MAY BE IS INVESTED AS LAID DOWN BY SEC TION 11(2) AFTER FOLLOWING THE PROCEDURE LAID DOWN THEREIN. THEREFOR E SUB-SECTION 20 (2) ONLY WILL HAVE TO OPERATE QUA THE BALANCE OF 75 PER CENT OF THE TOTAL INCOME OF THE PREVIOUS YEAR OR INCOME BEYOND RS. 10 000 WHICHEVER IS HIGHER WHICH HAS NOT GOT THE BENEFIT OF TAX EXEMPTION UNDER SUBSECTION (L)(A) OF SECTION 11. IF LEARNED COUNSEL FOR THE REVENUE IS RIGHT AND IF 100 PER CEN T OF THE ACCUMULATED INCOME OF THE PREVIOUS YEAR IS TO BE IN VESTED UNDER SUB-SECTION (2) OF SECTION 11 TO GET EXEMPTION FROM INCOME-TAX THEN THE CEILING OF 25 PER CENT OR RS. 10 000 WHI CHEVER IS HIGHER WHICH IS AVAILABLE FOR ACCUMULATION OF INCO ME OF THE PREVIOUS YEAR FOR THE TRUST TO EARN EXEMPTION FROM INCOME-TAX AS LAID DOWN BY SECTION 11(1) (A) WOULD BE RENDERED RE DUNDANT AND THE SAID EXEMPTION PROVISION WOULD BECOME OTIOSE. I T HAS TO BE KEPT IN VIEW THAT OUT OF THE ACCUMULATED INCOME OF THE PREV IOUS YEAR AN AMOUNT OF RS. 10 000 OR 25 PER CENT OF THE TOTAL INCOME FROM PROPERTY WHICHEVER IS HIGHER IS GIVEN EXEMPT ION FROM INCOME-TAX BY SECTION 11(1) (A) ITSELF. THAT EXEMPT ION IS UNFETTERED AND NOT SUBJECT TO ANY CONDITIONS. IN OTHER WORDS IT IS AN ABSOLUTE EXEMPTION. IF SUB SECTION (2) IS SO READ A S SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE WHAT IS AN ABSOLUT E AND UNFETTERED EXEMPTION OF ACCUMULATED INCOME AS GUARA NTEED BY SECTION 11(1) (A) WOULD BECOME A RESTRICTED EXEMPTI ON AS LAID DOWN BY SECTION 11(2). SECTION 11(2) DOES NOT OPERA TE TO WHITTLE DOWN OR TO CUT ACROSS THE EXEMPTION PROVISI ONS CONTAINED IN SECTION 11(1) (A) SO FAR AS SUCH ACCUM ULATED INCOME OF THE PREVIOUS YEAR IS CONCERNED. IT HAS ALSO TO B E APPRECIATED THAT SUBSECTION (2) OF SECTION 11 DOES NOT CONTAIN ANY NON OBSTANTE CLAUSE LIKE ' NOTWITHSTANDING THE PROVISIO NS OF SUB- SECTION (1) '. CONSEQUENTLY IT MUST BE HELD THAT A FTER SECTION 11(1) (A) HAS FULL PLAY AND IF STILL ANY ACCUMULATED INCO ME OF THE PREVIOUS YEAR IS LEFT TO BE DEALT WITH AND TO BE C ONSIDERED FOR THE PURPOSE OF INCOME-TAX EXEMPTION SUB-SECTION (2 ) OF SECTION 11 CAN BE PRESSED INTO SERVICE AND IF IT IS COMPLIE D WITH THEN SUCH ADDITIONAL ACCUMULATED INCOME BEYOND 25 PER CENT O R RS. 10 000 WHICHEVER IS HIGHER CAN ALSO EARN EXEMPTION FROM I NCOME-TAX ON COMPLIANCE WITH THE CONDITIONS LAID DOWN BY SUB-SEC TION (2) OF SECTION 11. IT IS TRUE THAT SUB-SECTION (2) OF SECT ION 11 HAS NOT CLEARLY MENTIONED THE EXTENT OF THE ACCUMULATED INC OME WHICH IS TO BE INVESTED. BUT ON A CONJOINT READING OF THE AF ORESAID 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 UNDE R THE EARLIER INCOME-TAX ACT OF 1922 EXEMPTION WAS AVAILABLE TO CHARITABLE 21 TRUSTS WITHOUT ANY RESTRICTION UPON THE ACCUMULATED INCOME. THERE WAS A CHANGE IN THIS RESPECT UNDER THE PRESENT ACT OF 1961. UNDER THE PRESENT ACT ANY INCOME ACCUMULATED IN EXCESS O F 25 PER CENT OR RS. 10 000 WHICHEVER IS HIGHER IS TAXABLE UNDE R SECTION 11(1) (A) OF THE ACT UNLESS THE SPECIAL CONDITIONS REGAR DING ACCUMULATION AS LAID DOWN IN SECTION 11(2) ARE COMP LIED WITH. IT IS CLEAR THEREFORE THAT IF THE ENTIRE INCOME RECE IVED BY A TRUST IS SPENT FOR CHARITABLE PURPOSES IN INDIA THEN IT WIL L NOT BE TAXABLE BUT IF THERE IS A SAVING THAT IS TO SAY AN ACCUMU LATION OF 25 PER CENT OR RS. 10 000 WHICHEVER IS HIGHER IT WILL N OT BE INCLUDED IN THE TAXABLE INCOME. SECTION 11(2) QUOTED ABOVE FURT HER LIBERALIZES AND ENLARGES THE EXEMPTION. A COMBINED READING OF B OTH THE PROVISIONS QUOTED ABOVE WOULD CLEARLY SHOW THAT SEC TION 11(2) WHILE ENLARGING THE SCOPE OF EXEMPTION REMOVES THE RESTRICTION IMPOSED BY SECTION 11(1) (A) BUT IT DOES NOT TAKE AWAY THE EXEMPTION ALLOWED BY SECTION 11(1) (A). ON THE EXPR ESS LANGUAGE OF SECTIONS 11(1) AND 11(2) AS THEY STOOD ON THE ST ATUTE BOOK AT THE RELEVANT TIME NO OTHER VIEW IS POSSIBLE. IN THE LIGHT OF THE AFORESAID DISCUSSION AND KEEPIN G IN VIEW THE ILLUSTRATION WHICH WE HAVE GIVEN EARLIER THE COMBI NED OPERATION OF SECTION 11(1) (A) AND SECTION 11(2) AS APPLICABLE A T 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 PRE VIOUS YEAR IS RS. 1 00 000 AND IF RS. 20 000 THEREFROM ARE ACTUAL LY APPLIED TO SUCH PURPOSES IN INDIA THEN THOSE RS. 20 000 WILL G ET EXEMPTED FROM PAYMENT OF INCOME-TAX AS PER THE FIRST PART OF SECTION LL(L)(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 THE SECOND PART O F SECTION 11(1) (A). THUS OUT OF THE TOTAL INCOME DERIVED FR OM PROPERTY AS AFORESAID DURING THE PREVIOUS YEAR THAT IS RS. 1 00 000 RS. 45 000 IN ALL WILL GET EXCLUDED FROM THE TAX NET ON A COMBINED OPERATION OF THE FIRST AND THE SECOND PART OF SECTI ON 11(1) (A). (III) THE AFORESAID CEILING OF RS. 25 000 OF THE AC CUMULATED INCOME FROM PROPERTY OF THE PREVIOUS YEAR WILL GET LIFTED UNDER SECTION 11(2) TO THE EXTENT THE BALANCE OF SUCH ACC UMULATED INCOME IS INVESTED AS LAID DOWN BY SECTION 11(2). T O TAKE AN 22 ILLUSTRATION IF SAY AN ADDITIONAL AMOUNT OF RS. 2 0 000 OUT OF THE BALANCE OF ACCUMULATED INCOME OF RS. 55 000 IS INVE STED AS PER SECTION 11(2) THEN THIS ADDITIONAL AMOUNT OF RS. 2 0 000 OF ACCUMULATED INCOME WILL GET EXCLUDED FROM THE TAX N ET AS PER SECTION 11 (2). (IV) THE REMAINING BALANCE OF THE ACCUMULATED INCOM E 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 ACC UMULATED INCOME OF RS. 55 000 IS WHOLLY INVESTED AS PER SECT ION 11 (2) THE SAID ENTIRE AMOUNT OF RS. 55 000 WILL GET EXEMPTED FROM THE TAX NET. ' 5.7 THIS DECISION OF THE HON'BLE SUPREME COURT CLEA RLY HELD THAT THERE IS A BLANKET EXEMPTION WITH REGARD TO THE 25% (NOW 15%) OF GROSS RECEIPTS AS PER SECOND PART OF SECTION LL(L)( A) OF THE INCOME TAX ACT. THIS EXEMPTION OF 25% IS NOT DEPENDENT ON ANY OTHER CONDITION EXCEPT THAT THE TRUST OR SOCIETY SHOULD BE REGISTERED U/S 12AA OF THE INCOME TAX ACT. THE ONLY ISSUE TO BE EXAMINED HERE IS WHETHER THE PROVISIONS OF SECTION 11(1) (A) AND 11(2) HAVE BEEN SINCE AMENDED AND IF SO WHETHER THE AFORESAID DECISION WOULD APPLY TO T HE AMENDED PROVISIONS ALSO? 5.8 THE PROVISIONS OF SECTION LL(L)(A) AND 11 (2) A S THEY WERE IN FORCE IN THE YEAR 1968-69 RELEVANT TO AY 69-70 I.E THE YEAR TO WHICH THE CASE OF A.L.N. RAO CHARITABLE TRUST (SUPRA) REL ATES HAVE BEEN REPRODUCED IN THE ORDER OF THE HON'BLE SUPREME COUR T ITSELF AS UNDER: 'THESE PROVISIONS AS THEY STOOD AT THE RELEVANT TIM E READ AS UNDER: '11. (1) SUBJECT TO-THE PROVISIONS OF SECTIONS 60 T O 63 THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOM E (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO W HICH 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 ACCUMUL ATED IS NOT 23 IN EXCESS OF TWENTY-FIVE PER CENT OF THE INCOME FR OM THE PROPERTY OR RUPEES TEN THOUSAND WHICHEVER IS HIGHE R ... (2) WHERE THE PERSONS IN RECEIPT OF THE INCOME HAVE COMPLIED WITH THE FOLLOWING CONDITIONS THE RESTRICTION SPEC IFIED IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) AS RESPECTS AC CUMULATION 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 T O THE INCOME- TAX OFFICER IN THE 'PRESCRIBED MANNER SPECIFIED TH E PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART WHICH SHALL IN NO CASE EXCEED TEN YEARS. (B) THE MONEY SO ACCUMULATED OR SET APART IS INVEST ED IN ANY GOVERNMENT SECURITY AS DEFINED IN CLAUSE (2) OF SEC TION 2 OF THE PUBLIC DEBT ACT 1944 (18 OF 1944) OR IN ANY OTHER SECURITY WHICH MAY BE APPROVED BY THE CENTRAL GOVERNMENT IN THIS BEHALF.' 5.9 THE PROVISIONS OF SECTION LL(L)(A) AND 11 (2) A S THEY WERE IN FORCE IN THE YEAR 2009-2010 I.E THE YEAR TO WHICH THE PRESENT CASE RELATES ARE REPRODUCED AS UNDER: '11. INCOME FROM PROPERTY HELD FOR CHARITABLE OR RE LIGIOUS 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 W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND W HERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICA TION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOM E SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEE N PER CENT OF THE INCOME FROM SUCH PROPERTY; (2) WHERE EIGHTY-FIVE PER CENT OF THE INCOME REFER RED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUBSECTION IS NOT APPLIED OR IS NOT DEEMED TO HAVE BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN IND IA DURING THE 24 PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART EITH ER IN WHOLE OR IN PART FOR APPLICATION TO SUCH PURPOSES IN INDIA SU CH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN T HE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF TH E INCOME PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH NAMELY (A) SUCH PERSON SPECIFIES BY NOTICE IN WRITING GIV EN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER THE PUR POSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART WHICH SHALL IN NO CASE EXCEED TEN YEARS; (B) THE MONEY SO ACCUMULATED OR SET APART IS INVEST ED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB-SE CTION (5): PROVIDED THAT IN COMPUTING THE PERIOD OF TEN YEARS REFERRED TO IN CLAUSE (A) THE PERIOD DURING WHICH THE INCOME COUL D NOT BE APPLIED FOR THE PURPOSE FOR WHICH IT IS SO ACCUMULA TED OR SET APART DUE TO AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED: PROVIDED FURTHER THAT IN RESPECT OF ANY INCOME ACCU MULATED OR SET APART ON AFTER THE 1ST DAY OF APRIL 2001 THE PROVISIONS OF THIS SUB-SECTION SHALL HAVE EFFECT AS IF FOR THE WO RDS 'TEN YEARS ' AT BOTH THE PLACES WHERE THEY OCCUR THE WORDS 'FIVE Y EARS ' HAD BEEN SUBSTITUTED. 5.10 IT IS APPARENT FROM THE READING OF PROVISIONS REFERRED TO ABOVE THAT SECTION11 (A) WAS ALMOST IDENTICAL DURING THE AY 69-70 AND DURING AY 20010-11. AS REGARDS THE PROVISIONS OF S ECTION 11(2) ARE CONCERNED EVEN THE AMENDED SUB SECTION (2) OPERATE S QUA THE BALANCE OF 85 PER CENT OF THE TOTAL INCOME OF THE PREVIOUS YEAR WHICH HAS NOT GOT THE BENEFIT OF TAX EXEMPTION UNDER SUB-SECTION(L)(A) OF SECTION 11. SECTION 11(2) AS AMENDED DOES NOT OPERATE TO WHITTLE DOWN OR TO CUT ACROSS THE EXEMPT ION PROVISIONS CONTAINED IN SECTION LL(L)(A)SO FAR AS SUCH ACCUMUL ATED INCOME OF THE PREVIOUS YEAR IS CONCERNED. AS HELD BY THE HON 'BLE SUPREME COURT IN THE CASE OF A.L.N. RAO CHARITABLE TRUST (S UPRA) IT HAS TO BE APPRECIATED THAT SUB-SECTION (2) OF SECTION 11 DOES NOT CONTAIN ANY NON OBSTANTE CLAUSE LIKE 'NOTWITHSTANDING T HE PROVISIONS OF SUB- SECTION(1)'.CONSEQUENTLY IT MUST BE HELD THAT AFTE R SECTION LL(L)(A) HAS FULL PLAY AND IF STILL ANY ACCUMULATED INCOME O F THE PREVIOUS YEAR IS LEFT TO BE DEALT WITH AND TO BE CONSIDERED FOR THE PURPOSE OF INCOME- 25 TAX EXEMPTION SUB-SECTION (2) OF SECTION 11 CAN BE PRESSED INTO SERVICE AND IF IT IS COMPLIED WITH THEN SUCH ADDITI ONAL ACCUMULATED INCOME BEYOND 15 PER CENT CAN ALSO EAR N EXEMPTION FROM INCOME-TAX ON COMPLIANCE WITH THE CONDITIONS LAID D OWN BY SUB-SECTION (2) OF SECTION 11. 5.11 IT MAY ALSO BE RELEVANT TO REFER TO THE VIEWS EXPRESSED BY 'CHATURVEDI AND PITHISARIA' ON THIS ISSUE. THESE VIEWS READ AS UNDER: 'SECTION 11 HAS UNDERGONE AMENDMENTS MORE THAN ONCE . IN ORDER TO BE ABLE TO BETTER GRASP THE PROVISIONS AS APPLIC ABLE FROM TIME TO TIME IT WILL BE BETTER TO PUT THE EFFECT OF SUC H PROVISIONS EXCEPT THOSE OF SUB-SECTION (1A) DEALT SEPARATELY H EREUNDER VIS- A-VIS EXEMPTION AND TAXABILITY OF INCOME DERIVED FR OM PROPERTY HELD UNDER CHARITABLE OR RELIGIOUS TRUST IN A TABU LAR FORM SUBJECT-WISE. THUS:- INCOME DERIVED FROM PROPERTY HELD UNDER TRUST OF OT HER LEGAL OBLIGATION WHOLLY FOR CHARITABLE PURPOSES AND SUCH INCOME OR PART THEREOF IS NOT APPLIED TO SUCH PURPOSES IN INDIA DURING THE PREVIOUS YEAR WHEREIN IT IS DERIVED BUT IS ACCUMULATED FOR APPLICATION TO SUCH PURPOSES IN IND IA: - 1 2 3 4 1922 ACT PROVISIONS 1961 ACT PROVISIONS APPLICABLE FOR AY 1962-63 TO 1970-71 1961 ACT PROVISIONS APPLICABLE FOR AY 1971-72 TO 1975-76 1961 ACT PROVISIONS APPLICABLE FROM 1976 ONWARDS UNCONDITIONALLY EXEMPT {S.4(3)(I)}. CONDITIONALLY EXEMPTION - (A) IF A NOTICE IN FROM NO. 10 IS GIVEN TO THE 1TO IN ACCORDANCE WITH RULE 17 AND INCOME SO ACCUMULATED {MINUS ACCUMULATION PERMITTED UNDER (B) BELOW} IS INVESTED IN GOVERNMENT SECURITIES OR OTHER APPROVED SECURITIES THE ACCUMULATION UP TO A PERIOD OF TEN YEARS IS EXEMPT [S. LL(L)(A) LATTER PART READ WITH S. 11(2)}; AND (B) IF CONDITIONS AT CONDITIONALLY EXEMPT - (A) IF A NOTICE IN FORM NO. 10 IS GIVEN TO THE 1TO IN ACCORDANCE WITH RULE 17 AND INCOME SO ACCUMULATED ACCUMULATION PERMITTED UNDER (B) BELOW] IS INVESTED IN THE GOVERNMENT SECURITIES OR OTHER APPROVED SECURITIES OR IS DEPOSITED IN POST OFFICE SAVINGS BANK ACCOUNTS OR UNDER THE POST OFFICER (TIME DEPOSITS) RULES CONDITIONALLY EXEMPT - (A) SAME AS IN COL. (3) FOR ASSESSMENT YEARS 1976-77 TO 1982- 83. FOR AND FROM ASSESSMENT YEAR 1983-84 INVESTMENT OR DEPOSIT IS TO BE MADE IN THE FORMS OR MODES SPECIFIED IN SECTION 11(5). (B) IF CONDITIONS AT (A) ARE NOT FULFILLED ACCUMULATION TO THE EXTENT OF 25% ONLY IS EXEMPT. IN COMPUTING THE 25% ANY VOLUNTARY CONTRIBUTIONS 26 (A) ARE NOT FULFILLED ACCUMULATION TO THE EXTENT OF 25 PER CENT OF THE INCOME FROM THE PROPERTY OR RS. 10 000/- WHICHEVER IS HIGHER IS EXEMPT. IN COMPUTING THE 25 PER CENT. THE INCOME FROM SUCH PROPERTY FOR THE RELEVANT PREVIOUS YEAR OR THE IMMEDIATELY PRECEDING PREVIOUS YEAR WHICHEVER IS HIGHER MAY BE TAKEN [S. 11(1) (A) LATTER PART READ WITH THE EXPLANATION]. _____________ 1970 OR IN A BANKING COMPANY TO WHICH THE BANKING REGULATION ACT 1949 APPLIES OR CO- OPERATIVE LAND MORTGAGE BANK OR A COOPERATIVE LAND DEVELOPMENT BANK OR DEPOSITED IN AN ACCOUNT WITH AN APPROVED FINANCIAL CORPORATION THE ACCUMULATION UP TO A PERIOD OF TEN YEARS IS EXEMPT [S. 11(2)]. [(B) NO SUCH EXEMPTION]. REFERRED TO IN S. 12 SHALL BE DEEMED TO BE PART OF THE INCOME [S. 11(1)(A) LATTER PART READ WITH EXPL. (1)]. 5.12 AS SUCH THIS JUDGEMENT OF THE HON'BLE SUPREME COURT IS SQUARELY APPLICABLE TO THE APPELLANT'S CASE. THE AP PELLANT IS THUS ELIGIBLE FOR EXEMPTION OF 15% OF GROSS RECEIPTS I.E . 15% OF RS.9 85 33 522/- U/S LL(L)(A) OF THE INCOME TAX ACT . THE AO IS ACCORDINGLY DIRECTED TO ALLOW THIS EXEMPTION OF 15% OF THE GROSS RECEIPTS AMOUNTING TO RS.1 47 80 028/-. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 15. AFTER HEARING THE RIVAL CONTENTIONS WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LEARNED CIT (APPEALS) ON PROPER APPRECIATION OF FAC TS IN THE LIGHT OF THE PROVISIONS OF SECTION 11 OF THE ACT AN D THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F A.L.N. RAO CHARITABLE TRUST (SUPRA) RIGHTLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HON'B LE SUPREME COURT NOTED ABOVE IN THE FINDINGS OF THE LE ARNED CIT (APPEALS). THE LEARNED D.R FOR THE REVENUE DI D NOT 27 CONTRIBUTE MUCH ON THIS ISSUE AND MERELY RELIED UPO N THE ORDER OF THE ASSESSING OFFICER WITHOUT POINTING OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) IN ALLOWING THE EXEMPTION OF 15% ON THE GROSS RECEIPTS . THUS WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE IN TH E ORDER OF THE LEARNED CIT (APPEALS). THIS GROUND OF DEPARTME NTAL APPEAL IS ACCORDINGLY DISMISSED. 16. ON GROUND NO.2 OF THE DEPARTMENTAL APPEAL THE REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT (AP PEALS) IN ALLOWING CLAIM OF DEPRECIATION WHICH WAS SUBSEQUEN TLY CLAIMED DURING THE COURSE OF ASSESSMENT PROCEEDINGS . 17. THE LEARNED CIT (APPEALS) ALLOWED THE CLAIM OF DEPRECIATION BY FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. THE REVENUE IS NOT AGG RIEVED AGAINST THIS FINDING. THE ONLY ISSUE RAISED IN T HE GROUND OF APPEAL IS THAT THE SAID CLAIM OF DEPRECIATION WA S RAISED SUBSEQUENTLY DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THE LEARNED CIT (APPEALS) FOLLOWED THE DECISION OF I.T.A.T. CHANDIGARH BENCH IN THE CASE OF BUDHEWAL COOPERATIV E SUGAR MILLS LTD. VS. THE A.C.I.T.(OSD) IN ITA NO.1077/CHD/2012 DATED 24.5.2013 IN WHICH IT WAS H ELD THAT THE ASSESSEE CAN RAISE ADDITIONAL GROUND AND M AKE CLAIM DURING THE ASSESSMENT PROCEEDINGS. THE TRIB UNAL FOLLOWED THE DECISION OF THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. RAMCO INTERNATIONAL. THJE 28 LEARNED CIT (APPEALS) ALSO RELIED UPON EXPLANATION- 5 TO SECTION 32 OF THE ACT WHICH PROVIDES FOR THE REMO VAL OF DOUBTS IT IS HEREBY DECLARED THAT THE PROVISIONS O F THIS SUB- SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTI NG HIS TOTAL INCOME. THE LEARNED CIT (APPEALS) THEREFOR E NOTED THAT THE DEPRECIATION HAS TO BE ALLOWED TO THE ASSE SSEE WHETHER IT IS CLAIMED WHILE COMPUTING TOTAL INCOME OR NOT. HE HAS ALSO RELIED UPON THE ORDER OF THE I.T.A.T. BANGALORE BENCH IN THE CASE OF RAKESH SINGH VS. ACIT 139 IT R 128 IN SUPPORT OF HIS FINDINGS. THE LEARNED CIT (APPE ALS) THEREFORE FOLLOWING THE ABOVE DECISIONS AND EXPLAN ATION-5 TO SECTION 32 OF INCOME TAX ACT DIRECTED THE ASSESS ING OFFICER TO ALLOW THE CLAIM OF DEPRECIATION. IN PR INCIPLE THE REVENUE DID NOT AGITATE THE ALLOWING OF DEPRECIATIO N TO THE ASSESSEE. THEREFORE NOTHING SURVIVES IN FAVOUR O F THE REVENUE. FURTHER THE CLAIM OF DEPRECIATION WAS RA ISED AT THE ASSESSMENT STAGE WHICH IS SUPPORTED BY THE JUD GMENT OF THE I.T.A.T. CHANDIGARH BENCH IN THE CASE OF B UDHEWAL COOPERATIVE SUGAR MILLS LTD. (SUPRA) IN WHICH FOLL OWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT S IMILAR CLAIM HAS BEEN ALLOWED. WE THEREFORE DO NOT FIN D ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. TH E SAME IS ACCORDINGLY DISMISSED. 18. IN THE RESULT THE DEPARTMENTAL APPEAL IS DISMISSED. 29 19. IN THE RESULT THE DEPARTMENTAL APPEAL AS WELL A S CROSS OBJECTION BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH APRIL 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR ITAT CHANDIGARH