The DCIT (Exemptions), Circle-1., Ahmedabad v. Nirman Foundation Charitable Trust,, Ahmedabad

ITA 470/AHD/2018 | 2014-2015
Pronouncement Date: 04-03-2021 | Result: Dismissed

Appeal Details

RSA Number 47020514 RSA 2018
Assessee PAN AABTN0243R
Bench Ahmedabad
Appeal Number ITA 470/AHD/2018
Duration Of Justice 3 year(s) 5 day(s)
Appellant The DCIT (Exemptions), Circle-1., Ahmedabad
Respondent Nirman Foundation Charitable Trust,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 04-03-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 04-03-2021
Date Of Final Hearing 16-03-2020
Next Hearing Date 16-03-2020
Last Hearing Date 16-03-2020
First Hearing Date 23-10-2019
Assessment Year 2014-2015
Appeal Filed On 27-02-2018
Judgment Text
A 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 ./ I.T.A. NO. 470/AHD/2018 ( ASSESSMENT YEAR : 2014-15) THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTIONS) CIRCLE-1 AHMEDABAD / VS. NIRMAN FOUNDATION CHARITABLE TRUST C/O. H. B. KAPADIA CHARITABLE TRUST PANCHVATI C. G. ROAD AHMEDABAD 380009 ./ ./ PAN/GIR NO. : AABTN0243R ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. S. SHUKLA SR.DR / RESPONDENT BY : SHRI ANKIT TALSANIA A.R. DATE OF HEARING 10/02/2021 !'# / DATE OF PRONOUNCEMENT 04/03/2021 / 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 IN COME TAX (APPEALS)-9 AHMEDABAD (CIT(A) IN SHORT) DATED 1 1.12.2017 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. ITA NO. 470/AHD/18 (DCIT(EXEMP.) VS. NIRMAN FOUNDATION CHARITABLE TRUST.) A.Y. 2014-15 - 2 - 2. THE GROUND OF APPEAL RAISED BY REVENUE READS HER EUNDER: 1. THE LD. CIT(A) HAS ERRED IN THE LAW AND ON FACT S IN ALLOWING THE BENEFIT OF THE DEFICIT OF RS.1 30 49 125/- FOR EARL IER YEARS AGAINST THE INCOME OF SUBSEQUENT YEAR IN ABSENCE OF ANY EXP RESS PROVISION IN THE ACT REGARDING THE SAME AND ALSO BY OVERLOOKI NG THE DECISIONS IN FAVOUR OF REVENUE IN THIS REGARD. 3. BRIEFLY STATED THE ASSESSEE A PUBLIC CHARITABL E TRUST HAS BEEN FORMED FOR THE PURPOSES OF EDUCATION AND IS RUNNING SCHOOL AT VASTRAPUR AHMEDABAD. THE TRUST HAS BEEN GRANTED R EGISTRATION UNDER S.12A(A) OF THE ACT. IN THE COURSE OF SCRUTINY PRO CEEDINGS IT WAS NOTICED BY THE AO THAT DURING THE F.Y. 2013-14 UNDE R CONSIDERATION THE ASSESSEE HAS CLAIMED SET OFF OF UNABSORBED/EXCE SS APPLICATION OF EARLIER YEARS AMOUNTING TO RS.5 66 96 948/-. THE A O WHILE PASSING THE ASSESSMENT ORDER UNDER S.143(3) OF THE ACT DENI ED THE CARRY FORWARD OF EXCESS APPLICATION OVER CONTRIBUTIONS RE CEIVED BEING DEFICIT FOR THE PURPOSES OF SET OFF OF AGAINST CO NTRIBUTIONS TO BE RECEIVED IN THE SUBSEQUENT ASSESSMENT YEARS. 4. IN THE FIRST APPEAL THE CIT(A) HOWEVER REVERS ED THE ACTION OF THE AO AND RESTORED THE CLAIM OF CARRY FORWARD OF E XCESS APPLICATION OF FUNDS BY THE ASSESSEE. THE RELEVANT OPERATIVE P ARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 5.2 I HAVE CAREFULLY CONSIDERED RIVAL CONTENTIONS AND OBSERVATIONS MADE BY THE A.O IN THE ASSESSMENT ORDER. IT IS SEE N FROM THE ORDER OF ASSESSMENT THAT A.O. HAS DISALLOWED CARRY FORWARD O F DEFICIT OF RS.1 30 49 125/- TO BE SET OFF AGAINST CURRENT YEAR 'S INCOME. THE APPELLANT HAS RELIED UPON THE ORDER OF JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL 211 ITR 293(GUJ.) CIT VS MAHARANA OF MEWAR CHARITABLE FOUNDATION (1987) 1 64 ITR 439 476 (RAJ) ETC. HON'BLE GUJARAT HIGH COURT IN THE CASE O F SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL HAS HELD AS FOLLOWS :- 'A BARE PERUSAL OF SECTION 11 OF THE INCOME-TAX ACT 1961 SHOWS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TR UST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO W HICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA IS TO BE EXCLU DED FOR THE PURPOSES OF COMPUTING THE INCOME OF THE TRUST FOR T HE PURPOSE OF ASSESSMENT. THERE ARE NO WORDS OF LIMITATION IN THI S SECTION PROVIDING THAT THE INCOME SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY IN THE YEAR IN WHICH THE INCOME HAD ITA NO. 470/AHD/18 (DCIT(EXEMP.) VS. NIRMAN FOUNDATION CHARITABLE TRUST.) A.Y. 2014-15 - 3 - ARISEN. THE WORD 'APPLY' MEANS 'TO PUT TO USE' OR ' TO TURN TO USE' OR 'TO MAKE USE' OR 'TO PUT TO PRACTICAL USE'. HAVI NG REGARD THE PROVISIONS OF SECTION 11 OF THE ACT IT IS CLEAR TH AT WHEN THE INCOME OF A TRUST IS USED OR PUT TO USE TO MEET THE EXPENS ES INCURRED FOR RELIGIOUS OR CHARITABLE PURPOSES IT IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE APPLICATION OF THE INCOME F OR CHARITABLE OR RELIGIOUS PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED FOR CHARITAB LE OR RELIGIOUS PURPOSES. IN OTHER WORDS EVEN IF EXPENSES FOR CHAR ITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRED FOR THE EARLI ER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCOME OF A SUBSEQUENT YEAR THE INCOME OF THAT YEAR CAN BE SAID TO HAVE BEEN AP PLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WH ICH THE EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ADJUSTED. THERE IS NOTHING IN THE LANGUAGE OF SECTION 11(1)(A ) OF THE ACT TO INDICATE THAT THE EXPENDITURE INCURRED IN THE EARLI ER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UT ILIZATION OF SUCH INCOME FOR MEETING THE EXPENDITURE OF THE EARLIER Y EAR WOULD NOT AMOUNT TO SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. INCOME DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIPLES AND IF COMMERCIAL PRINCIPL ES FOR DETERMINING THE INCOME ARE APPLIED IT IS BUT NATUR AL THAT THE ADJUSTMENT OF THE EXPENSES INCURRED BY THE TRUST FO R CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YEAR AGAINST INCO ME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAVE TO BE REGARD ED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BEEN M ADE HAVING REGARD TO THE BENEVOLENT PROVISIONS 'CONTAINED IN S ECTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRUST UNDER SECTION 11(1)(A).' I AGREE WITH THE CONTENTION OF THE APPELLANT AS WEL L AS THE RELIANCE PLACED ON THE DECISION OF JURISDICTIONAL GUJARAT HI GH COURT AND HEREBY DIRECT THE A.O TO ALLOW THE SET OFF OF EXCESS EXPEN DITURE INCURRED DURING THE EARLIER YEARS TO BE SET OFF AGAINST THE INCOME OF THE YEAR UNDER CONSIDERATION AND FUTURE INCOME. WHILE GIVING EFFEC T OF THIS ORDER AO IS DIRECTED TO ALLOW DEFICIT OF EARLIER YEARS FIRST. T HEREAFTER THE EXCESS OF EXPENDITURE OF CURRENT YEAR WOULD BE ALLOWED. NO AC CUMULATION U/S 11(1)(A) @ 15% AND U/S. 11(2) OF THE ACT WOULD BE A LLOWED ALONGWITH CARRY FORWARD OF DEFICIT. ACCORDINGLY GROUND OF AP PEAL IS ALLOWED SUBJECT TO THESE REMARKS. 5. THE REVENUE HAS PREFERRED APPEAL AGAINST THE AFO RESAID DIRECTIONS OF THE CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON THE LEGAL CONTROVERSY ON WHETHER A CHARITABLE INSTITUTION IS ALLOWED TO CARRY FORWARD AND SET OFF OF DEFICIT (THAT IS EXCESS TO E XPENSES OVER INCOME) AND SET IT OFF AGAINST INCOME OF SUBSEQUENT YEAR. ITA NO. 470/AHD/18 (DCIT(EXEMP.) VS. NIRMAN FOUNDATION CHARITABLE TRUST.) A.Y. 2014-15 - 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 I S NO LONGER RES INTEGRA . THE CIT(A) HAS CORRECTLY APPLIED THE LAW LAID DO WN IN CIT VS. SHRI PLOT SHWETAMBER MURTI PUJAK JAIN MANDAL (1 995) 211 ITR 0293 (GUJ) . THE HONBLE 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 OR DER OF THE HONBLE HIGH COURT WHERE IDENTICAL ISSUE WAS ADJUDICATED IN FAVOUR OF ASSESSEE BY THE HONBLE DELHI HIGH COURT IN IT NO. 382 OF 20 15 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 INCOM E 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 SECTIO N 11 OF THE ACT. WE THUS DECLINE TO INTERFERE. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP KUMA R KEDIA) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 04/03/2021 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ / CONCERNED CIT 4. - / CIT (A) THIS ORDER PRONOUNCED ON 04/03/2021 ITA NO. 470/AHD/18 (DCIT(EXEMP.) VS. NIRMAN FOUNDATION CHARITABLE TRUST.) A.Y. 2014-15 - 5 - /. 012 33*+4 *+#4 56) / DR ITAT AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56)