IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `A': NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI L.P. SAHU, ACCOUNTANT MEMBER
ITA No. 3033/Del/2015
Assessment Year 2010-11
M/s KSD Charitable Trust, VS. Assistant Commissioner of
C/o Ganesh Cold, Income Tax, Circle-1,
Storage, Meerut
Railway Road, Meerut.
(PAN: AABTK2686H)
(Appellant) (Respondent)
Appellant by : Shri K. Sampath, Advocate
Respondent by : Shri Sridhar Dora, Sr. DR
ORDER
H.S. SIDHU, JM:
This appeal has been filed by the assessee against the order dated 20.3.2015
passed by the Ld. CIT(A), Meerut pertaining to relevant assessment year 2010-11
on the following grounds:-
1. That Ld. CIT(A) has failed to appreciate the content and tenor o various
High Court and Tribunal judgments cited before him which are a direct
authority on the issue at hand and has thereby violated the principles of
judicial discipline.
2. That the Ld. CIT(A) has failed to appreciate that income has to be
computed commercially even in cases covered u/s. 11-13 of the Income
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Tax Act, 1961 and resultant loss, if any, arising due to surplus application
of income, has to be computed and carried forwards to next year to be set
off therein accordingly.
3. The Ld. CIT(A) has also failed to appreciate that neither section 11 nor
section 72 of the Income Tax Act, 1961 have a mutual rider for
computation of income or for its carry forward and set off and hence the
impugned order deserves to be quashed.
2. Briefly stated the facts of the case are that the assessee is a society, running
several educational institutions. The objects of the assessee's trust are primarily in
the field of education. The return of income for the current year was filed on
8.10.2010 showing loss of Rs. 15,397/- and brought forward loss of Rs. 9059978/-
was claimed. In this case the AO noted that the assessee in its computation of
income has claimed, excess application made during the year and excess application
of income of earlier year to be carried forward and to be set off against the future
income receipts. The AO however, stated in the assessment order that even though
the capital expenses in the case of a charitable institution are allowable as
application of income, no claim for carry forward of loss on account of capital
expenses is allowable. The AO therefore, did not allow the carry forward of either
the current year loss or that of earlier year loss. The AO however, stated that the
assessee satisfies the condition for exemption u/s. 11 and 12 and completed the
assessment NIL vide order dated 23.1.2013 passed u/s. 143(3) of the Income Tax
Act, 1961 (in short "Act").
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3. Aggrieved by the order of the Assessing Officer's order, assessee appealed
before the Ld. CIT(A), who vide his impugned order dated 20.3.2015 has upheld
the action of the AO and dismissed the appeal of the assessee. Now against the
impugned order, the Assessee is in appeal before the Tribunal.
4. Ld. counsel for the assessee has stated that Ld. CIT(A) has failed to
appreciate that income has to be computed commercially even in cases covered u/s.
11-13 of the Income Tax Act, 1961 and resultant loss, if any, arising due to surplus
application of income, has to be computed and carried forward to next year to be set
off therein accordingly. He further submitted that the issue in dispute is squarely
covered by the Coordinate Bench common decision dated 10.8.2015 in ITA No.
4056/Del/2014 (AY 2009-10) in the case of M/s City Educational and Social
Welfare Society vs. Additional Commissioner of Income Tax and in assessee's own
case in ITA No. 4326/Del/2014 (AY 2008-09) title M/s KSD Charitable Trust vs.
Additional Commissioner of Income Tax, Range-1, Meerut. In this behalf he filed
the copy of the aforesaid common decision dated 10.8.2015 of the Tribunal before
us. Ld. counsel for the assessee also filed the copy of the Order dated 16.4.2018 of
the Hon'ble Supreme Court of India in the case of CIT(E) vs. Subros Educational
Society (2018) 303 CTR 0001 (SC) and stated that the issue in dispute is also
covered by the order dated 16.4.2018 of the Hon'ble Supreme Court of India in the
case of CIT(E) vs. Subros Educational Society (Supra) wherein the Hon'ble Court
has dismissed the miscellaneous application of the Department.
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5. We have heard both the parties and perused the records. We find that the
Assessing Officer was of the view the loss suffered during the year was on account
of capital expenditure and therefore loss cannot allowed to be carried forward. This
issue according to us is no longer res integra in view of the Coordinate Bench
common decision dated 10.8.2015 in assessee's own case for the AY 2008-09
passed in ITA No. 4326/Del/2014 and M/s City Educational and Society Welfare
Society vs. Additional CIT in ITA No. 4056/Del/214 in AY 2009-10. The Tribunal
has adjudicated the issue in dispute as under:-
"7. I have heard rival submissions and perused the material
on record. I find that the AO was of the view the loss
suffered during the year was on account of capital
expenditure and therefore loss cannot be allowed to be
carried forward. This issue according to me is no longer
rest integra. I further find that the Tribunal in assessee's
own case for the AY 2005-06 (Supra) by following the
judgment of the Hon'ble Bombay High Court in the case
of CIT Vs. Institute of Banking (reported in 264 ITR 110
(Bom.) ) has decided the issue the similar in favour of the
assessee. The relevant finding of the coordinate Bench
order reads as follows:-
"4. We have duly considered the rival
contention and gone through the record
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carefully. Learned CIT(A) while permitting the
assessee to claim set off against the brought
forward losses has put reliance upon the
following decisions:-
"CIT Vs. Matri Sewa Trust, 242 ITR 20
(Mad.);
CIT Vs. Institute of Banking, 264 ITR 110
(Bom.);
CIT Vs. Maharana of Mewar Charitable
Foundation 164 ITR 439 &
Govindu Naicker Estate Vs. ADIY, 248 ITR
368"
5. We have gone through the order of the CIT(A) in
assessment years 2001-02, 2003-04 & 2004-05. In
those years, the assessee has been permitted to carry
forward the losses and also to claim set off of such
losses against the income. The CIT(A) has made a
reference in those assessment years to section 11(4)
of the Income-tax Act. In the case of CIT Vs. Institute
of Banking reported in 264 ITR page 110 an
argument was raised before the Hon'ble Mumbai
High Court by the revenue that in the case of a
charitable trust, their income was assessable under
self contained code mentioned in section 11 to 13 of
Income-tax Act and that the income of the charitable
trust was not assessable under the head "profit and
gains of business" u/s 28 in which the provision for
carry forward of losses was relevant. According to
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the revenue, there was no provision for carry forward
of the excess of expenditure of earlier years to be
adjusted against the income of subsequent years. This
argument was rejected by the Bombay High Court
and it has been held that income derived from the
trust property has also got to be computed on
commercial principles and if commercial principles
are applied then adjustment of expenses incurred by
the trust for charitable religious purpose in the
earlier years against the income earned by the trust
in the subsequent year will have to be regarded as
application of the income of the trust for charitable
and religious purpose. The learned CIT(A) has
followed this decision apart from others referred
above. The order of the CIT(A) in three assessment
years have been accepted by the revenue. In this
year, the learned CIT(A) has simply based his
decision on the finding given in earlier assessment
years. Keeping in view the principle of consistency,
we do not see any reason to interfere in the order of
learned CIT(A). In view of the above discussion, the
appeal of the revenue is dismissed.
6. In result, the appeal of the revenue is
dismissed."
6. We further note that the Hon'ble Supreme Court of India in the case of
CIT(E) vs. Subros Educational Society (2018) 303 CTR 0001 (SC) vide its Order
dated 16.4.2018 has adjudicated the similar and identical issue as under by
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dismissing the Miscellaneous Application No. 941/2018 in Civil Appeal No
5171/2016 filed by the Department.
"1. In this application filed by the Income Tax Department it
is stated that Civil Appeal No. 5171 of 2016 arises out of
Special Leave Petition (C)...CC No. 8982/2016 was tagged
with other appeals and the batch matters were decided by this
Court on 13.12.2017. However, the following question was
also raised in the instant appeal which was not the subject
matter of those appeals:
"(a). Whether any excess expenditure incurred by
the trust / charitable institution in earlier assessment
year could be allowed to be set off against income
of subsequent years by invoking Section 11 of the
Income Tax Act, 1961?"
To this extent, Mr. K. Radhakrishnan, learned senior
counsel appearing on behalf of the applicant / appellant is
correct.
Therefore, we have heard him on the aforesaid question of
law as well but did not find any merit therein.
The miscellaneous application is dismissed."
7. Respectfully following the Coordinate Bench order of the Tribunal in assessee's
own case passed in assessment year 2008-09 vide order dated 10.8.2015 and in view
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of the Order dated 16.4.2018 Hon'ble Supreme Court of India in the case of CIT(E)
vs. Subros Educational Society (2018) 303 CTR 0001 (SC) which is identical to the
facts of the instant case, hence, we quash the orders of the lower authorities and
allow the carried forward of current year's loss to be set off in the future years. It is
ordered accordingly.
8. In the result, the appeal filed by Assessee is allowed.
This Order is pronounced on 13-12-2018.
Sd/- Sd/-
(L.P. SAHU) (H.S. SIDHU)
Accountant Member Judicial Member
Dated: 13-12-2018.
SRBHATNAGAR
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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