9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (1) TMI 1113 - AT - Income TaxExcess application of the earlier year set off this year disallowed - assessee is a trust registered U/s. 12AA - disallowance of ₹ 14 crores capital expenditure - Held that - Since 85% of the assessee's income of the Trust during the relevant assessment year is ₹ 43,41,69,412/- (51,07,87,543/- 85 100), it is evident from the above computation that the assessee has applied more than 85% of its income for charitable or religious purpose in accordance with the provisions of Sec.11(1)(a) of the Act. Therefore, there is no shortfall in application of fund as worked out by the Ld. Assessing Officer, as a result setting off the brought forward excess application of income from the assessment year 2007-08 to the relevant assessment year is not necessary and irrelevant in the present case before us. For the above said reasons we hereby set aside the order of the Ld.A.O wherein he has disallowed the capital expenditure of ₹ 14 Crores and reduced the shortfall in application of funds from the excess brought forward application of income of the assessment year 2007-08 to the extent of the shortfall and further we hereby strike down the order of the Ld.CIT(A) wherein he has directed the Ld.A.O to bring to tax the sum of ₹ 11,05,02,792 by denying the benefit of carried forward of excess application of income. - Decided in favour of assessee.
Issues Involved:
1. Taxation of excess application of the earlier year set off in the current year. 2. Disallowance of Rs. 14 crores paid for the purchase of land. Issue-wise Detailed Analysis: 1. Taxation of Excess Application of the Earlier Year Set Off in the Current Year: The Assessee, a trust registered under Section 12AA of the Income Tax Act, filed its return of income for the assessment year 2008-09, claiming exemption under Section 11. The CIT(A) directed the Assessing Officer (AO) to bring to tax Rs. 11.05 crores being the excess application of the earlier year set off in the current year. The AO had concluded that the trust's income should be computed on commercial principles, and there is no provision under Section 11 to carry forward excess expenditure to subsequent years. The CIT(A) upheld this view, stating that the trust's income should be real income and not computed for assessment purposes. The CIT(A) relied on the decision of ITAT Delhi Bench in Pushpawati Singhania Research Institute for Liver, Renal & Digestive Diseases Vs. DDIT(E), which held that excess expenditure cannot be carried forward and set off in subsequent years. 2. Disallowance of Rs. 14 Crores Paid for the Purchase of Land: The trust had purchased 8.83 acres of land for Rs. 74.15 crores and additionally paid Rs. 14 crores to M/s. Golden Homes Pvt. Ltd. for land development. The AO disallowed this payment, considering it non-genuine as it was not mentioned in the registered sale deeds. The CIT(A) upheld this disallowance, stating that the payment was not for charitable purposes as per Sections 11 to 12 of the Act. The CIT(A) emphasized that the payment was not included in the registered sale deed and was described as an assessment fee/nomination fee, which was not obligatory for the trust. Tribunal's Findings: 1. Excess Application of the Earlier Year: The Tribunal held that the CIT(A) erred in directing the AO to tax Rs. 11.05 crores. The Tribunal noted that the trust had applied more than 85% of its income for charitable purposes during the relevant assessment year, making the set-off of brought forward excess application unnecessary. The Tribunal referenced the decision in DIT (Exemption) Vs. Govindu Naicker Estate, which clarified that repayment of loans obtained for capital investment should be considered as application of income for charitable purposes under Section 11(1)(a). 2. Disallowance of Rs. 14 Crores: The Tribunal found that the payment of Rs. 14 crores to M/s. Golden Homes Pvt. Ltd. was genuine and part of the purchase consideration for the land. The Tribunal referred to the tripartite agreement which confirmed the payment as an assignment/nomination fee for causing the sale of the land. The Tribunal concluded that the payment should be treated as application of income towards capital expenditure, thereby increasing the total application of income to Rs. 46,36,66,620/-. This amount exceeded the required 85% application of the trust's income, negating any shortfall. Conclusion: The Tribunal set aside the orders of the AO and CIT(A), allowing the appeal in favor of the Assessee. The disallowance of Rs. 14 crores was overturned, and the direction to tax Rs. 11.05 crores was struck down. The Tribunal confirmed that the trust had complied with the provisions of Section 11(1)(a) by applying more than 85% of its income for charitable purposes.
|
