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TMI Blog2017 (12) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... iety of Bangalore Vs. ADIT(E)(2015 (11) TMI 1270 - ITAT BANGALORE) wherein held The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income during the year can be regarded as application of the income of future years and can be adjusted. Therefore, in our view, the claim of the assessee for carry forward of excess application is in accordance with the judicial precedents on the issue and the same is allowable. - ITA Nos. 1785 to 1790/Bang/2016, C.O. Nos. 52 to 57/Bang/2017 And ITA Nos. 1785 to 1790/Bang/2016 - - - Dated:- 29-11-2017 - SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER For The Assessee : Shri A. Shankar, Advocate For The Revenue : Smt. Susan D. George, CIT (DR) ORDER Per Bench: All these six appeals are filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nia Resaerch Institute for Lever, Renal and Digestive Diseases Vs. DDIT(E), New Delhi (29 SOT 316) which has held that any excess expenditure incurred by a trust/ charitable institution in earlier years cannot be allowed to be carried forward and set off against the income of subsequent assessment years? 7 Any other ground that may arise at the time of hearing. 4. The ld. DR of revenue supported the assessment order. She also submitted written submissions and in respect of the allowability of depreciation, reliance is placed on a judgment of Hon ble Kerala High Court rendered in the case of M/s Lissy Medical Institutions vs. CIT, 349 ITR 344 and of Hon ble Apex court rendered in the case of Escorts Ltd. vs. Union of India, 199 ITR 43. In respect of the second issue i.e. carry forward and set off of excess of expenditure over income, reliance is placed on the tribunal order rendered in the case of ITO vs. Sri Sathya Sai Trust, 33 ITD 320. In addition to this, reliance is placed on the following judicial pronouncements in respect of this second issue:- a) CIT vs. Indian national Theatre Trust, 305 ITR 149 (Delhi), b) CIT vs. Ramchandra Poddar charitable Trust, 164 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Jurisdictional High Court rendered in the case of DIT Vs. Al-Ameen Charitable Fund Trust (Supra), this judgment of Hon ble Kerala High Court is not even required to be considered. We consider the applicability of the second judgment i.e. of Hon ble apex court rendered in the case of Escorts Ltd. (Supra). We find that the dispute in that case was regarding allowability of depreciation on those assets which were allowed as deduction u/s 35 (1) (iv) which deals with expenditure of capital nature on scientific research. Under these facts, it was held that if depreciation is also allowed in respect of same assets which were allowed as deduction u/s 35 (1) (iv), it will amount to allowance of double deduction. In the present case, the revenue contends that considering the acquisition of assets to fulfill the objects of the trust as application of income of the trust and thereby exempting such income u/s 11, it amounts to allowance of deduction and therefore, depreciation on those assets is not allowable because it will amount to allowing of double deduction. We find a fallacy in this argument because by considering the acquisition of assets to fulfill the objects of the trust as app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of a charitable trust, their income was assessable under self-contained code mentioned in s. 11 to s. 13 of the IT Act and that the income of the charitable trust was not assessable under the head Profits and gains of business under s. 28 in which the provision for 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 subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles areapplied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in s. 11 of the Act and that such adjustment will have to be excluded from the income of the trust under s. 11(1)(a) of the Act. Our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed as application of income under s. 11 in past years. In Govindu Naicker Estate VS. ADIT 248 ITR 368 (Mad), the Hon'ble Madras High Court held that the income of the trust has to be arrived at having due regard to the commercial principles, that s. 11 is a benevolent provision, and that the expenditure incurred on religious or charitable purposes in earlier year or years can be adjusted against the income of the subsequent year. The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(2) of the Act and has taken the view that the accumulation under Section 11(2) of the Act can be only out of current income. We, however, find that the coordinate benches of the Bangalore Tribunal have consistently followed the view of the Hon'ble Bombay High Court (supra) in which the application has been regarded as adjustable against the income of the future years. We are, therefore, inclined to follow the view taken by the co- ordinate benches of this Tribunal, inter alia, in the case of Baldwin Methodist Educational Society (supra), based on the view/decisions of the Hon'ble Bombay High Court in the case of Institute of Banking (supra) and the Hon'ble Gujarat High Court in the case of CIT V Shri Plot SwetamberMurtiPujak Jain Mandal reported in 211 ITR 293. In this view of the matter, the Assessing Officer is directed to allow carry forward of the excess application of ₹ 7,44,328 for the year to be adjusted from income from property held under trust of the subsequent years. It is ordered accordingly. Consequently, Grounds 2 and 3 of assessee's appeal are allowed. 10. Respectfully following the decision of co-ordinate Bench we allow the appeal of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the income. In this case, there was no dispute about deficit and it s carry forward and set off in later years. Therefore, this judgment is also not applicable. 12. The fourth judgment relied upon by the learned DR of the revenue is the judgment of Hon ble Calcutta High Court rendered in the case of DIT (Exemption) vs. Girdharilal Shewnarain Tantia Trust (Supra) and the issue involved in this case was this that whether capital gain of ₹ 291,644/- is eligible for deduction u/s 80 T of I T Act. In this case also, there was no dispute about deficit and it s carry forward and set off in later years. Therefore, this judgment is also not applicable. 13. As per above discussion, it is seen that the reliance on these three judgments of Hon ble Delhi High court and Hon ble Calcutta High Court is entirely misplaced and it is without considering the facts and dispute in these cases and in the present case. In our considered opinion, before placing reliance on any judgment, the facts and dispute of that case and the present case where the said judgment is being cited should be studied and compared and no case should be cited blindly as done by the learned DR of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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