Assessee's appeal dismissed, denial of carry forward and set off of excess income, disallowed depreciation, upheld treatment of gross rent.

The Tribunal dismissed the appeal of the assessee, upholding the decisions of the lower authorities on all grounds. It denied the carry forward and set off of excess application of income, disallowed depreciation as an application of income, and upheld the treatment of gross rent received without applying deductions under Sections 23 & 24 of the Act.

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Issues Involved:
1. Disallowance of the carry forward and set off of excess application of income.
2. Disallowance of the depreciation while computing the income of the assessee trust.
3. Treatment of gross rent received as the income from house property without computing in accordance with the provisions of Sections 23 & 24 of the Act.

Issue-wise Analysis:

1. Disallowance of the Carry Forward and Set Off of Excess Application of Income:

The assessee claimed Rs. 1,00,70,474 as excess application of income to be carried forward, but the Assessing Officer allowed only Rs. 23,96,355. The CIT (A) denied the benefit, stating that income derived from property held under trust means real income, not computed income. The CIT (A) referenced the ITAT Delhi Bench decision in Pushpawati Singhania Research Institute and the Bombay High Court decision in the case of CIT Vs. Institute of Banking Personnel Selection, which emphasized that excess expenditure cannot be carried forward for trusts.

The Tribunal held that Section 11(1)(a) of the Act provides that income derived from property held under trust shall not be included in total income to the extent applied for charitable purposes. The Act does not reference the application of funds from the corpus, loans, sundry creditors, or accumulated funds for claiming exemption under Section 11. Therefore, excess application of funds over income received cannot be carried forward. The Tribunal concluded that the claim of the assessee to carry forward excess application of funds cannot be entertained as per the provisions of the Act, and the ground was disposed of accordingly.

2. Disallowance of the Depreciation While Computing the Income of the Assessee Trust:

The assessee claimed depreciation on assets as an application of income. The Assessing Officer disallowed this, citing that it would amount to double deduction since the cost of assets was already claimed as application of income when purchased. The CIT (A) upheld this view.

The Tribunal referenced the Kerala High Court decision in Lissie Medical Institution Vs. CIT, which held that claiming depreciation on assets already written off as application of income results in a cash surplus outside the books, violating Section 11(1)(a). The Tribunal, following this and the Calcutta High Court decision in DCIT Vs. Girdharilal Shewnarain Tantia Trust, confirmed the CIT (A)'s order, holding the issue in favor of the Revenue.

3. Treatment of Gross Rent Received as the Income from House Property Without Computing in Accordance with the Provisions of Sections 23 & 24 of the Act:

The Assessing Officer substituted the actual rental income received by the assessee with a lower amount, disallowing notional deductions under Sections 23 & 24. The CIT (A) confirmed this, stating that gross receipts should be considered for calculating 85% application, not income after deductions.

The Tribunal held that while determining the income of the trust for exemption under Section 11(1)(a), the provisions of Sections 22 to 27 (Chapter IV) for computing income from house property do not apply. Instead, the real income, after deducting any related expenditure, should be considered. Therefore, the Tribunal upheld the Revenue's order, dismissing the ground raised by the assessee.

Conclusion:

The appeal of the assessee was dismissed, and the Tribunal upheld the decisions of the lower authorities on all grounds:
1. Denial of carry forward and set off of excess application of income.
2. Disallowance of depreciation as an application of income.
3. Treatment of gross rent received without applying Sections 23 & 24 deductions.

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