TaxTMI 
TaxTMI 
2015 (9) TMI 1005
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....lier year's excess application viz., for the assessment year 2001-02 Rs. 42,92,803/-, for the assessment year 2003-04 Rs. 20,40,283/- as application for the succeeding assessment years. iii) The Ld. CIT (A) had erred by directing the Ld. Assessing Officer to tax surplus of Rs. 7,10,815/- for the assessment year 2005-06 at the maximum marginal rate by denying the exemption U/s.11 of the Act. iv) The Ld. CIT (A) had erred by disallowing the foreign travel expenses of Rs. 2,39,095/- by invoking the provisions of section 11(1)(c) of the Act. 3. The brief facts of the case are that the assessee is a company registered U/s.25 of the Companies Act as a non-profit institution for controlling and monitoring motor sports conducted by various clubs in India and affiliated to World Associations of Motor Sports. The Ld. A.R. submitted before us that the assessee's activities are related to promotion and education of Motor sports and therefore, the decision of the Bench in the case of DDIT(Exemption) Vs. Dolphin Club in ITA No.1929/Mds./2014 order dated 13.11.2015 and in the case of M/s. All India Chess Federation in ITA No.184/Mds./2013 dated 09.05.2014 would be applicable to the cas....
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....f excess application by observing as under:- "Income derived from property held under trust means real income and not the income computed for assessment. The question of spending of 85% of income and accumulation of 15% of income arise only when there is real income. The income derived should be during the current year and accumulation is also from current year's income. If the trust is able to spend the entire income derived from trust, the whole expenditure is treated as application and exempted U/s. 11 of the Act. There is no provision U/s. 11 of the Act to carry forward the excess spending in excess of 85% stipulation. If the trust spends more than the income, it should be either from corpus or from loan obtained. The application should always be from income derived or from income set apart or accumulated income. Therefore the question of carry forward of excess expenditure and set off of the same subsequently does not arise at all in the case of trusts. Reliance is placed on the decision of ITAT Delhi Bench 'F' in the case of Pushpawati Singhania Research Institute for Liver, Renal & Digestive Diseases Vs DDIT(E),Inv. Circle-II, New Delhi (2009) 29 SOT 316(Delhi)....
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.... includes any "voluntary contribution received by the trust created wholly or partly of charitable or religious purposes". Further explanation to section-11(1)(a)(b) r.w.s 12(1) of the Act provides that any "voluntary contribution received other than with specific direction that they shall form part of the corpus of the trust or institution" created wholly for charitable or religious purpose shall be deemed to be the "income derived from property held under trust". From the above it is clear that, when the assessee trust applies 85% of its income received by way of "voluntary contributions other than the voluntary contributions received with specific directions" and the "income derived from property held under trust", then such income shall not be included in the total income of the Trust. Further the balance 15% of such income even if accumulated or set apart shall also not be included in the total income of the Trust. Therefore, what is provided under the Act is with respect to 'application of income' from the 'income derived from the property held under the Trust' and any 'voluntary contributions received by the Trust other than contributions made with specif....
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....lication of fund for the purpose of Section 11 of the Act, because such fund have already been exempt from the income of the Trust in the year in which it is received or such amount is set aside and therefore once again treating the same as application of fund will amount to double deduction. Similarly voluntary contribution received toward Corpus is exempt from income of the trust in the year in which it is received and therefore when it is utilized for the objects of the Trust it cannot be considered as application of fund otherwise it will amount to double deduction. From the above factual and mathematical matrix it is evident that carry forward of excess application of fund in the commercial principles cannot be allowed as per the provisions of the Act because it would result in notional application of income in the subsequent year. These aspects have not been considered by the Mumbai Bench of the Tribunal, and the unreported decision of the Hon'ble Bombay High Court is also not placed before us. 4.6 Now analyzing the facts of the case before us, it appears that the assessee trust's gross receipts is Rs. 5,11,60,794/- and the assessee trust have spent Rs. 5,35,57,149/....