TaxTMI 
TaxTMI 
2019 (2) TMI 526
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.... the case and in law the Ld. CIT(A) erred in allowing the carry forward of deficit of Rs. 2,30,44,449/- and allowing set off against the income of the subsequent years." 2. Whether, on the facts and in the circumstances of the case and in law, the Ld.CIT (A) erred in allowing the claim of the assessee for carry forward of the said deficit, ignoring the fact that there was no express provision in the I T Act, 1961 permitting allowance of such claim." 3. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in allowing the claim of the assessee for carry forward of the said deficit by relying upon the judgment of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Court on merit of the case, but due to smallness of tax effect appeal was not filed before Hon'ble Supreme Court. However, on this issue the department has filed SLPs in other cases before the Hon'ble Apex Court inclusive the case of MIDC (SLP (Civil) 9891 of 2014), in which leave has been granted and the issue is pending for a....
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....If excess expenditure is out of corpus then any corpus received is separately exempt u/s. 11(1)(d) of the Act and hence any further deduction of the same outgoing will amount to double deduction. If source of expenditure is a loan then repayment is allowable as a deduction in the year of repayment. Clearly, scheme of computation of business income has no application in determination of income u/ s. 11. Thus, in view of the above stated facts deficit of Rs. 2,33,03,449/- is not allowed to be carried forward for future set off. Moreover, Department has filed SLP in the case of Gems & Jewellery Export Promotion Council for Assessment Year 2004-05 on the deficit issue." 4. The assessee being aggrieved by assessment framed by the AO vide orders dated 30.01.2013 passed u/s 143(3), filed first appeal with learned CIT(A) which was allowed by Ld. CIT(A) in favour of the assessee vide appellate order dated 14.06.2017, by holding as under:- "6.2 I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the appellant and also discussed the case with the AR of the appellant. The contentions and submissions....
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.... the Act and that such adjustment will have to be excluded from the income of the Trust under section 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 1TR 293 (Guj).Accordingly, we answer question No. 3 in the affirmative i.e., in favour of the assessee and against the department." ii. Respectfully following the ratio laid down by the Hon. High Court as above, the AO is directed to allow the carry forward of deficit in the succeeding years after due verification of facts. iii. Ground of appeal No. II is therefore allowed." The Ld. CIT(A) while adjudicating aforesaid appeal in favour of the assessee mainly relied upon the decision of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (2003) 264 ITR 110(Bom. HC). 5. Aggrieved by the appellate order dated 14.06.2017 passed by learned CIT(A), the Revenue has now filed an appeal before us. The Ld. DR relied upon the order of the AO and contended that excess of expenditure over income in the case of Charitable Trust being deficit cannot be allowed to be carried forwar....
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....the case, the tribunal was justified in law forward the deficit of earlier year and set it off against the surplus of subsequent years when the same was not allowable in the case of assessee trust in whose case income exempted under section 11 of the Income Tax Act, 1961." The Hon'ble Bombay High Court decided the aforesaid substantial question of law in favour of the assessee in Institute of Banking Personnel Selection (IBPS) (supra) , by holding as under:- " 5. Now coming to question No. 3, the point which arises for consideration is : whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off a....
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....stions of law for our consideration: "(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was right in allowing the claim of the assessee for carry forward of the deficit, amounting to Rs. 3,71,99,050/ignoring the fact that there was no express provision in the Income Tax Act, 1961 for permitting allowance of such claims?". (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in upholding the decision of the CIT(A) which allowed carry forward of deficit on account of excess expenditure and directed the assessing officer to allow carry forward of deficit on account of excess expenditure without appreciating the fact that this would have the effect of granting double benefit to the assessee, first as 'accumulation' of income u/s. 11 1(a) or as corpus donation u/s. 11(1)(d) in earlier years/current year and then as 'application' of income u/s. 11(1)(a) in the subsequent years which were legally not permissible?". 3 Mrs. Bharucha, learned Counsel appearing for the Revenue very fairly states that the issues arising herein stands concluded against the Revenue and i....
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....e issue in favour of the assessee , by holding as under:- " 3. We find that the impugned order of the Tribunal has dismissed the Revenue's appeal on both the issues namely - allowability of depreciation on capital assets acquired for the purposes of carrying out charitable activities and set off of deficit of earlier years against income of the current year. The impugned order in fact followed decision of this Court in CIT v/s. Institute of Banking Personnel Services reported in 264 ITR 110 while holding in favour of the RespondentAssessee. 4. Mr. Malhotra, learned Counsel appearing for the Revenue very fairly states that the issue as raised by the Revenue stands concluded against Revenue by decision of this Court in Institute of Banking Personnel Services (supra). 5. In view of the above, the questions as framed do not give rise to any substantial question of law." The Mumbai-tribunal in ITO(Exemptions) vs. Vaibhav Medical & Education Foundation in ITA no. 6998/Mum/2016 for AY 2008-09, vide order dated 31.08.2017 has also decided this issue in favour of the assessee , by holding as under:- " 6. We find that the Hon'ble Bombay High Cou....
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....n) vs. M/s. Gem & Jewellery Exports Promotion Council (ITA (LOD) No. 1133 of 2010) dated 15.02.2011 also, and the SLP of the Department has also been dismissed by the Hon'ble Supreme Court in CC 13512/2011 dated 09.09.2011. Therefore, in this background, we find no merit in the Ground raised by the Revenue and the same is accordingly dismissed. 7. In the result, appeal of the Revenue is dismissed." Further we have also observed that Mumbai Tribunal in DDIT v. Maharashtra Samaj Ghatkoper in ITA no. 3654/Mum2013 , vide order dated 22.06.2016 to which one of us being Judicial Member was part of the Division Bench who adjudicated the appeal in ITA no. 3654/Mum/2012 , has again decided the issue of carried forward of losses in favour of the tax-payer , by holding as under:- "3. We have heard Departmental Representative (DR) for Revenue and Authorised Representative (AR) for assessee and perused the material available on record. Ld. DR argued that Ld DIT wrongly given the relief to the assessee and prayed that order of the AO may be restored. Ld AR for assessee argued that this case is squarely covered by the decision of Bombay High Court in CIT vs. Institute of ....
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....ial principles are applied 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 section 11 of the Act and that such adjustment will have to be excluded from the income of the Trust under section 11(1)(a) of the Act. Our view is also supported by the Judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal *1995+ 211 ITR 293." Further the Hon'ble jurisdictional High Court in case of DIT vs. Mumbai Education Trust in ITA No. 11/2014 dated 3rd May 2016 given the similar relief in respect of allowability of depreciation of capital asset acquired for the purpose of carrying out charitable activities and set off of deficit of earlier years against the income of current year. 5. By respectfully following the judgment of Hon'ble jurisdictional High Court, we hold that the assessee is claimed for setting....