TaxTMI 
TaxTMI 
2019 (2) TMI 989
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....;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 was legally not permissible.? 1.2 Whether, on the facts of the case and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the claim of the assessee 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 adjudication before the Hon'ble Supreme Court and the case has not reached finality. 1.3 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....
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.... allow the carry forward of deficit of Rs. 9,76,12,2511or adjustment in subsequent years. We would be glad to clarify the above and address any further aspects that you may require." The ld. CIT (A) vide para 6.2.1. has given his finding as under: "6.2 I have considered the facts of the case and the submissions made by the assessee. I find that this issue is covered in favour of the assessee by the decision of the Hon'ble jurisdictional Bombay High Court in the case of CIT vs. Institute of Banking and Personnel Selection (supra). Inthe said decision the question before the Hon'ble Court was "3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in Jaw 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 6.2.1 In Para 5 of their judgement, the Hon. Jurisdictional Bombay High Court held as follows - "5. Now corning to question No. 3, the point which arises for consideration is : whether excess of expenditure in the earlier yearscan be a....
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.... High Court was "Whether on the facts and circumstances of the case and in law the Tribunal was right in directing the A.O. to set off the deficit of earlier years to the surplus of this year and consider such adjustment as application of income for charitable purpose". The Hon. High Court held as follows: - "4. As regards second question is concerned, counsel on both sides agree that the said question is covered against the revenue by the decision of this Court in the case of Commissioner of Income Tax vs. Institute of Banking reported in (2003] 264 1. TI? 110. In this view of the matter, we see no merit in the appeal and the same is dismissed with no order as to costs." 6.2.3 Similarly, in a recent decision of the Hon. ITAT, Mumbai Bench "J", Mumbai in ITA No. 5143/Mum/2016 for the A.Y. 2011-12 dated 12.5.2017 in thecase of ITO(Exemption)-1(1) Mumbai vs Bombay Natural History Society, the grounds of appeal filed by the revenue read as under: "i. Whether on the facts on the case and in law the Ld. CIT(A) erred in allowing the carry forward of deficit of Ps. 52,98,1491 and allowing set off against the income of the subsequent years. ii. Whether on the ....
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....ot arise. This is because if there is no income available, from where will the assessee accumulate the income? My above decision is supported by the decision of the HON. ITAT "G" Bench Mumbai in the case of Dawat Institute of Dawoodi Bohra Community in ITA No. 4309/Mum/2005 for the A.Y, 2001-02 dated 30.4.2013, wherein the same issue was involved. It was held by the Hon. ITAT as follows: "5. We have perused the records and considered the rival contentions carefully. The dispute raised in this appeal is whether the assessee can still be allowed statutory accumulation of 25% of the income u/s 11 (1)(a) of the IT Act even if the entire income has been applied for the year and no income is left for accumulation. The authorities below have disallowed the claim on the ground that the assessee had incurred more expenditure towards the application of income than the income earned. Therefore, the claim of accumulation cannot be allowed. The learned AR for the assessee has however argued that the assessee is entitled for statutory accumulation of 25% of gross income irrespective of the fact whether any income is left for application or not. Reliance has been placed on the judgmen....
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....u/s 11(2) subject to the fulfillment of conditions mentioned there in. but in respect of accumulation of 25% or 10 thousand whichever is more u/s 11(1)(a), the conditions mentioned u/s 11(2) could not be applied. In other words, Hon'ble Supreme Court held that accumulation of 25% or 10 thousand whichever was more was absolute and unfettered without any conditions. Thus observations "absolute and unfettered exemption" was only in relation to fulfillment of conditions mentioned in section 11(2). It was not held by the Hon'ble Supreme Court that such accumulation had to be allowed even if there was no income left for application. 5.2 Similar was the position in case of C1T Vs. Trustees of Bhat Family Research Foundation (Supra) in which the foundation had earned income of Rs. 41,513/- against which it had applied the sum of Rs. 8,150/- leaving a balance of Rs. 33,363/-. The Assessing Officer held that for allowing exemption, the entire balance amount of Rs. 33363/- has to be invested in Government securities and bonds as provided in section 11(2). The High Court held that the conditions of investment in Government Securities and bonds was only in relation to any accumulation ....
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....d to be allowed even if there was no income left for application but the issue was whether accumulation had to be computed with respect to gross income or net income. Similarly, the Tribunal allowed the claim of the assessee in the assessment years 2002-03 and 2003-04 (Supra) in the same manner. Therefore, the decision of Tribunal in assessee's own case in earlier years in our, view, cannot be considered as binding precedent. As regards the decision of CIT (A) in assessment year 2004-05 (Supra) nothing has been produced on record to show that it was a conscious decision of the government to accept the order. Mere failure of an official to not file appeal in one year could not be the ground to make a claim in the subsequent year. The income can be accumulated u/s 11 (1)(a) if something remained unspent but if the entire income has already been spent, the same is fully exempt from tax and there is nothing left to be accumulated. We are therefore, unable to accept the arguments advanced on behalf of the assessee that the accumulation has to be allowed even if the entire income has already been spent by the assessee. We accordingly, confirm the order of CIT(A) disallowing ....