TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1139
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....g 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 adjudication before the Hon'ble Supreme Court and the case has not reached finality." 2. The brief facts of the case are that the assessee is a trust registered under the Bombay Public Trust Act, 1950 and u/s 12A of the Income-tax Act, 1961, engaged in the charitable activity of providing secondary and college education. The assessee has filed its return of income for AY 2012-13 on 28- 12-2012 declaring Nil income after claiming exemption u/s 11 of the Incometax Act, 1961. The case has been selected for scrutiny and the assessment has been completed u/s 143(3) of the Inco....
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.... on the facts and in the circumstances of 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 ?"...." 5.1.4 In Para 5 of their judgement, the Hon. Jurisdictional Bombay High Court held as follows - "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 against the surplus of the subsequent years on the grou....
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....ame is dismissed with no order as to costs." 5.1.6 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 J dated 12.5.2017 in the case of ITO(Exemprion)-l(l) Mumbai vs Bombay Natural History Society, the grounds of appeal filed by the revenue read as under: "/. Whether on the facts on the case and in law the Ld. CIT(A) erred in allowing the carry forward of deficit of Rs. 52,98,149/~ and allowing set off against the income of the subsequent years. ii. 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. Hi. Whether on the facts and in the circumstances of the cases 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 judgement of Hon'ble High Court in the case of Institute of Banking Personnel Select/on, ignoring the fact that the Department has not accepted the said decision of the jurisdictional High Co....
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....come 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 judgments of the juhsdictional high and the Supreme Court as well as the decision of coordinate bench of Tribunal in assessee's own case. We have carefully gone through the judgments cited. In case of CIT Vs. Programme for Community Organization (Supra), the issue before the Horibte Supreme Court was whether accumulation u/s ll(l)(a) has to be computed on gross income or the net income, In that case income received by the trust was Rs. 2,57,376/- against which a sum of Rs. 170369/-had been applied during the year leaving a balance of Rs. 87,013/~. The issue was whether percentage of accumulation should be computed with respect to the gross income of ....
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....imilar was the position in case of CIT Vs. Trustees of Bhat Family Research Foundation (Supra) in which the foundation had earned income of Rs. 4l,S13/- against which it had applied the sum of Rs. 8,ISO/- 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 beyond the accumulation of 25% or 10 thousand whichever was more as provided in section 11(1 )(a). It was thus held that in so far as accumulation of 25% of income i.e. Rs. 10,378/- was concerned, conditions for investment in Government securities were not required to be fulfilled as this exemption was unqualified and unconditional. The conditions were only in respect of further accumulation of balance amount i.e. the sum of Rs. 22,900/- (33363- 10378). Thus even in this case, there was no ruling that accumulation u/s ll(l)(a) has to be allowed to the assesses, even if there was no income left for accumulation and entire income had already....
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....o 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 ll(l)(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 the claim of the assessee." 5.1.10 In the case of Dawat Institute of Dawoodi Bohra Community 116 TTJ Mum 673, the only ground taken by the assessee was that the CIT(A) have erred in upholding the AO's order of not allowing statutory deduction at 25 percent of the gross total income even though the same was legitimate claim of accumulation of income, disregarding the previous orders of the CIT(A) and the judgment of the Hon'ble Supreme Court in the case of CIT v. Programme For Community Organisation. The Hon'ble ITAT in para 13 of the order have held as follows ; "13. The issue in dispute is whether the assessee is entitled to first acc....
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....stant case, the assesses has incurred expenditure or applied for charitable religious purposes Rs. 58,09,87,048 against the total income of Rs. 35,60,82,101. In this case, he is entitled to claim the carry forward of the excess expenditure but he will not be allowed to accumulate 25 per cent of the total income first and then claim the excess expenditure for its carry forward to subsequent years. We accordingly set aside the order of the CIT(A) and restore the matter to the file of the AO with a direction to allow the carry forward of the excess expenditure incurred by the assessee to subsequent year for its set off only in terms indicated above. " 5.1.11 In the case of ITO(E)-II(1) vs Lakshmi and Usha Mittal (Formerly known as The LNM Foundation), the question raised by the Department before the Hon. ITAT A Bench Mumbai in ITA No. 5383/Mum/2011 for the AY 2005-06 were as follows: "3. On the facts and in the circumstances of the case, and in law, the Ld.CIT(A), Mumbai erred in directing the AO to carry forward the deficit of Rs. 2,78,81,409/- to the subsequent year ignoring that the deficit so claimed has arisen due to excess expenditure incurred by the assessee Trust." 6. Th....
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....uch income to be from the current year which is to be applied on the objects of the trust and the earlier years accumulation or otherwise cannot be expanded on the objects of the trust resulting into deficit. Such deficit cannot be allowed to be carried forward to the subsequent years as the same being against the principle and law laid down under the Act." 'We have heard the rival submissions and have perused material placed before us. We find that 'A' Bench of ITAT, Mumbai vide its order dtd.13- 05-2009 (ITA No, 170/M/08 AY 2003-04) has decided the same issue vide para No, 3 of its order as under: Lakshmi and Usha Mittal (Formerly known as The LNM Foundation) "We have heard both the parties, peruse the records and considered the matter carefully. The issue whether deficit in the income and expenditure in case of charitable institutions can be carried forward to subsequent year and adjusted towards application of income has been decided by the Jurisdictional high Court in the case of Institute of Banking (supra), in which it has been held that excess expenditure in e.arlier year can be adjusted against income in the subsequent year and such adjustment has to be tre....
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....bsequent year for 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 u/s 11(1)(a) of the Act. The relevant observations of the Court are 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 against the surplus of the subsequent years on the ground that in the case of a Charitable Trust, their income was assessable under self-contained code mentioned in sect/on 11 to section 13 ....