TaxTMI 
TaxTMI 
2020 (1) TMI 967
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....of the Act. 3. We shall first take up the appeals filed by the assessee. The first common issue urged by the assessee in AY 2012-13 and 2013- 14 relate to the disallowance of amount utilized for acquisition of assets as application of income u/s11 of the Act. The second common issue urged in all the four years (AY 2012-13 to 2015-16) relate to the disallowance of claim of repayment of loan as application of income u/s 11 of the Act. Since both these issues are interconnected, both of them are adjudicated together. 4. The facts relating to the above said issue are that the assessee claimed cost of purchase/construction of assets as application of income. The AO noticed that the assessee has used "loan funds" for the above said purchase/construction of assets. Accordingly, he rejected the claim of "application of income" to the extent of usage of loan funds. The Ld CIT(A) confirmed the disallowance by following the decision rendered by the co-ordinate bench in the case of DCIT vs. M/s Peoples Education Society (ITA No.1074/Bang/2016 dated 09-06-2017). 5. In all the five years, the assessee has claimed "repayment of loans" as application of income by placing reliance on the decisi....
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....e deduction, since the original cost of asset (which was purchased by using loan proceeds) was allowed as application of income in the earlier years. 5. Accordingly, the AO completed the assessments by disallowing the claims of "repayment of loan" as application of income in all the three years and also by assessing the sale consideration arising on sale of capital assets in AY 2008-09 and 2010-11 as income of the assessee. 6. In the appellate proceedings, the Ld CIT(A) directed the AO to allow the claim of repayment of loan as application of income u/s 11 of the Act. With regard to the sale consideration arising on sale of capital assets, the Ld CIT(A) directed the AO to delete the addition made and substitute the same with the figure of capital gains as computed u/s 45 to 55A. For this purpose, the Ld CIT(A) relied upon the decision rendered by the co-ordinate bench in the case of Al- Ameen Educational Society (ITA No.575 (B)/2011). 7. The first issue relates to the claim of repayment of loan as application of income. The Ld D.R submitted that the assessee had already claimed the 'cost of capital assets' purchased out of loan proceeds as "application of income" in the earli....
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....fifteen per cent of its income shall in no case exceed five years; and (b) ..... The provisions of Section 11(1) also requires that the income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India, and where any such income is accumulated or set apart for application for such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property. 11. It can be noticed that both the third proviso to sec. 10(23C) as well as section 11(1) of the Act allows exemption of "income applied to objects of the trust". The provisions of sec.11(1) was interpreted by the coordinate bench in the case of M/s Peoples Education Society (supra). It is pertinent to note that the Hon'ble Karnataka High Court has held in the case of Janmabhumi Press Trust (supra) that the "repayment of loan" is application of income within the meaning of sec.11(1) of the Act. Hence the co-ordinate bench held as under in the case of M/s Peoples Education Society (supra):- "19. In our view, Section 11 only contemplates the applica....
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....s acquired and (ii) in the second instance, it will claim exemption of Rs. 10.00 lakhs, when the loan is repaid. It can be seen that "Trust B" would be getting exemption twice for the same asset, i.e., once at the time of purchase of asset and again on repayment of loan. As observed by the co-ordinate bench, it could not be intention of the Statute. 14. In the instant appeals, it is the case of the AO that the cost of assets acquired out of loan funds have been claimed by the assessee as application of income in the years in which those assets were acquired. In that case, if the assessee is allowed to claim exemption again on repayment of loan taken for acquiring the very same asset, then the same would result in double exemption for the very same amount, which cannot be the intention of the statute. Since the assessee has already claimed exemption towards the cost of asset as application of income, in our view, the assessee cannot take support of the decision rendered by Hon'ble Karnataka High Court in the case of Janmabhumi Press Trust (supra) to claim exemption on account of repayment of loan taken for acquiring the above said asset. We notice that the Ld CIT(A) has om....
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.... assessee with regard to utilization of loan funds. The assessee should be provided with adequate opportunity of being heard. 9. The next common issue urged in all the appeals relate to rejection of claim of carry forward of current year's deficit (excess amount of application of income) to subsequent years and also claim of depreciation on assets. The issue of carry forward of deficit amount is consequential to the earlier two issues. Since the assessing officer has disallowed claim of "application of income" in respect of assets purchase out of loan funds and also repayment of loans, the income came to be assessed in positive figure. Hence there was no requirement of holding that the deficit shall be carried forward. Since the earlier two issues have been restored to the file of the assessing officer, this issue shall be dependent upon the result of the consequential order that may be passed by the AO. Accordingly, this issue is also restored to his file with the direction to allow carry forward of deficit, if any, computed in any of the years. The AO is also directed to allow claim of depreciation after examining the same upto assessment year 2014-15, since the provisions of s....