The Revenue as well as the assessee are in cross appeal against the impugned order dated 18/03/2015 of the Ld. First Appellate Authority, Mumbai. In the appeal of the assessee (ITA No.3788/Mum/2015), the only ground pertains to depreciation of Rs. 89,54,208/-.
2. The crux of argument advanced by Ms. Arati Visanji, ld. counsel for the assessee is that the written submissions, filed by the assessee, were not considered by the ld. Commissioner of Income Tax (Appeals) and it should have been treated as additional ground. Reliance was placed upon the decision in the case of CIT vs Institute of Banking (264 ITR 110)(Bom.), CIT vs Maharana of Mebar Charitable Foundaton (164 ITR 439) (Raj.), CIT vs Plot Swetamber Murtipujak Jain Mandal (211 ITR 293)(Guj.) and CIT vs Shimla Chandigarh Diocese Society (318 ITR 96) (P & H). My attention was also invited to the written submission filed before the ld. Commissioner of Income Tax (Appeals) and para-6, page -11 of the impugned order. On the other hand, the ld. DR, defended the conclusion arrived at in the impugned order by contending that no formal ground was raised by the assessee, therefore, the ld. Commissioner of Income Tax (Appeals) was right in his conclusion.
2.1. I have considered the rival submissions and perused the material available on record. Without going into much deliberation, undisputedly, the assessee filed written submissions for claim of depreciation and same has been reproduced in para 5 onwards of the impugned order and various case laws have been relied upon therein. However, the ld. Commissioner of Income Tax (Appeals) concluded that no specific ground has been raised, hence, no decision was given by rejecting the submission of the assessee. In view of this fact, I am of the view that as per Article -265 of Constitution of India, the authorities are to levy and collect due taxes, therefore, since, no grievance is caused to either side, I remand this ground to the file of the ld. Commissioner of Income Tax (Appeals) to consider the submissions of the assessee. The assessee is also directed to raise a specific ground so that the same can be disposed of in accordance with law in the light of the case laws cited by the assessee. The appeal of the assessee is allowed for statistical purposes only.
3. So far as, the appeal of the Revenue (ITA No.3774/Mum/2015) is concerned, the ground raised pertains to allowing the carry forward of deficit of Rs. 47,57,38,232/- and allowing set off against income of subsequent years is concerned, the crux of argument on behalf of the Revenue is identical to the ground raised by submitting that it amounts to double deduction on account of expenditure out of exempt income. On the other hand, the ld. counsel for the assessee, relied upon the decision from Hon’ble jurisdictional High Court in CIT vs Institute of Banking (264 ITR 110) (Bom.), DIT(E) vs Shri Ville Parele Kelavani Mandal 232 taxman 499 (Bom.)(2015), CIT vs Leelawati Mehata Medical Trust (2015) 229 Taxman 276 (Bom), DIT (E) vs Framjee Cavasjee Institute (2014) 227 taxman 266 (Mag.), DIT(E) vs Indraprashtha Cancer Society (2014) 112 DTR 345 (Del.), CIT vs Siligurhi Regulated Marekt Committee 366 ITR 51 (Cal.) and CIT vs Devi Shankuntla Tharal Charitable foundation 358 ITR 452 (MP).
3.1. I have considered the rival submissions and perused the material available on record. Section 11(6) was inserted by the Finance (No.2) Act, 2014. In this section, where any income is required to be applied or accumulative or set apart for application, then for such purposes, the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. So far as, the word applied, in this context, means that the income is actually applied for charitable or religious purposes. The word “applied” need not necessarily imply (spent). Even an amount is irretrievably year marked and allocated for charitable or religious purposes, it may be said to have been applied to the purposes. Our view find support from the ratio laid down in following cases:-
i. CIT vs Radhaswamy Satsang Sabha (1954) 25 ITR 472 (All.)
ii. CIT vs HEH the Nizam Charitable Trust (1981) 131 ITR 497(AP)
iii. Nachi Muthu Industrial Association vs CIT (1999) 235 ITR 190 (SC),
iv. CIT vs Thanthi Trust (1982) 137 ITR 735 (Mad.),
v. CIT vs Thanthi Trust (1999) 239 ITR 502 (SC)
3.2. Under section 11(1)(a) income derived from property held under trust for charity, to the extent such income is applied for charitable or religious purposes will be exempt from income tax (Tirupati Trust vs CIT) (230 ITR 636, 640 (SC), thus, it is clear that the pre-requisite conditions for application of income u/s 11(1)(a), earlier part, are that the income must be derived from property held under the trust wholly for charitable or religious purposes and the exclusion of the income is limited to the extent to which such income is applied to such purposes for which the property are held by the trust.
3.3. There is no word of limitation in section 11(1)(a) providing that the income should have been applied for charitable or religious purposes only in the year in which the income had arisen. The word “applied” means “to put to use” or “to turn to use” or “to make use” or “to put to practical use”. Having regard to the provisions of section 11, it is clear that the when the income of the trust is used or put to use to meet the expenses incurred for charitable purposes, it is considered to be applied for the purposes. The said application of the income for the purposes takes place in the year in which the income is adjusted to meet the expenses. In other words, even if expenses for charitable and religious purposes have been incurred for earlier year and the said expenses are adjusted against the income of the subsequent years.
3.4. Now, I shall examine the facts of the present appeal, in the light of the aforesaid discussions/judicial pronouncements. The facts, in brief, are that the Assessing Officer denied carried forward of deficit of Rs. 47,57,38,232/- of earlier years being excess of application of income over the income of the trust. The assessee in view of the aforesaid decisions, claimed that carried forward to be allowed to be set off. On appeal, before the ld. Commissioner of Income Tax (Appeals), the Assessing Officer was directed to allow the brought forward deficit of earlier years and also to allow carry forward of aggregate deficit to succeeding year after verification. The Revenue is aggrieved and is in appeal before this Tribunal. Under the facts narrated hereinabove, the Hon’ble jurisidictional High Court in cases discussed hereinabove, and also by other Hon’ble High Courts held that carry forward of deficit of earlier years has to be set off against the surplus of subsequent years. Likewise, Hon’ble Delhi High Court by placing reliance upon the decision of the High Court in 211 ITR 293 (Guj.), 164 ITR 439 (Raj.), 264 ITR 110 (Bom.) 242 ITR 20 (Mad.) held that excess of expenditure over income in one year can be set off in subsequent year against the income u/s 11 as and by way of application of income. Respectfully following the aforementioned Hon’ble High Courts and specifically Hon’ble jurisdictional High Court, I find no infirmity in the conclusion of the ld. Commissioner of Income Tax (Appeals) and affirmed the same.
Finally the appeal of the Revenue is dismissed.