TMI Blog2015 (8) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon’ble jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel (2003 (7) TMI 52 - BOMBAY High Court ) is squarely applicable in this case. - Decided against revenue Carry forward of deficit on account of excess expenditure denied - CIT(A) allowed the appeal of assessee - Held that:- The issue of excess application of income of earlier years to be carried forward is decided in favour of the assessee in the decision of Higher Judicial Forum in Commissioner of Income-Tax Versus Institute Of Banking Personnel Selection [2003 (7) TMI 52 - BOMBAY High Court] as referred to and relied by the CIT(A). Therefore, respectfully following the decision relied upon by the CIT(A) and applicable under the facts and circumstances of the case, these grounds of the Revenue are dismissed. - Decided against revenue - ITA Nos.3421&3422/Mum/2015 - - - Dated:- 30-7-2015 - SHRI R.C.SHARMA, J. For The Revenue : Shri Jasbir Singh Chouhan For The Assessee : Shri F.B.Andhyarujina ORDER These are the appeals filed by the revenue against the order of CIT(A) for the A.Y.2010-11 2011-2012 in the matter of order passed u/s.143(3) of the I.T.Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that there was no express provisions in the Act, 1961 permitting allowance of such claim. 6. The appellant prays that the order of the Commissioner of Income-Tax (Appeals)- 1Mumbai, be set aside and that of the Assessing Officer be restored. 3. As common grounds have been taken in both the years, therefore, both appeals are being heard together and are now decided by this consolidated order. 4(i) The facts of the case are that the assessee is a trust which is engaged in religious charitable activities for the welfare of Dawaoodi Bohra community and other communities. It filed return of income on 30th September,2011 along with the Income and Expenditure Account, Balance Sheet and Audit Report in Form No.10B declaring total income at deficit of ₹ 2,782,426,641/-. It also claimed carried forward of earlier years excess of expenditure of ₹ 21,289,728,242/- in the computation of income filed along with the return of income. The trust is registered as a Charitable Organization with DIT (Exemption), Mumbai u/s. 12A of the Income Tax Act, 1961. The Assessee has accordingly claimed exemption u/s. 11 of the Income Tax Act,1961. 4(ii) For the Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in favour of the appellant. The AO has not given any other reason for disallowance of depreciation and relied on the decision of the Hon. Apex Court in Escorts Limited case (199 ITR). However, the appellant has further relied on decision in the case of DIT(E) vs. Najam Baug Trust (Bom.). In fact the decision of the Hon. Jurisdiction Court in CIT Vs. Institute of Banking Personnel Selection (2003) 185 CTR 492 (Bom) is applicable in this case. As per decision of the Hon. Higher judicial authorities on this issue, deprecation is allowable as claimed by the appellant. Therefore, Ground No. 2 of appeal is allowed for both the years. 5.3 Aggrieved with the order of CIT(A), the Revenue filed second appeal before us. 5.4 Ld. AR submitted that the depreciation claimed is as per established accounting principle and based on various judgment of High Court. The income being exempt, depreciation should be reduced for determining the correct income computation. Depreciation is a charge which ought to be allowed in order to reflect the trusts correct profits. Ld. AR further contended that the Supreme Court in CIT vs. Williamson Financial Services (2008) 297 ITR 17 (SC) has held that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Janahit Trust (1994) 208 ITR 372 (Cal); v) CIT Vs. Seth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 198 ITR 598 (Guj); vi) CIT Vs. society of Sisters of St. Anne (1984) 146 ITR 28 (Ker); vii) CIT Vs. St. George Forana Church (1988) 170 62 (Ker); and viii) CIT Vs. Rao Bahadur Calavala Chetty Charities (1982) 135 ITR 485 (Mad) 5.7 The sole contention of the ld. DR is that jurisdiction in the case reported in 264 ITR 110 (Bom) was accepted by the department in view of the low tax involved. He further relied on decision of Kerala High Court in the case of Lissi Medical Institution (supra) and Delhi High Court decision in the case of Charanjiv Charitable Trust (supra). The ld. AR has further relied on the decision in the case of DIT(E) Vs. Najam Baug Trust (Bom). 5.8 It is pertinent to note here that by way of amendment in Finance Act 2014 in Section 11(6) of the Act, depreciation will not be allowed while computing application of income w.e.f.1-4-2015. Thus, the amended provisions are applicable w.e.f.A.Y.2015-2016. However, the section does not mention anything for applicability prior to A.Y.2015-16 cases. So cases prior to A.Y.2015-2016 have to be decided as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-D of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under normal commercial accounting principles, there is authority for the proposition that depreciation is a necessary charge in computing the net income. Secondly, the Supreme Court was concerned with the case where the assessee had claimed deduction of the cost of the asset under Section 35(1) of the Act, which allowed deduction for capital expenditure incurred on scientific research. The question was whether after claiming deduction in respect of the cost of the asset under Section 35(1), can the assessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double deduction in regard to the same business outgoing is not intended unless clearly expressed. The present case is not one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is decided in favour of the appellant in the decision of the higher judicial forums as referred and relied by the appellant. Therefore, respectfully following the decisions relied upon by the appellant and applicable under the facts and circumstances of the case, Ground Nos. 3 and 4 for both the years i.e. A.Yrs. 2010-11 and 2011-12 are allowed. However, the A.O is directed to verify the claim of c/f of earlier year deficits amounting to Rs. ₹ 2,01,37,85,581/upto A.Y. 2010-11 and Rs~ 2,78,24,26,641/- upto A.Y. 2011-12, that such amounts are part of 'excess expenditure of earlier years', and such amounts are liable to be considered as part of 'application of income' in the respective years. It may further be verified that such excess expenditure of earlier years claimed is out of income of the respective years. 6.3 Aggrieved with the order of ld. CIT(A) the revenue filed appeal with this Bench. 6.4 The assessee submitted as below :- (i) The carry forward of this excess application as deficit/loss to the subsequent years is required to be in compliance with the provisions for the Act. Hence the deficit of the current year is to be allowed to be car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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