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2015 (9) TMI 1005 - ITAT CHENNAI

2015 (9) TMI 1005 - ITAT CHENNAI - TMI - Eligibility for deduction U/s.11 & 12 denied - assessee company registered U/s.25 of the Companies Act, though a non-profit institution for controlling and motor sports as per CIT(a) - Held that notification No.S.O.1246(E) dated 29.11.2002 wherein the Central Government has specified motor racing including motor cycle racing to be granted the benefit of section 80G of the Act which was not considered by the Ld. CIT (A). On perusing the order of the Ld. CI .....

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rcial principles. However if the excess application of funds are from the borrowed fund or from the sundry creditors during the earlier years, the same shall be allowed as application in the year in which such loan or sundry creditors are repaid from the income of the trust. This ground is accordingly disposed off.

Tax surplus at the maximum marginal rate by denying the exemption U/s.11 of the Act - Held that:- Since this issue is linked with the denial of exemption U/s. 11 & 12 of th .....

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ply with the objects of the assessee company which if entitled for the benefit of Section-11 & Section-12 of the Act, the same shall be treated as the application of income. - Decided partly in favour of assessee for statistical purposes. - ITA. Nos. 2168, 2169, 2170 & 2171/Mds/2014 - Dated:- 30-6-2015 - N. R. S. Ganesan, JM And A. Mohan Alankamony, AM, JJ. For the Appellant : Mr T N Seetharaman, Adv For the Respondent : Mr N Madhavan, JCIT, DR ORDER Per A. Mohan Alankamony, Accountant Member Th .....

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registered U/s.25 of the Companies Act, though a non-profit institution for controlling and motor sports, is not eligible for deduction U/s.11 & 12 of the Act. ii) The Ld. CIT (A) had erred by not allowing the set-off of the earlier year's excess application viz., for the assessment year 2001-02 ₹ 42,92,803/-, for the assessment year 2003-04 ₹ 20,40,283/- as application for the succeeding assessment years. iii) The Ld. CIT (A) had erred by directing the Ld. Assessing Officer .....

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in India and affiliated to World Associations of Motor Sports. The Ld. A.R. submitted before us that the assessee's activities are related to promotion and education of Motor sports and therefore, the decision of the Bench in the case of DDIT(Exemption) Vs. Dolphin Club in ITA No.1929/Mds./2014 order dated 13.11.2015 and in the case of M/s. All India Chess Federation in ITA No.184/Mds./2013 dated 09.05.2014 would be applicable to the case of the assessee and accordingly the activities of th .....

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dered while denying the benefit of Sections 11 & 12 of the Act to the assessee. Therefore in the interest of justice we hereby remit back this issue to the file of the Ld. CIT (A) to consider the matter in the light of the above decisions and the activities of the assessee coupled with its affiliations to various State Government & Central Government authorities which played a vital role while deciding the cases pointed out by the Ld. A.R. supra. Thus Ground No.(i) hereinabove is dispose .....

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/2014 dated 02.06.2014, the relevant portion of the order is extracted herein below for reference:- "4.1. Ground No.(i) - Disallowance of the carry forward and set off of excess application of income. The assessee in its return of income had claimed ₹ 1,00,70,474/- as excess application of income to be carried forward as follows:- Gross receipts Rs.5,11,60,794 85% of the Gross receipts Rs.4,34,86,675 Application of income including Capital expenditure Rs.5,35,57,149 Excess Application .....

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uestion of spending of 85% of income and accumulation of 15% of income arise only when there is real income. The income derived should be during the current year and accumulation is also from current year's income. If the trust is able to spend the entire income derived from trust, the whole expenditure is treated as application and exempted U/s. 11 of the Act. There is no provision U/s. 11 of the Act to carry forward the excess spending in excess of 85% stipulation. If the trust spends more .....

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rcle-II, New Delhi (2009) 29 SOT 316(Delhi). In the above decision, the Hon'ble ITAT analysed all the decisions which are in favour of carry forward and set off and distinguished them and arrived at the correct decisions as declared by the Income-tax Act. The Bombay High Court in the case of Ld. CIT Vs. Institute of Banking Personnel Selection (2003) 131 Taxman 386 observed that the income of the trust is to be computed on the basis of commercial principles. It is not in dispute that to arri .....

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concept of exemption U/s. 11 of the Act is defeated if provisions of profits and gains of business or provision relating to carry forward and set-off is substituted for the "Income which do not from part of Total income" included under Chapter-III of the Income-tax Act." 4.3. Before us, the Ld. A.R. citing the decision of the Bombay Tribunal in ITA No.6129/Mum./2013 in the case of M/s.Maharashtra Industrial Development Corporation, Mumbai vide order dated 05.03.2015 argued that t .....

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e in India. The Act also provides that upto 15% of such income is accumulated or set apart, then that shall also not be included in the total income. Further Section-11(1)(d) of the Act provides that "income in the form of voluntary contribution made with specific direction that they shall form part of the corpus of the trust or institution" will also not be included in the total income. By virtue of Section- 2(24) of the Act the definition of 'income' includes any "volunt .....

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that, when the assessee trust applies 85% of its income received by way of "voluntary contributions other than the voluntary contributions received with specific directions" and the "income derived from property held under trust", then such income shall not be included in the total income of the Trust. Further the balance 15% of such income even if accumulated or set apart shall also not be included in the total income of the Trust. Therefore, what is provided under the Act .....

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ust or 'accumulate fund' of the Trust for claiming exemption U/s.11 (1) of the Act. 4.5. Application of fund by any charitable institution is possible only from the following sources:- i) Voluntary contributions received by the Trust towards its corpus, ii) Other voluntary contributions, iii) Accumulated fund, iv) Amount received by way of loan, v) Sundry creditors, vi) "Income" derived from the "Property" held under the Trust. [Hon'ble Calcutta High Court has hel .....

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re, it signifies every possible interest which a person can acquire, hold and enjoy. Business would undoubtedly be property unless there is something to the contrary in the enactment.] When the Trust applies its funds from its Corpus, accumulated fund, Sundry creditors or from the loan obtained by the Trust, then such funds which are applied cannot be said to be funds applied from the income of the Trust. Therefore, there cannot be a case where the trust can apply its income more than the income .....

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y creditors are repaid from the income of the Trust. However when amount is applied from the corpus fund or accumulated fund the same cannot be treated as application of fund for the purpose of Section 11 of the Act, because such fund have already been exempt from the income of the Trust in the year in which it is received or such amount is set aside and therefore once again treating the same as application of fund will amount to double deduction. Similarly voluntary contribution received toward .....

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year. These aspects have not been considered by the Mumbai Bench of the Tribunal, and the unreported decision of the Hon'ble Bombay High Court is also not placed before us. 4.6 Now analyzing the facts of the case before us, it appears that the assessee trust's gross receipts is ₹ 5,11,60,794/- and the assessee trust have spent ₹ 5,35,57,149/- which shows that the assessee trust has spent ₹ 23,96,355/- more than its income received during the relevant year. This amount .....

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as application of fund in the year in which such 'Loan' or 'Sundry Creditors' are repaid. It is pertinent to mention that if the amount is applied from the 'Corpus fund' or 'accumulated fund' it will not be treated as application of fund because 'Corpus fund' and 'accumulate fund' are already exempt from the income of the Trust and once again if it is treated as application of fund it would amount to double deduction. Therefore the claim of the as .....

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t' and any 'voluntary contributions received by the Trust other than contributions made with specific directions that they shall form part of the corpus of the trust' i.e., item Nos.(ii) and (vi) mentioned hereinabove. This ground raised by the assessee is accordingly disposed off." Following the decision of Co-ordinate Bench of this Tribunal, we hereby hold that the claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commerci .....

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