TMI Blog2016 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... nne [1983 (8) TMI 44 - KARNATAKA High Court ] .- Decided in favour of assessee - ITA No.140/Bang/2015, CO No.104/Bang/2015 - - - Dated:- 27-7-2016 - Shri Vijay Pal Rao, Judicial Member And Shri Inturi Rama Rao, Accountant Member Revenue by : Shri Sunil Kumar Agarwal, Jt. CIT ( DR ) Assessee by : Shri V.K. Gurunathan, Advocate ORDER Per Vijay Pal Rao, Judicial Member This appeal by the revenue and CO by the assessee are directed against the order dated 13.11.2014 of the CIT(Appeals), Mysuru for the assessment year 2011-12. 2. The Revenue has raised various grounds, however, the only effective grounds raised by the revenue are as under:- Set-off of excess expenditure/application/deficit/loss :- a) The CIT(A) has erred in directing the assessing officer to allow set-off of unabsorbed expenses of ₹ 1,15,42,645/- of earlier years and allow the current deficit of ₹ 1,18,24,928/- without appreciating the fact that as per the scheme of taxation of charitable or religious trust/institution as codified u/s. 11, 12 and 13, there is no provision for computing loss from property held under trust/institution on account of excess application of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng/2015 has held in paras 5 6 as under:- 5. Having regard to the rival contentions and the material on record, we find that similar issue had arisen before the Tribunal in the case of Baldwin Methodist Educational Society in ITA No.523/Bang/2014 for assessment year 2009-10 and C bench of this Tribunal to which both of us are signatories, had considered the issue at length and at para.5 of the order had held as under: We also find that A bench of this Tribunal in the case of Academy of Liberal Education in ITA No.687/Bang/2014 dated 20/2/2015, to which one of us i.e. the Accountant Member is the signatory, has considered this issue and in para.8 of its order, held as under: 8. We are of the view that pendency of an appeal before the Hon'ble High Court of Karnataka cannot be the basis not to follow the decision on the issue already rendered in identical cases. Section 11(1)(a) does not contain any words of limitation to the effect that the income should have been applied for charitable or religious purpose only in the year in which the income has arisen. The application for charitable purposes as contemplated in section 11(1)(a) takes place in the year in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be liable to tax. The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The High Court relied on the decision in the case of CIT Vs. Society of Sisters of ST. Anne 146 ITR 28 (Kar). We find that the order of the CIT(A) is in consonance with the judicial precedents reproduced above. Therefore, we see no reason to interfere with the order of the CIT(A). The revenue s appeal is, accordingly, dismissed 6. Further, we also find that the Hon ble Bombay High Court in the case of CIT vs. Institute of Banking (2003) 264 ITR 110 has held as under: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment years. 8. In view of the above decision of the Hon ble High Court as well as the coordinate Bench, we do not find any error or illegality in the order of CIT(Appeals), qua decision. 9. The next ground is regarding disallowance of depreciation. The AO has disallowed the claim of depreciation on the ground that when the assessee has already claimed the exemption at the time of acquisition of the capital asset being application of income, then depreciation would amount to double deduction. 10. On appeal, the CIT(Appeals) has allowed the claim of the assessee by following the various decisions including the decision of the Hon ble Kerala High Court in the case of Lissie Medical Institutions v. CIT dated 17.2.2012. 11. We have heard the ld. DR as well as the ld. AR and considered the relevant material on record. At the outset, we note that this issue is now covered by the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Society of the Sisters of St. Anne, 146 ITR 028 (Kar). By following the said decision, the coordinate Bench of this Tribunal in the case of ACIT v. Sri Adichunchanagiri Shikshana Trust, 141 ITD 575 has held in para 12 as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year has to be applied for the purposes of charitable trust or institution but there is no ban under the Act to make the applications in advance from other sources in anticipation of incomes to be received in the subsequent years. It will arise in the following circumstances: (i) Application out of unutilized funds available on account of income received towards corpus of the trust/institution (ii) Application out of accumulated income (i.e 15% of the income allowed to be accumulated under the Act) (iii) Application out of borrowed funds. Now let us examine the above situations. Both income received towards corpus and 15% accumulated income are exempt from tax under the Act. Application of these incomes as a stop-gap-arrangement for the purposes of trust or institution in advance that means making application without revenue income on hand if not allowed as application us 11(1) (that means excess application not allowed to be set-off against incomes of subsequent years) ultimately results in taxing of exempted incomes which is contrary to the intents of the legislature. Similarly application out of borrowed funds results in excess application since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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