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TMI Blog2017 (5) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... another Vs'. Union of India (199 HR 43), while dealing with the issue of allowance of expenditure on scientific research u/s 35(1)(iv) [corresponding to section 10(2) (xiv) of the II. Act. 1922] held that any expenditure of a capital nature (or incurred towards purchase of capital assets) on scientific research allowed as deduction u/s 35(1)(iv) cannot be allowed once again as deduction in the form of depreciation on such capital assets. While doing so, it was observed by the Hon'ble Supreme Court that no legislature could have at all intended a double deduction in regard to the same business outgoing and if it is intended, it would be clearly expressed in the statute itself. Accordingly, it was held that even in absence of clear statutory indication to contrary, statute should not be read so as to permit an assessee two deductions i.e. once in the form of expenditure incurred towards purchase of capital assets and secondly, in the form of depreciation on such capital assets. It was also held that even before the amendment of the Act in the form of insertion of clause (iv) of sub section (2) of section 35 by Finance Act, 1980, prohibiting allowance of depreciation, the Act did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst income from another head and carry forward and setoff of loss against the income of subsequent years as envisaed u/s 70 to 79 are also not applicable to the charitable trusts/institutions. ii). Whether, in the given facts and circumstances, the CITlA) is correct in law without appreciating the fact that the issue of application of income more than the income computed does not arise, except in a case where the assessee has incurred huge amount of capital expenditure sourced out of borrowed or corpus donations or 15% of income set apart over a period of time. However, expenditure incurred out of the above sources cannot be termed as application of funds out of the income earned in a particular assessment year inasmuch as loan borrowed does not fall under the category of income earned by the assessee, corpus fund donatiOn does not come under income by virtue of section 11(1)(d) and 15% of income set apart in earlier assessment year cannot be construed as income of the current year and 15% set apart out of the current year income is also excluded from income available for application. As such, the concept of application is only to show that the income is fully utilized rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee-trust on the ground that when the capital expenditure itself was allowed as application of income then the allowance of depreciation would amount to double deduction. The CIT (Appeals) has allowed the claim of the assessee by following the decision of the Hon'ble jurisdictional High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28. We further note that this Tribunal has been taking a consistent view on this issue and in the case of DCIT Vs. Manipal Academy of Higher Education 44 ITR (Trib) 18 (Bang), the Tribunal has decided this issue in paras 12 to 15 held as under : " 12. A similar view has been taken by the Hon'ble Bombay High Court in the case of Institute of Banking 264 ITR 110(Supra) as well as by the Hon'ble P&H High Court and in case of CIT Vs Manav Mangal Society 328 ITR 421 (Supra). The view taken in the case of Institute of Banking (Supra) has been re-affirmed by the Hon'ble Bombay High Court in the recent decision dated 23-03-015 in case of DIT(Exemption), Mumbai Vs Ville Parle Kelavani Mandal, Mumbai by observing inpara-6 as under; "6. As far as question no.4 is concerned, this Court has repeatedly held that there is nothing like do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon'ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P&H), following CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. The decision of the Hon'ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 (SC) have been referred to and distinguished by the Hon'ble Court in the aforesaid decisions. 21. The issue raised by the revenue in the ground of appeal is thus no longer res integra and has been decided by the Hon'ble Punjab & Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P&H). The Hon'ble Punjab & Haryana High Court after considering several decisions on that issue and also the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Society of the Sisters of St. Anne as well as the decision of the coordinate bench of this Tribunal, we do not find any error or any illegality in the order of the CIT(A), qua this issue. 13. Ground no.3 regarding carry forward of deficit. The assessee claimed a total deficit of Rs. 933,27,87,598/- inclusive of current year deficit to be carry forward for setting up of the same as application of income in subsequent assessment years. The AO rejected the claim of the assessee on the ground that in the Income Tax Act, there is no provision of carry forward of excess of expenditure over income. 14. On appeal, the CIT(A) has allowed the claim of the assessee by following the decision of this Tribunal dated 16- 02-2010 in case of Dr. T.M.A Pai Foundation in ITA No.486 to 491(B)/2009. The CIT(A) has also taken note of the fact that in assessee's own case for the assessment year 2010-11 this issue was decided by the CIT(A) in favour of the assessee. 15. We have heard the learned DR as well as the learned AR and considered the relevant material on record. There is no dispute that an identical issue was considered and decided by this Tribunal in favour of the assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not 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, ITA No.676/Bang/2014 Page 10 of 11 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid expenses are adjusted against the income of a subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. In other words, the set-off of excess of expenditure incurred over the income of earlier years against the income of a later year will amount to application of income of such later year. The above is the position of law as held in the case of CIT Vs. Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj) CIT Vs. Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 (Guj.). In CIT Vs. Institute of Banking Personnel Selection 264 ITR 110 (Bom), it was held that in case of charitable trust whose income is exempt under s. 11, excess of expenditure in the earlier years can be adjusted against income of subsequent years and such adjustment would be application of income for subsequent years and that depreciation is allowable on the assets the cost of which has been fully allowed as application of income under s. 11 in past years. In Govindu Naicker Estate VS. ADIT 248 ITR 368 (Mad), the Hon'ble Madras High Court held that the income of the trust has to be arrived at havin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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