TMI Blog2018 (4) TMI 1066X X X X Extracts X X X X X X X X Extracts X X X X ..... n though the cost of the asset was allowed as application of income under Section 11 of the Act. This Tribunal is unable to uphold the orders of the authorities below. Assessing Officer is directed to allow depreciation. Assessee is eligible for carry forward the excess application of income against the shortfall in the succeeding year. See case of Matriseva Trust (1999 (3) TMI 34 - MADRAS High Court) Eligible for exemption under Section 11 - Held that:- Charitable activity cannot be carried on without money. In other words, to carry out the object of the trust, the assessee needs money and income. Therefore, it is for the assessee to generate income from the property held under trust. When the assessee exploited the land by putting up a construction and letting out the same with an intention to generate income for the purpose of carrying on the object of the trust, this Tribunal is of the considered opinion that the construction of such building and letting out the same cannot be considered to be a commercial activity. Therefore, the CIT(Appeals) has rightly found that the assessee is eligible for exemption under Section 11 of the Act Validity of reopening of assessment - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee is reopening of assessment under Section 147 of the Income-tax Act, 1961 (in short the Act ). 4. Shri S. Sridhar, the Ld.counsel for the assessee, submitted that for the assessment year 2006-07, the assessment was completed under Section 143(3) of the Act after examining all the material filed by the assessee. According to the Ld. counsel, the Assessing Officer subsequently found that the assessee set off excess application of income brought forward to the extent of ₹ 1,03,58,210/- from the assessment year 2005-06. According to the Ld. counsel, the required material was already available before the Assessing Officer and the Assessing Officer allowed the claim of the assessee on the basis of the material. According to the Ld. counsel, no fresh material came into the possession of the Assessing Officer, therefore, reopening of assessment in the absence of any new material is not justified. 5. On the contrary, Smt. Ruby George, the Ld. Departmental Representative, submitted that the assessee made a wrong claim of set off before the Assessing Officer. Therefore, according to the Ld. D.R., the Assessing Officer is justified in reopening the assessment afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue also filed an appeal for the assessment year 2006-07 in I.T.A. No. 2984/Chny/2016. Since the reopening of assessment is held to be not valid in the assessee s appeal, this Tribunal do not find any reason to entertain the Revenue s appeal. Accordingly, the Revenue s appeal for assessment year 2006-07 stands dismissed. 10. Now coming to assessment year 2009-10, the assessee alone filed appeal in I.T.A. No.3022/Chny/2016. 11. The only ground raised by the assessee is with regard to addition of accumulated income of ₹ 1,23,41,310/-. 12. Shri S. Sridhar, the Ld.counsel for the assessee, submitted that this Tribunal for the assessment year 2009-10 in I.T.A. No.1044/Mds/2014 dated 15.05.2015 found that the matter needs to be examined afresh. According to the Ld. counsel, the Tribunal further found that the issue of application of accumulated income for the assessment year 2004-05 upto 31.03.2008 is to be examined while framing the fresh assessment. In view of above, the CIT(Appeals) found that the issue raised by the assessee is premature and infructuous. According to the Ld. counsel, when the assessee has raised a specific issue, the CIT(Appeals) is not justified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016. 21. The only ground raised by the Revenue is with regard to carry forward the excess application of ₹ 6,94,54,741/- to the subsequent years. 22. Smt. Ruby George, the Ld. Departmental Representative, submitted that the CIT(Appeals), by following the judgment of Madras High Court in CIT v. Matriseva Trust (2000) 242 ITR 20, allowed the claim of the assessee by holding that the deficiency in one year can be set off against the excess application of subsequent year. According to the Ld. D.R., the excess application of income, in a particular year cannot be adjusted with deficiency in another year. 23. We heard Shri S. Sridhar, the Ld.counsel for the assessee also. The CIT(Appeals) by placing reliance on the judgment of Madras High Court in Matriseva Trust (supra) found that the assessee is eligible for carry forward the excess application of income against the shortfall in the succeeding year. We have carefully gone through the judgment of Madras High Court in Matriseva Trust (supra). The Madras High Court by placing its reliance on the judgment of Rajasthan High Court in CIT v. Maharana of Mewar Charitable Foundation (1987) 164 ITR 439 and on the judgment of Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tution. The income of the trust was applied for running women s hostels for working women and girl students mostly studying in Ethiraj Women s College. The CIT(Appeals) referred the judgment of Madras High Court in DIT v. Willington Charitable Trust (2011) 330 ITR 24. The High Court found that when the assessee established that the income derived from business was utilised towards fulfilment of object of the trust, then the assessee is entitled for exemption under Section 11 of the Act. We have carefully gone through the provisions of Section 11(4) and 11(4A) of the Act. It is not the case of the Revenue that the income from two Kalyana Mandapams is not used for charitable activity. The CIT(Appeals) in the impugned order has held as follows:- To sum up therefore, in so far as invoking Sec.2(15) r.w.s. 13(8) of the Act is concerned by the respective A.Os in the impugned assessments, thereby denying the benefit of Sec.11 to the instant appellant is legally untenable and clearly unjustifiable since as per the provisos to Sec.2(15), the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on activities in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects of the assessee, albeit in many cases through other similarly placed charitable Trusts, having charitable objects particularly of the first three limbs of Sec.2(15), the instant appellant was therefore eligible for exemption u/s 11 including on the income derived undisputedly from the aforesaid properties held under trust and therefore the A.O. is directed to allow exemption u/s 11 of the Act in all the years in appeal where such claim has been made. In the result, this ground is allowed for all the three years the issue is raised in appeal. 31. As rightly found by the CIT(Appeals), the income generated is incidental to the charitable activity. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 32. The next ground of appeal is with regard to addition of ₹ 46.05 Crores towards construction of building known as Sigappi Aachi building . 33. Smt. Ruby George, the Ld. Departmental Representative, submitted that the assessee spent ₹ 46.05 Crores towards construction of 10-storeyed building known as Sigappi Aachi building over a period of five years from financial year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering service in trade, commerce or business. In this case, the main object of the trust is not business, trade or commerce or rendering any service to trade. Therefore, according to the Ld. counsel, the amendment made by the Parliament by inserting the proviso to Section 2(15) of the Act is not applicable at all. 35. Shri S. Sridhar, the Ld.counsel for the assessee, further submitted that the assessee-trust was established in the year 1924. Referring to the judgment of Apex Court in ACIT v. Surat City Gymkhana (2008) 300 ITR 214, the Ld.counsel submitted that once the assessee-trust was registered under Section 12AA of the Act and the registration continues till date, the A.O. cannot probe into the objects of the trust. What the Assessing Officer can do is he can verify whether the assessee is carrying on the activity in furtherance of its object for which it was established. According to the Ld. counsel, the Assessing Officer cannot say that the object of the trust is not charitable one. It is for the Director of Income Tax (Exemptions) to examine the same in case the activity was not carried on as per the object of the trust as provided in Section 12AA(3) of the Act. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Ld. Departmental Representative. From the orders of the lower authorities it appears that an amount of ₹ 1,25,00,000/- accumulated under Section 11(2) was added back under Section 11(3) of the Act to the total income on the ground that the assessee had not applied for the purpose for which it was accumulated. While passing revisional order under Section 263 of the Act for the assessment year 2005-06 pursuant to the order of the High Court, according to the Ld. counsel for the assessee, the accumulated income for assessment year 2004-05 was deducted from the application of income made by the trust for assessment year 2005-06 and hence the very same accumulated income cannot be subject matter of taxation. 41. On the contrary, Smt. Ruby George, the Ld. Departmental Representative, submitted that though the assessee claimed that the accumulated income was used for charitable purpose, the Assessing Officer found that the application was made out of the donation, therefore, the assessment was rightly reopened. 42. We have considered the rival submissions on either side and perused the relevant material available on record. The Assessing Officer found that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred thereon. The Revenue has also raised an issue with regard to income from Kalyana Mandapams. This issue was also elaborately considered in the earlier part of this order. This Tribunal found that it is incidental to the main activity of the assessee. For the same reason, the order of the CIT(Appeals) is confirmed. 49. The next issue raised by the Revenue is with regard to exemption claimed by the assessee under Section 80G of the Act. 50. We heard Smt. Ruby George, the Ld. Departmental Representative and Shri S. Sridhar, the Ld.counsel for the assessee. From the material available on record it appears that the assessee made donation in respect of the trust which was granted approval under Section 80G of the Act, from and out of current profit. When the assessee has advanced money to the trust which has similar object and approved under Section 80G of the Act, from and out of current profit, this Tribunal is of the considered opinion that the assessee is eligible for exemption under Section 11 of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 51. In the result, both the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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