TMI Blog2019 (1) TMI 1260X X X X Extracts X X X X X X X X Extracts X X X X ..... t year the application of income was more than the receipts of the year, can the excess application of income i.e. expenditure in the hands of assessee, be carried forward to the succeeding year? - Held that:- In view of the settled position of jurisdictional High Court, which has been applied by the CIT(A), we find no merit in the issue raised by the Revenue in this regard and the same is dismissed. Once the grounds of appeal raised by Revenue are dismissed, then admittedly, there is no taxable income in the hands of assessee trust. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by Revenue. Since the income of assessee has been held to be eligible for exemption under sections 11 to 13 of the Act, we hold that the alternate claim made by assessee of exemption under section 10(23C)(vi) becomes academic in nature. AR for the assessee stressed that the said deduction has been allowed to the assessee in preceding and subsequent assessment years. We are of the view that in view of our decision with regard to Revenue’s appeal, the grounds of appeal raised by assessee at present become academic and we keep the issue of allowability of deduction under section 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld in the case of Trustees of Shri Satyasai Trust decided by the Hon'ble ITAT, Mumbai Bench in 33 ITD 320, Mumbai ? 2. Whether on the facts and in the circumstances of the case and in law, the Trust is entitled to claim benefit u/s.11(1)(a) of the I.T.Act, 1961 when the application of income during the year is more than the gross receipts ? 3. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in holding that the trust would be entitled to claim excessive carry forward of deficit which results after making an allowance @ 15% gross receipts u/s.11(1)(a) of the Income Tax Act, 1961 and then claiming the application of income to the extent of the expenses incurred on the objects of the trust ? 5. First, we shall take up the appeal of Revenue, wherein the first issue raised by way of ground of appeal No.1 is against order of CIT(A) in allowing the claim for carry forward of deficit in the hands of assessee trust. 6. Brief facts relating to the issue are that the assessee trust was running several schools in Pune. The case of assessee was reopened under section 147/148 of the Act. During the course of assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIT(A) that it is entitled to the deduction under section 11 of the Act, since the assessee trust was granted registration under section 12A of the Act. The CIT(A) noted that since the assessee had fulfilled all the conditions as required under sections 11 to 13 of the Act and nothing adverse had been noted by the Assessing Officer in assessment proceedings, the assessee deserves the benefit of aforesaid deduction under section 11 of the Act. In respect of order of Assessing Officer making disallowance of ₹ 11,00,15,480/-, which was taxed by Assessing Officer on the ground that the said amount was not expenditure but mere creation of reserve, the CIT(A) noted the submissions of assessee in this regard wherein the assessee had stressed that the said amount was not claimed as expenditure. On perusal of computation of income and Income Expenditure Account, the CIT(A) observed as under:- 11 It was pointed out by the appellant that in the computation of income, the total amount of revenue expenditure incurred on the objects of the trust was claimed at ₹ 32,22,02,781/-, however, expenditure of capital nature was claimed for ₹ 15,37,19,866/- for the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer in this regard were not correct. He referred to section 11(1)(a) of the Act, wherein the assessee trust was entitled to accumulate 15% of its gross receipts and balance 85% of receipts were to be applied on the objects of trust. In this regard, reliance was placed on the decision of Hon'ble Supreme Court in CIT Vs. Rao Charitable Trust (ALN) (216 ITR 697) (SC). The next reliance was placed on the decision of Hon'ble Supreme Court in the case of Programme for Community Organization (248 ITR 1) (SC), wherein it was held that charitable trust was entitled to accumulate 15% of receipts without considering the expenditure and application made on the objects of trust. The CIT(A) thus, upheld the method of computation of deficit by the assessee. It was further held that excess application was permitted to be carried forward in the subsequent years in turn, relying on the decision of the Hon ble Bombay High Court in CIT Vs. Institute of Banking Personnel Selection (264 ITR 110) (Bom), wherein it was held that the adjustment of expenses incurred for the trust for charitable purposes, in earlier years, against the income earned by trust in the subsequent year, will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, Hon'ble Supreme Court in the case of Programme for Community Organization [248 ITR 1] held that a charitable trust is entitled to accumulate 15% of the receipts without considering the expenditure and the application made on the objects of the trust. Accordingly, in view of the above decisions, the method of computation of deficit is correct. The excess application is permitted to be carried forward in the subsequent years. Further, Hon ble Bombay H.C. in the case of CIT v. Institute of Banking Personnel Selection [264 ITR 110] has held that income derived from the trust property has to be computed on commercial principles and if the commercial principles are applied then the adjustment of expenses incurred for the trust for charitable purposes in the earlier years against income earned by the trust in the subsequent year will have to be regarded as an application of income for charitable purposes in the subsequent year in which adjustments has been made. Similar view has been taken by Hon ble Delhi H.C. in the case of DIT v. Raghuvanshi Charitable Trust and Ors. [44 DTR 223]. In view of the above decisions, the appellant is justified in carrying forward the excess applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue raised by the Revenue in this regard and the same is dismissed. Once the grounds of appeal raised by Revenue are dismissed, then admittedly, there is no taxable income in the hands of assessee trust. Upholding the order of CIT(A), we dismiss the grounds of appeal raised by Revenue. Since the income of assessee has been held to be eligible for exemption under sections 11 to 13 of the Act, we hold that the alternate claim made by assessee of exemption under section 10(23C)(vi) of the Act becomes academic in nature. 19. The learned Authorized Representative for the assessee stressed that the said deduction has been allowed to the assessee in preceding and subsequent assessment years. However, we are of the view that in view of our decision with regard to Revenue s appeal, the grounds of appeal raised by assessee at present become academic and we keep the issue of allowability of deduction under section 10(23C)(vi) of the Act alive, which shall be adjudicated upon at the relevant time, if relevant time arises. 20. In the result, both the appeals of assessee and Revenue are dismissed. Order pronounced on this 12th day of December, 2018. - - TaxTMI - TMITax - Income T ..... 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