TMI Blog2019 (4) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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, 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. Soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred in excess of its income for setting off against income of the succeeding years? 3. The assessee is a charitable trust with objects to identify eligible beneficiaries for the purpose of nurturing, promoting, encouraging and developing their talent so that they can compete as professional sports persons in India and abroad and other objects to secure compliance of the above main object. The Assessee was granted recognition as charitable trust u/s.12A of the Act by the DIT(Exemption) vide order dated 13.2.2006. 4. As far as the first issue is concerned, the facts are that in the course of assessment u/s. 143(3) of the Act for AY 2011-12 2012-13, the AO noticed from the details of depreciation claimed, that the depreciation was claimed on assets, the cost of acquisition of the said assets had been claimed by the assessee as capital expenditure towards application of funds towards the objects of the trust and allowed as such. According to the AO, allowing such a claim would amount to allowing double deduction. On the facts of the present case, he was of the view that the decision of the Hon ble Supreme Court in the case of Escorts Limited another Vs. Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as application of income in the year of its acquisition. The AO took the view that allowing depreciation would amount to allowing double deduction and placed reliance on the decision of Hon'ble Supreme Court in Escorts Ltd. (supra) . The CIT(A), however, allowed the claim of assessee. On further appeal by the Revenue, the Tribunal held as follows:- 20. We have considered the rival submissions. If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. 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 depreciatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. 10. As already stated, the aforesaid amendment is prospective and will apply only from A.Y. 2015-16. In view of the above legal position, we are of the view that the order of the CIT(A) does not call for any interference. Consequently, the issue raised by the Revenue in this regard is without any merit and the same is dismissed. 11. The second issue that arises for consideration in this appeal which is projected by the Revenue in grounds of appeal, is as to whether the CIT(Appeals) was justified in holding that assessee, a trust, is entitled to carry forward expenditure incurred in excess of its income for setting off against income of the succeeding years? The assessee is a trust registered u/s. 12A of the Act. For the A.Ys. 2011-12 and 2012-13, the assessee filed a return of income claiming set off of an amount of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 having due regard to the commercial principles, that s. 11 is a benevolent provision, and that the expenditure incurred on religious or charitable purposes in earlier year or years can be adjusted against the income of the subsequent year. The principle that the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to delete any of the grounds that may be urged at the time of hearing of the Appeal. Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to delete the additions as above and may pass such other as the Appellate Authority deems fit. 17. The first common issue in both the appeals by the assessee is with regard to disallowance of expenditure incurred in foreign currency. As already stated, the assessee is a charitable trust. Its objects are as follows:- i) Identifying eligible beneficiaries for the purpose of nurturing, promoting, encouraging and developing their talent so that they can compete as professional sports persons in India and abroad. ii) Paying or reimbursing the fees or other consideration paid by the Eligible Beneficiaries to sports trainers, coaches, clubs, gymnasiums, or for the purchase of sports gear, equipment or other articles relating to sporting activity generally. iii) Paying or reimbursing the expenses incurred on travel, including, air fares, lodging and boarding of eligible beneficiaries for engaging in sporting activity in India and abroad. iv) Selecting eligible beneficia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions. Identical issue was considered by the Hon ble Delhi High Court in the case of CIT v. Associated Chambers of Commerce Industry of India, ITA No.343/2016 judgment dated 24.05.2016. In the aforesaid decision, the Hon ble Delhi High Court upheld the order of the Tribunal that sending delegates to foreign countries cannot be held as outside the main objects of the assessee. Therefore, exemption cannot be denied on the ground that expenses were incurred outside India. 22. The ld. DR, however, placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT v. National Association of Software Services Companies, 345 ITR 362 (Del) , wherein a contrary view was taken. 23. The ld. counsel for the assessee brought to our notice the decision of the ITAT Delhi Tribunal rendered in the case of DDIT v. Associated Chamber of Commerce Industry of India, ITA No.6525/Del/2013, order dated 31,97,2915 wherein the decision cited by the ld. DR in the case of CIT v. National Association of Software Services Companies, 345 ITR 362 (Del) ,was also considered and the Tribunal following the decision of the Hon ble Supreme Court in the case of H.E.H. Nizam s Religio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, ground no. 1 and 2 of the revenue being devoid or merits are dismissed. 24. In the light of the aforesaid decision of the Tribunal which was confirmed by the Hon ble Delhi High Court, we are of the view that the expenses incurred in foreign currency has to be considered as application for charitable purpose and incurred for the charitable purposes in India. We hold accordingly. 25. As far as the next common issue raised by the assessee in the grounds of appeal is concerned, the same is with regard to not considering the expenditure incurred in subsequent year before filing of return of income as application for accumulation of income. On this aspect, the conclusion of the CIT(Appeals) was as follows:- 8. The appellant has submitted before me that elaborate claims were made before the AO for allowing accumulation of income by filing revised Form 10 for AY 2011-12 before completion of assessment. The same was not considered by the AO who referred to the original Form 10 filed with the return of income for ₹ 9,58,712 and a later Form 10 filed for ₹ 68,01,632. The AO did not allow the claim since the amounts in question were already spent and the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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