TMI Blog2020 (1) TMI 967X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal by duly considering the information provided by the assessee with regard to utilization of loan funds. The assessee should be provided with adequate opportunity of being heard. Rejection of claim of carry forward of current year s deficit (excess amount of application of income) to subsequent years and also claim of depreciation on assets - HELD THAT:- The issue of carry forward of deficit amount is consequential to the earlier two issues. Since the assessing officer has disallowed claim of application of income in respect of assets purchase out of loan funds and also repayment of loans, the income came to be assessed in positive figure. Hence there was no requirement of holding that the deficit shall be carried forward. Since the earlier two issues have been restored to the file of the assessing officer, this issue shall be dependent upon the result of the consequential order that may be passed by the AO. Accordingly, this issue is also restored to his file with the direction to allow carry forward of deficit, if any, computed in any of the years. The AO is also directed to allow claim of depreciation after examining the same upto assessment year 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of income to the extent of usage of loan funds. The Ld CIT(A) confirmed the disallowance by following the decision rendered by the co-ordinate bench in the case of DCIT vs. M/s Peoples Education Society (ITA No.1074/Bang/2016 dated 09-06-2017). 5. In all the five years, the assessee has claimed repayment of loans as application of income by placing reliance on the decision rendered by Hon'ble Karnataka High Court in the case of CIT vs. Janmabhumi Press Trust (2000)(242 ITR 457). The AO expressed the view that the assessee had utilized the loan funds in the earlier years for purchase of assets and it has already claimed the value of those assets as application of income . Accordingly, the AO took the view that the assessee cannot claim the repayment of said loans again as application of income , as it will result in double deduction of same amount. Before Ld CIT(A), the assessee did not submit any working to disprove the view expressed by the AO. Accordingly, the Ld CIT(A) confirmed the disallowance of claim of repayment of loan as application of income. 6. We notice that identical issues came for the consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital assets, the Ld CIT(A) directed the AO to delete the addition made and substitute the same with the figure of capital gains as computed u/s 45 to 55A. For this purpose, the Ld CIT(A) relied upon the decision rendered by the co-ordinate bench in the case of Al- Ameen Educational Society (ITA No.575 (B)/2011). 7. The first issue relates to the claim of repayment of loan as application of income. The Ld D.R submitted that the assessee had already claimed the cost of capital assets purchased out of loan proceeds as application of income in the earlier years, when the said assets were purchased. Hence the repayment of loan taken for acquiring very same asset would result in double deduction of same item. He submitted that the various case laws relied upon by Ld CIT(A) would be applicable only in cases, where the cost of capital asset was not allowed as application of income. He submitted that the concept of deduction when the loan was taken for purchasing the asset has been explained by the co-ordinate bench in the case of DCIT vs. M/s Peoples Education Society (ITA No.1074/Bang/2016 dated 09-06-2017). In the above said case, the Tribunal had expressed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the income from such property. 11. It can be noticed that both the third proviso to sec. 10(23C) as well as section 11(1) of the Act allows exemption of income applied to objects of the trust . The provisions of sec.11(1) was interpreted by the coordinate bench in the case of M/s Peoples Education Society (supra). It is pertinent to note that the Hon'ble Karnataka High Court has held in the case of Janmabhumi Press Trust (supra) that the repayment of loan is application of income within the meaning of sec.11(1) of the Act. Hence the co-ordinate bench held as under in the case of M/s Peoples Education Society (supra):- 19. In our view, Section 11 only contemplates the application of income and if the said income is applied for the aims and objectives of the trust, then the trust is entitled for exemption under the provision. The said analogy cannot be extended to acquisition of assets from the borrowed funds. If we hold so, then we would be equating the borrowed fund with the income of the trust. Under the law, it is the application of income and not of the fund that is required to be seen for the purpose of granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epayment of loan. As observed by the co-ordinate bench, it could not be intention of the Statute. 14. In the instant appeals, it is the case of the AO that the cost of assets acquired out of loan funds have been claimed by the assessee as application of income in the years in which those assets were acquired. In that case, if the assessee is allowed to claim exemption again on repayment of loan taken for acquiring the very same asset, then the same would result in double exemption for the very same amount, which cannot be the intention of the statute. Since the assessee has already claimed exemption towards the cost of asset as application of income, in our view, the assessee cannot take support of the decision rendered by Hon'ble Karnataka High Court in the case of Janmabhumi Press Trust (supra) to claim exemption on account of repayment of loan taken for acquiring the above said asset. We notice that the Ld CIT(A) has omitted to consider above said factual aspects and hence we cannot sustain his order passed on this issue. Accordingly, we set aside the order passed by Ld CIT(A) in all the three years on this issue and restore the addition made by the AO in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relate to rejection of claim of carry forward of current year s deficit (excess amount of application of income) to subsequent years and also claim of depreciation on assets. The issue of carry forward of deficit amount is consequential to the earlier two issues. Since the assessing officer has disallowed claim of application of income in respect of assets purchase out of loan funds and also repayment of loans, the income came to be assessed in positive figure. Hence there was no requirement of holding that the deficit shall be carried forward. Since the earlier two issues have been restored to the file of the assessing officer, this issue shall be dependent upon the result of the consequential order that may be passed by the AO. Accordingly, this issue is also restored to his file with the direction to allow carry forward of deficit, if any, computed in any of the years. The AO is also directed to allow claim of depreciation after examining the same upto assessment year 2014-15, since the provisions of sec.11(6) debars claim of depreciation on the assets, which have been allowed as application of income. The following decisions govern the claims of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilised rather than claiming excess expenditure either revenue or capital over and above the income so as to claim excess application or deficit/loss to be carried forward to subsequent assessment years. Even in the case of excess application by virtue of borrowed funds/corpus fund donations 15% set part of earlier years, the income of the assessee cannot be converted to loss but at best it can be made Nil. Hence, the carry forward of excess application of income as claimed by the assessee cannot be allowed . 12. We heard the parties and perused the record. The grounds of revenue essentially deal with the manner of computation of income u/s 11 of the Act and carry forward of excess amount of application. Both the parties agreed that the issues urged by the revenue are covered against the revenue by the decision rendered by Hon'ble Supreme Court in the case of CIT vs. Rajasthan Gujarati Charitable Foundation (supra). Accordingly, we dismiss the grounds urged by the revenue in all the three years. 13. In the result, the appeals of the assessee are treated as partly allowed and the appeals of the revenue are dismissed. Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
