DCIT Vs Delhi Public School Society (ITAT Delhi)
Conclusion: Adjustment of deficit of current year against income of subsequent year would amount to the application of income of the trust for charitable purposes in subsequent years within the meaning of section 11(1)(a).
Held: Revenue contended that CIT(A) has erred in law in allowing the claim of carry forward of losses of assessee-trust disregarding the fact that set-off and carry forward of losses were dealt with by the provisions of section 70 to 74 of the Income Tax Act. It was held that in the decision of Delhi High Court in the case of DIT vs. Raghuvanshi Charitable Trust wherein it was that a trust could be allowed to carry forward the deficit of the current year and to set off the same against income of subsequent years. Therefore, adjustment of deficit of current year against income of subsequent year would amount to the application of income of the trust for charitable purposes in subsequent years within the meaning of section 11(1)(a).
FULL TEXT OF THE ITAT JUDGEMENT
This appeal is preferred by the Revenue against order dated 28.09.2016 passed by the Learned Commissioner of Income Tax (Appeals)-36, New Delhi {CIT(A)} for Assessment Year 2011-12. The grounds of appeal are as under:
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law & fact by ignoring that the receipts are on account of franchisee fee and the same are in the nature of business income within the meaning of provisions of sub-section 4A of section 11 of the Act. The assessee failed to maintain separate books of accounts as per sub section 12A of section 2 of the I.T. Act
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law in allowing the claim of carry forward of losses disregarding the fact that set-off and carry forward of losses are dealt with by the provisions of section 70 to 74 of the Income Tax Act.
3. The Ld. CIT(A) has erred in law & fact that allowing depreciation of fixed assets is tantamount double deduction as the expenditure on fixed assets is already allowed.
4. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”
(B) At the time of hearing before us, the Ld. Counsel for assessee submitted that the disputed issues in this case are covered in favour of the assessee’s own case. The Ld. Counsel of the assessee further submitted that, in identical facts, in assessee’s own case, the Co-ordinate Bench of ITAT, Delhi has already taken a view, on the disputed issues, in favour of the assessee vide order dated 08.08.2019 in ITA No. 2761/Del/2017 for Assessment Year 201314. The Learned Commissioner of Income Tax (Departmental Representative) [“Ld. CIT(DR), for short] appearing for Revenue accepted that all the issues in disputed were covered in favour of the assessee by the aforesaid order dated 08.08.2019 of Co-ordinate Bench of Income Tax Appellate Tribunal (“ITAT”, for short), Delhi, in which, in identical facts, the disputed issues were decided in favour of the assessee. The relevant portion of the aforesaid order dated 08.08.2019 of Co-ordinate Bench of the ITAT, Delhi in assessee’s own is reproduced below:
“(A) This appeal by Revenue is filed against the order of Learned Commissioner o f Income Tax (Appeals)-40, Delhi, [“Ld. CIT(A)”, for short], dated 27.02.2017 for Assessment Year 2013-14. The grounds of appeal are as under:
“i. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law & fact by ignoring the fact that the receipt are on account o f franchisee fees and same are in the nature of business income within the meaning of provisions of sub-section 4A of the Section 11 of the I.T. Act. The assessee failed to maintain separate books of accounts as per Sub section 12A of the Section 2 of the I.T. Act.
ii. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law allowing the claim of carry forward of losses disregarding the fact that set-off and carry forward of losses are delete with by the provisions of section 70 to 74 of the Income Tax Act.
iii. On the facts and in the circumstances of the case and in laws, the Ld. CIT(A) has erred in law & fact that allowing depreciation on fixed assets in tantamount to double deduction as the expenditure on fixed asset is already allowed.
iv. The appellant craves leave to add, to alter or amend any ground of appea l raised above at the time of hearing. ”
(B) During appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short), copies of the following orders were filed from assessee’s side:
I. ITAT order dated 20/04/2005 for AY 2001-02 in the case of The Delhi Public School Society v. DCIT(E) ITA No. 4571/D/2004.
II. ITAT order dated 23/05/2019 for AY 2012-13 in the case of DCIT(E) v. The Delhi Public School Society ITA No. 4887/D/2016.
III. Director of Income tax (E) v. Delhi Public School Society High Court of Delhi 92 com 132
IV. Director of Income tax (E) v. Delhi Public School Society Supreme Court of India 100 com 80.
V. Commissioner of Income tax –III v. Rajasthan & Gujarati Charitable Foundation Poona Supreme Court of India 89
VI. Director of Income tax v. Raghuvanshi Charitable Trust High Court of Delhi 197 taxman 170 ”
(B.1) At the time of hearing before us, the Ld. Authorized Representative (“AR”, for short) of the assessee submitted that all the disputed issues are covered in favour of the assessee by the aforesaid judicial precedents. The Ld. AR of the assessee further submitted that, in identical facts, in assessee’s own case, the Co-ordinate Bench of ITAT, Delhi has already taken a view, on the disputed issues, in favour of the assessee vide aforesaid order dated 23.05.2019. The Ld. CIT(DR) appearing for Revenue accepted that all the issues in dispute were covered in favour of the assessee by the aforesaid judicial precedents, in which, in identical facts, the disputed issues were decided in favour of the assessee.
(B.1.1) Relevant portion of the aforesaid order dated 20.04.2005 of Co-ordinate Bench o f ITAT, Delhi in ITA No. 4571/Del/2004 in assessee’s own case i.e. The Delhi Public School Society vs. DCIT(E) is reproduced as under:
