Case Law Details
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:
(B.1.2) The relevant portion of the aforesaid order dated 23.05.2019 of Co-ordinate Bench of ITAT, Delhi in assessee’s own case in DCIT(E) vs. The Delhi Public School Society in ITA No. 4887/Del/2016 is reproduced as under: “The aforesaid appeal has been filed by the assessee against the impugned order dated 01.06.2016, passed by Ld. Commissioner of Income Tax (Appeals)-XL, New Delhi for the quantum of assessment passed u/s. 143(3) for the Assessment Year 2012-13 on the following grounds of appeal.
1. On the facts and circumstances of the case and in Ictw, the Ld. CIT(A) has erred in law & fact by ignoring the fact that the receipts are on account of 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 IT Act. The assessee failed to maintain separate books o f accounts as per Sub-Section 12A of the 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 allowing the depreciation amounting of Rs. 11,52,34,406/- as in a case where the capital expenditure has been treated to have been applied for the object of the trust, allowance of deduction on account of depreciation will amount to double deduction.
3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the deficit of earlier assessment, as there is no provision for set off of losses u/s 11, 12 and 13 of the income tax act, 1961.
4. On the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in allowing the claim of carry forward of losses disregarding the facts that the set of and carry forward of losses are dealt with by the provisions of section 70,71,72,73 &74 o f the Income Tax Act. ”
2. At the outset, the ld. AR stated that the impugned issues raised in this appeal are squarely covered in favour of the assessee and against the Revenue by the decision of the Co-ordinate bench in assessee’s own case in 6627/Del/2015 for A. Y. 2010-11 vide order dated 29th November, 2017.
3. The ld. DR, other than supporting the findings of the Assessing Officer, could not bring any distinguishing decision in favour of the Revenue
4. After considering the impugned orders and the issues raised in the present appeal, we find that similar issues were involved in the earlier years and were considered by the co-ordinate bench. The relevant observation reads as under: “Ground No. 1
4. This ground has been raised by revenue against the addition that has been deleted in respect of franchisee fees received by assessee from different satellite schools which are running under the name and logo of assessee, having different management than assessee society.
4.1 It is seen from various orders placed in the paper book for the various assessment years in assessee’s own case passed by this Tribunal that this issue now stands settled in favour of assessee and against revenue. It is also observed that Ld. CIT(A) followed the binding decision of this Tribunal in assessee’s own case for the previous assessment years. In view of above, we do not find any infirmity in the order passed by Id. CIT(A) and the ground raised by Revenue stands dismissed. ”
5. Respectfully following the aforesaid precedence, which is also applicable in this ground of the Revenue is dismissed.
6. In ground no. 2 in ITA No. 6627/Del/2015 (supra), the relevant findings given qua ground no. 2 & 3 of appeal have been given in paragraph 5 which reads as under:
“5. This ground has been raised by revenue, as Ld. CIT (A) allowed deduction on account of depreciation. The Ld. AO was of the opinion that assessee was a trust and it was deriving income from depreciable assets. As assessee took into account depreciation on those assets while computing income of trust, Ld.AO held that depreciation could not be taken into account because full capital expenditure has been allowed in the year o f acquisition of the assets. The Ld. DR placed reliance upon the decision of Hon’ble Delh i High Court in the case of DIT vs. Chiranjiv Charitable Trust reported in 223 Taxmann.com 71.
5.1.On the contrary assessee placed reliance upon a subsequent decision of Hon’ble Delhi High Court in the case of CIT vs. Indraprastha Cancer Society reported in 53 Taxmann.com 463.
5.2. We have perused the submissions advanced by both the sides in the light of the decisions relied upon by them.
5.3. It is observed that order passed by this Tribunal in assessee’s own case for assessment year 2009-10 in ITA No. 4081/del/2012 placed at page 68 of the paper book dealt with this issue as under:
“10. Furthermore, we note the Hon’ble Jurisdictional High Court decision in the case of DIT vs. Vishwa Jagriti Mission in ITA no. 140/2012 vide order dated 29.3.2012. In this case the Ld.CIT(A) on the basis of the order passed by the -. Ld.DIT(E) accepted assessee’s claim for exemption u/s 11. As regards the claim of depreciation on fixed assets utilized for charitable objects of the trust, he accepted assessee’s claim. The tribunal confirmed the decision of Ld.CIT(A) on appeal. On appeal the Jurisdictional High Court has held as under.
“There is no dispute that the assessee has been granted registration u/s 12AA and, therefore, it was entitled to exemption of its income u/s 11. The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable purposes should be allowed. On this issue, there seems to be a consensus of judicial thinking.
Having regard, to the consensus of judicial opinion, we are not inclined to admit the appeal and frame any substantial question of law. There does not appear to be any contrary view plausible on the question raised before us and at any rate no judgement taking a contrary view has been brought to our notice. ”
7. Thus, respectfully, following the same, ground no.2 is dismissed.
8. In grounds no.3 & 4 in ITA No. 6627/Del/2015 (supra), the relevant findings given qua grounds no.4 & 5 of that appeal at paragraph 6.2 read as under:
6.2.1 Ld. AR a the outset submitted that the issue stands covered by this Tribunal in ITA No. 4081/Del/2012 for assessment year 2009-10. This Tribunal dealt with this issue as under:
“16. We have heard the rival contentions in light of the material ‘produced and precedent relied upon. Ld. Counsel of the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon’ble jurisdictional High Court in the case of Raghuvanshi Charitable Trust (Supra). The Ld. Departmental Representative could not produce any decision contrary in this regard.
17. Hence, upon careful consideration, we find that the Hon’ble jurisdictional High Court in the case of D.I.T. vs. Raghuvanshi Charitable Trust (Supra) has held as under (Heads notes only):-
“Section 11 of the Income Tax Act, 1961 – Charitable or religious trust – Exemption o f income from property held under – Whether a trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years – Held, yes – Whether adjustment of deficit of current year against income of subsequent year would amount to application of income of trust for charitable purposes in subsequent year within meaning of section 11(1 )(a) – Held, yes. “
18. In view of the aforesaid exposition by the Hon’ble Jurisdictional High Court, we find that there is no infirmity in the order of the Ld. Commissioner of Income Tax (A), accordingly, we uphold the same. In the result, the issue raised by the Revenue stands dismissed. 6.3 Respectfully following the same we do not find any infirmity in the order of the Ld. CIT(A). ”
9. In view of the above and respectfully following the same, grounds no. 3 & 4 are dismissed. ”
(B.2) In the case of aforesaid precedent of DIT(E) vs. Delhi Public School Society [2018] 92 taxmann.com 132 (Delhi), it was held by Hon’ble High Court of Delhi in assessee’s own case that the assessee society was maintaining schools in furtherance o f educational purpose and that also qualified as charitable purpose under section 2(15) and, therefore, assessee society fulfilled requirements to qualify for exemption under section 10(23C)(vi). In the case of DIT(E) vs. Delhi Public School Society[2018] 100 taxmann.com 80(SC), a special leave petition of Revenue against the aforesaid order o f Hon’ble Delhi High Court was dismissed by Hon’ble Supreme Court.
(B.2.1) In the case of CIT vs. Rajasthan & Gujarati Charitable Foundation Poona [2018] 89 taxmann.com 127 (SC), it was held by Hon’ble Supreme Court that in the case o f charitable institution registered under section 12A, even though expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under section 11(1)(a), yet depreciation would be allowed on assets so purchased.
(B.2.2) In the case of DIT vs. Raghuvanshi Charitable Trust [2011] 197 Taxman 170 (Delhi), it was held by Hon’ble Delhi High Court that a trust can be allowed to carry forward deficit of current year and to set off same against income of subsequent years. It was further held by Hon’ble Delhi High court in this case that adjustment of deficit o f current year against income of subsequent year would amount to application of income of trust for charitable purposes in subsequent year within meaning of section 11(1)(a).
(C) We have heard both sides. We have perused the materials available on record. We have also considered the judicial precedents brought to our notice. At the time of hearing before us, both sides have agreed that the issues in dispute are covered in favour of the assessee by the aforesaid judicial precedents mentioned in foregoing paragraphs (B) and sub paragraphs (B.1), (B.1.1), (B.1.2), (B.2), (B.2.1) and (B.2.2). The first ground o f appeal is dismissed accordingly and the issue is decided in favour of the assessee, respectfully following the precedents referred to in the foregoing paragraphs (B.1.1), (B.1.2), and (B.2) of this order. Further, respectfully following the aforesaid precedents referred to in foregoing paragraphs (B.1.2) and (B.2.2) of this order, the second ground of appeals is dismissed and the disputed issue is decided in favour of the assessee. Furthermore, respectfully following the aforesaid precedents referred to in foregoing paragraphs (B.1.2) and (B.2.1) of this order, third ground of appeal is dismissed, and the disputed issue is decided in favour of the assessee. ”
(C) We have heard both sides. We have perused the materials available on record. We have also considered the judicial precedent brought to our notice. At the time of hearing before us, both sides have agreed that the issues in dispute in this appeal are covered in favour of the assessee by the aforesaid order dated 08.08.2019 of Co-ordinate Bench of ITAT in assessee’s own case. Neither side has brought any facts and circumstances of this year on any of the issues in dispute to distinguish from the facts and circumstances of Assessment Year 2013-14 to which the aforesaid order dated 08.08.2019 pertains. In view of the foregoing, we decide all the issues in dispute in this appeal; in favour of the assessee and against Revenue. All the grounds of appeal are dismissed.
(D) In the result, this appeal is dismissed.
Order was already pronounced in the open Court orally on 25/01/2021 in the presence of representatives of both sides; after conclusion of hearing. Written order pronounced in open court on 28/01/2021.
Author Bio
