IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH
BEFORE: SHRI. N.K.SAINI, VP & SHRI, SANJAY GARG, JM
ITA NO. 82/Chd/2016 / Assessment Year: 2010-11
M/s Mukand Lal College Society
Model Town, Yamuna Nagar Vs The ITO
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order dt. 16/12/2015 of Ld. CIT(A),
2. Following grounds have been raised in this appeal:
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on
facts allowing set-off of excess expenditure of current year only for application against the
income of subsequent year and not allowing the set-off of excess expenditure incurred in
earlier years which is allowable and as such the order passed is illegal, arbitrary and
2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on
facts in holding that the assessee has not followed the correct accounting procedure
which is an incorrect finding and as such the order passed is arbitrary and unjustified.
3. That the order of the Ld. Commissioner of Income Tax (Appeals) is erroneous|
arbitrary, opposed to law and facts of the case and is, thus, untenable.
3. From the aforesaid grounds it is clear that only grievance of the assessee relates
to the denial of the set off of excess expenditure incurred in earlier years.
4. Facts of the case in brief are that the assessee filed its return of income on
23/09/2010 declaring NIL income by claiming that the entire income was exempt under
section 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). The said
return was processed under section 143(1) of the Act on 30/03/2011. Later on, the case
was selected for scrutiny. The A.O. worked out the excess of expenditure over income
at Rs. 43,80,261/- and assessed the income at Rs. NIL. However, the set-off of the brought
forward losses was not allowed.
5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) who also did
not allow the set off by observing in para 5.10 and 5.11 of the impugned order as under:
5.10 The appellant has claimed carried forward of excess of expenditure over income in
F.Y. 2009-10 of Rs. 1,35,59,836/- which includes Rs.43,80,261/- on account of excess
expenditure and Rs.91,79,575/- on account of amount accumulated or set apart for
application to charitable or religious purposes. On perusal of statement of particulars
annexed with Form 10B j, it is noticed that the auditor has stated the total amount of
application of Rs.6,55,77,425/- which is the total expenditure including addition to fixed
assets and depreciation claimed on fixed assets. Regarding accumulation under item No.
3, the auditor has mentioned, ‘not applicable’ as income applied for charitable purposes
being more than 85% of gross receipts. The exemption u/s 11 is allowed on application of
income of charitable purposes and not for its accumulation. In the instant case, the total
expenditure claimed by the appellant is more than its gross income. So, when the trust has
applied its entire income, it is entitled to claim 100% exemption and therefore, there is no
further question of further accumulation of 25% of total income of the trust. Even the
auditor has qualified that accumulation is not applicable as income applied for a charitable
purpose is more than 85% of its gross receipts, rather it is 100%. Since the exemption for
the entire expenditure has already been allowed there is no amount which can be considered
as accumulated or set apart. Further, there is no provision in section 11 for carryover of
the accumulated amount once the exemption on account of 100% expenditure has been
allowed. Therefore, the appellant’s claim for carryover of Rs.91,79,575/- on account of
the accumulated amount is erroneous and thus, not allowable. Here, the reliance is placed of
the decision of Hon’ble ITAT, Mumbai Bench in the case of Dawat Institute of Dawoodi
Bohra Community Vs. ITO  22 SOT 359 (Mum.).
5.11 Thus, the claim of excess of expenditure of year under consideration, i.e. Rs. 43,80,261/-
is allowed for application against income of subsequent year but the claim of earlier years
excess expenses for A.Ys. 2001-02 to 2010-11 which is neither in accordance with provisions
of section 11(1)(a) and 11(2) nor based on the accounting as per the court judgment relied
upon by the appellant is not allowed to set off against the income of subsequent years.
Thus, this ground of appeal is partly allowed.
6. Now the assessee is in appeal.
7. Ld. Counsel for the assessee submitted that this issue is squarely covered in
favour of the assessee vide order dt. 28/04/2011 of the ITAT Chandigarh Bench “A”
Chandigarh in ITA No. 240/Chd/2011 for the A.Y. 2007-08 in case of DCIT Vs. Ved
Parkash Mukand Lal Educational Society, Radaur, copy of the said order was furnished
which is placed on record.
8. Ld. DR in her rival submission supported the orders of the authorities below.
9. We have considered the submissions of both the parties and perused the
material available on the record. It is noticed that an identical issue has already been
adjudicated in the aforesaid referred to case vide order dt. 28/04/2011 wherein the
relevant findings have been given in para 9 to 12 which read as under:
9. The issue raised by the Revenue vide ground No.3 is as under: –
3. Whether the facts and circumstances of the case, the Ld. CIT (A)
Panchkula has erred in allowing credit of excess of expenditure over
income in the earlier years to be carried forward & set off losses as u/s 72
of the Income Tax Act, 1961 as the income of institution had been
asses sed in pursuance of sections 11 to 13 of the Income Tax Act, 1961.
10. The brief facts relating to the issue are that the Assessing Officer
while computing the income of the assessee did not allow credit of
excess of expenditure over income in the earlier years to be carried
forward. The CIT (A) allowed the claim of the assessee following the ratio
laid down by Bombay High Court in CIT Vs. Institute of Banking Personnel
Selection [131 Taxman 386 (Bom) ]. The Revenue is in appeal against the
11. We find that the CIT (A) allowed the claim of the assessee holding as
“4. The 3r ground of appeal is regarding Assessing Of f icer ‘ s action of not
allowing credit of excess of expenditure over income in the earlier year
to be carried forward. The counsel for the appellant has relied on the
decision of the Bombay High Court in the case of CIT Vs. Institute of
Banking Personnel Selection 131 Taxman 386 and that of my predecessor
in the case of Guru Nanak Gi r ls College, Yamunanagar in Appeal No.
30/YN/08-09 dated 27.7.2009 vide which a similar claim of the appellant
has been allowed. I have carefully gone through the order of my
predecessor and find that the issue has been decided in favour of the
appellant relying upon the decision of Bombay High Court in the case of
Institute of Banking Personnel Selection (supra). Therefore, without going
into much details, it is held that the Assessing Of f icer was not justified in
not allowing the carry forward of accumulated excess of expenditure of
over income relating the earlier years. This ground of appeal is allowed.
12. We uphold the order of CIT (A) in this regard following the ratio laid
down by the Bombay High Court in CIT Vs. Institute of Banking Personnel
Select ion ( supra) . Thus, the ground No. 2 of appeal raised by the Revenue
10. Since the facts of the assessee’s case are similar to the facts involved in the
aforesaid referred to case i.e; DCIT Vs. Ved Parkash Mukand Lal Educational Society.
So respectfully following the aforesaid referred to order dt. 28/04/2011 in ITA No.
240/Chd/2011 for the A.Y. 2007-08, we direct the A.O. to allow the claim of the assessee
for set-off of the brought forward losses related to the earlier years.
11. In the result, appeal of the assessee is allowed.
(Order pronounced in the open Court on 22/01/2020 )