Court directs Tribunal to review Trust's expenditure, sets 85% cap, Commissioner to decide in 3 months.

The Court partially allowed the appeal, directing the Tribunal to reconsider whether the Trust's expenditure for the relevant years exceeded 85% after adjusting the excess expenditure. The Commissioner was instructed to make a decision on this matter within three months. No costs were awarded in this case.

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Issues:
1. Interpretation of Section 80-G(5)(vi) of the Income Tax Act regarding set off of excess expenditure.
2. Determination of whether the assessee meets the 85% income application requirement for exemption under Section 80-G.

Analysis:
1. The case involves a Trust seeking initial exemption under Section 80-G of the Income Tax Act. The Commissioner of Income Tax rejected the application, stating that the Trust did not spend at least 85% of its income for the relevant assessment years. Additionally, the Commissioner held that the Trust could not set off excess expenditure from earlier years against the deficiency for subsequent years under Section 11 of the Act. The Income Tax Appellate Tribunal allowed the Trust's appeal, stating that the excess expenditure could be set off, and the Trust met the 85% requirement after adjustment. The Tribunal's decision was challenged by the Revenue.

2. The first substantial question of law raised was whether the Tribunal was correct in allowing the set off of excess expenditure for earlier years against the deficiency for subsequent years under Section 11, even though there was no provision under Section 11 for such a claim. The Court referred to a previous judgment stating that expenditure from earlier years can be adjusted against income of subsequent years, supporting the Tribunal's decision.

3. The second substantial question of law focused on whether the Trust met the 85% income application requirement for exemption under Section 80-G. The Revenue argued that the Trust did not meet this requirement even after adjusting the excess expenditure. The Court noted that the Trust's application form indicated that the percentage of income applied was less than 85%. The Court found a factual error in the Tribunal's decision and directed the Commissioner to reevaluate the expenditure for the relevant years to determine if it exceeded 85%, allowing the Trust to claim initial exemption under Section 80-G.

4. In conclusion, the Court partially allowed the appeal, directing the Tribunal to reconsider whether the Trust's expenditure for the relevant years exceeded 85% after adjusting the excess expenditure. The Commissioner was instructed to make a decision on this matter within three months. No costs were awarded in this case.

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