ITAT Bangalore Allows Set-off of Carry Forward Losses for Section 12A Assessee

The Appellate Tribunal ITAT Bangalore allowed the set off of carry forward losses for an assessee registered under section 12A of the Income-tax Act. The Tribunal held that losses from years prior to the immediately preceding assessment year could be adjusted against income of subsequent years, considering it as application of income for achieving religious and charitable purposes. The Tribunal dismissed the Revenue's appeal, affirming the eligibility of the assessee for the claim of carry forward losses.

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Issues:
- Eligibility of an assessee registered u/s.12A of the Income-tax Act for the claim of carry forward of losses from earlier assessment years.

Analysis:
The appeal before the Appellate Tribunal ITAT Bangalore involved the grievance of the Revenue regarding the CIT (A) allowing the set off of carry forward losses to the assessee. The Revenue argued that as the assessee was a trust registered u/s.12AA of the Income-tax Act, there should be no computation of business loss or carry forward. The Revenue contended that only losses of the immediately preceding assessment year could be allowed for set off, not losses from earlier years. The assessee, on the other hand, supported by the Ld. AR, relied on a decision of a coordinate bench in a similar case. The Tribunal examined the orders and contentions, noting the claim of carry forward of losses from A.Ys. 2005-06 and 2006-07 to be set off against the income for A.Y. 2010-11.

The Tribunal referred to a decision of a coordinate bench in the case of Academy of Liberal Education, where it was held that the set off of losses from earlier years against the income of a subsequent year can be considered as application of income. The Tribunal emphasized that the pendency of an appeal before the High Court cannot be a basis to disregard a decision already rendered in similar cases. Citing various legal precedents, the Tribunal reiterated that the expenditure incurred on religious or charitable purposes in earlier years can be adjusted against the income of subsequent years, considering it as application of income. The Tribunal highlighted that the trust's objective of achieving religious and charitable purposes requires incurring expenditure, and as long as the expenditure is on such purposes, it can be adjusted against income of subsequent years.

The Tribunal concluded that the set off of losses from years prior to the immediately preceding assessment year was permissible, aligning with the decision of the coordinate bench in a similar case. Consequently, the appeal filed by the Revenue was dismissed, affirming the allowance of carry forward losses for the assessee.

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