Tribunal allows deficit carry forward for charitable trust under Income Tax Act

The Tribunal dismissed the Revenue's appeal, affirming the decision of the CIT(A) to allow the carry forward of deficit for a charitable trust under Section 11 of the Income Tax Act. The Tribunal held that the trust could set off excess expenditure from previous years against income of subsequent years based on judicial precedents and commercial principles. The decision was in line with the interpretation provided by the Hon'ble Supreme Court and previous court rulings, including the Hon'ble Gujarat High Court's decision in a similar case.

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Issues:
Allowability of deficit carry forward for a charitable trust under Section 11 of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) concerning the assessment order passed by the Assessing Officer under Section 143(3) of the Income Tax Act for the assessment year 2014-15. The substantive ground of appeal raised by the Revenue was related to the allowance of the deficit of Rs.5,78,95,663 for earlier years against the income of the subsequent year by the CIT(A). The assessee, a public charitable trust, had claimed the carry forward of deficit, which was disallowed by the AO but allowed by the CIT(A) in the first appeal. The Revenue challenged this decision before the Tribunal.

The key question for adjudication was whether the excess expenditure incurred by the trust in earlier years could be set off against the income of subsequent years under Section 11 of the Act. The Tribunal referred to the decision of the Hon'ble Gujarat High Court in CIT vs. Shri Plot Shwetamber Murti Pujak Jain Mandal, where it was held that income derived from trust property should be computed on commercial principles, allowing the deficit arising from expenditure over income in previous years to be set off against the surplus of income over expenditure in subsequent years. Similar views were expressed in other cases as well. The Tribunal noted that the recent decision of the Hon'ble Supreme Court in the case of CIT(Exemption) vs. Subros Education Society further clarified this position. Consequently, the Tribunal found that the CIT(A) had correctly applied the law as per judicial precedents and declined to interfere with the order.

Therefore, the appeal filed by the Revenue was dismissed, affirming the decision of the CIT(A to allow the carry forward of deficit for the charitable trust in accordance with the provisions of Section 11 of the Income Tax Act.

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