TaxTMI 
TaxTMI 
2010 (7) TMI 158
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....N) VERSUS THE HUNGER PROJECT Through: Ms. Prem Lata Bansal, Advocate. Through: Mr. S.R. Wadhwa, Advocate CORAM:- HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE REVA KHETRAPAL A.K. SIKRI, J. (Oral) 1. The following questions of law are sought to be raised in all these appeals: a) Whether the Income Tax Appellate Tribunal was correct in law in allowing the assessee to carry forward deficit of the current year and to set off the same against the income of subsequent years? b) Whether the Income Tax Appellate Tribunal was correct in law in allowing the assessee to carry forward and set off the losses against the income of subsequent year ignoring that the determination of income under Sections 11 to 13 is a separate code and does not contain such provisions as contained in Chapter-VI of the Act? c) Whether adjustment of deficit (excess of expenditure over income) of current year against the income of subsequent year would amount to application of income of the Trust for charitable purposes in the subsequent year within the meaning of Section 11(1)(a) of the Act? 2. Learned counsel for the Revenue submitted that it is not necessary to go into the fac....
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....n which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived. (1A) For the purposes of sub-section (1), - (a) where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religiouspurposes to the extent specified hereunder, namely:- (i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain; (ii) Where only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital gain as is eq....
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.... of the previous year immediately following the previous year in which the income was derived." 3. It was the submission of Ms. Bansal that Section 11 which falls under Chapter-III is with the captioned "Income from property held for charitable or religious purposes" and thus specifically deals with the income derived from the properties which are held by the trust wholly for charitable or religious purposes. It further stipulates that the types of income enumerated in clause (a) to (d) of sub-Section (1) of Section 11 are not to be included in the total income of the previous years if the conditions contained in those clauses are fulfilled. For example, in clause (a) when it is mentioned that a particular income which is derived from property held under the trust wholly for charitable or religious purposes is not be to included if the following conditions are satisfied: (a) It is not only that income which is applied for such purposes in India; (b) Where such income is accumulated or set apart for application to such purposes in India to the extent to which the income so accumulated or set apart is not in excess of 15% of the income from such property. 4. Ms. Bansal ac....
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....tamber Murti Pujak Jain Mandal (supra). It could not be disputed by the learned counsel for the Revenue that the question of law raised and answered in the said case was identical to the one raised in the present appeals. This question was decided in favour of the assessee interpreting the provisions of Section 11 of the Act. The relevant discussion contained in the said judgment is in the following terms: "3. The learned DR sought to rely upon the finding of AO. None was present on behalf of the assessee. We find that the issue is answered by Hon'ble Gujarat High Court in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1995) 211 ITR 293 (Guj), wherein the High Court observed as under: "We are, therefore, of the opinion that the adjustment of he (sic. the) expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made and will have to be excluded from the income of the trust u/s 11(1)(a) of the Act." No contrary decision ha....
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....xpenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilization of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus of the subsequent years on the ground that tin the case of a charitable trust, their income was assessable under self-contained code mentioned in section 11 to section 13 of the Income-tax Act and that the income of the charitable trust was not assessable under the head "Profits and gains of business" under section 28 in which the provision for carry forward of losses was relevant. That, in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the tru....