TaxTMI 
TaxTMI 
2008 (7) TMI 623
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.... the assessee is an approved Scientific Research Institute approved under section 35(1)(ii) of the Income-tax Act, 1961. During the course of assessment proceedings the assessee vide its Letter No. 19/12/2006 requested the Assessing Officer to set off excess of expenditure over income of earlier years against shortfall in application of its income for assessment year 2004-05 in view of decision of Hon'ble Madras High Court in the case of CIT v. Matriseva Trust [2000] 242 ITR 20. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee was not allowed to carry forward any loss or depreciation in respective assessment orders and, therefore, assessee's request for adjustment of loss against current year's income was disallowed. 4. On appeal the ld. CIT (Appeals) relying on decision of Hon'ble Madras High Court in the case of Matriseva Trust (supra); the decision of Hon'ble Rajasthan High Court in the case of CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439; and the decision of Hon'ble Gujarat High Court in the case of CIT v. Sri Plot Swetambar Murti Pujak Jain Mandal [1995] 211 ITR 293 directed the Assessing....
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.... derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any 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 fifteen per cent of the income from such property; (b)income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of [fifteen] per cent of the income from such property; Explanation.-For the purposes of clauses (a) and (b),- (1)in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2)if, in the previous year, the income applied to charitable or religious purposes in Ind....
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....eferred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely :- (a)such person specifies, by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b)the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5) : Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any ....
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....ith the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated or set apart, the Assessing Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the Assessing Officer under clause (a) of sub-section (2) : Provided that the Assessing Officer shall not allow application of such income by way of payment or credit made for the purposes referred to in clause (d) of sub-section (3) of section 11 : Provided further that in case the trust or institution, which has invested or deposited its income in accordance with the provisions of clause (b) of sub-section (2), is dissolved, the Assessing Officer may allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in which such trust or ....
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.... sections constitute an independent and complete procedure for the purpose of assessment of charitable or religious institutions. No reference is required for any other provisions of law. 9. The language employed in section 11(1)(a) is plain and clear. It says that 85 per cent of the income derived from the property during the year has to be applied for the objects of the trust in the year in which such income was earned. If the assessee is not able to apply the income to the extent of 85 per cent, the statute provides an option to accumulate it for a period of not more than 5 years for a specific purpose.In the case of CIT v. Indian National Theatre Trust [2008] 305 ITR 149 (Delhi) the Tribunal was of the view that even the deposit of Rs. 1,00,000 made with the bank more than two years prior to previous year in question could qualify as accumulation of income for the purposes of availing of the exemption. Hon'ble Delhi High Court held that it was not possible to agree with the conclusion arrived at by the Tribunal. It is one thing to say that the requirement of investment is deemed to have been satisfied if the investment was made in the year in which income was received, a....
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....supra) wherein it has been held that section 11 does not permit accumulation of a larger amount than what is prescribed. If the assessee does not apply the income of a year for charitable purposes but spends a like amount for charitable purposes out of its accumulated profits, the conditions laid down in section 11(1)(a) are not fulfilled. The mere fact that the assessee had applied its accumulated income of the earlier years for the purpose of charity will not absolve the assessee of its duty to apply its income for the current year for the purpose of charity, nor will it enlarge the limit of the amount which is permitted to be accumulated under section 11(1)(a). Thus, donation of shares purchased out of accumulated income of earlier year will not amount to application of income for the year of donation. 12. The Assessing Officer has disallowed the claim of assessee on the ground that loss on account of excess income applied in earlier year was not allowed to be carried forward. There is no provision under section 11 of the Act under which the assessee can claim set off of excess expenditure incurred in earlier year against the income of the relevant assessment year. It is not ....