AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 194
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....se, the Ld CIT(A) erred in allowing depreciation on assets which had been taken into account for application for the purpose of Section 11(1)(a) in the previous years? 2 Whether on facts and in circumstances of the case, the Ld CIT(A) erred in admitting a ground regarding set off of excess expenditure over income when the ground does not arise from the order of the Assessing Officer and no claim has been made in the Returns of Income? 3 Whether on facts and in circumstances of the case, the Ld CIT(A) erred in not considering that as per the judicial precedents and Board's Circular, the income of charitable or religious trust/ institution is required to be computed by applying general commercial principles without referring to the regular provisions of Income Tax Act as contained under Chapter-IV? 4 Whether on facts and circumstances of the case, the Ld CIT (A) erred in not considering that as per the provisions of Sec.11, 12 and 13 there is no provision enabling set-off of loss from one source against income from another source/ set-off of loss of one head against income from another head and carry forward and set-off of loss against the income of subsequent years as e....
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....h Court rendered in the case of DIT Vs. Al-Ameen Charitable Fund Trust in ITA No. 62/2010 dated 22.02.2016 and respectfully following this judgment of Hon'ble Karnataka High Court, the issue was decided in favour of the assessee. 6. Regarding the second issue in respect of carry forward of deficit, he submitted that this issue was decided by CIT(A) by following the judgment of Bangalore Bench of the Tribunal rendered in the case of Jyothi Seva Society of Bangalore Vs. ADIT(E) in ITA No. 312/Bang/2015 and the relevant portion of the Tribunal order has been reproduced by the CIT(A) on pages 15 to 19 of the order of CIT(A) and therefore, this issue is also covered by the decision of Bangalore Bench of the Tribunal. 7. We have considered the rival submissions. We find that both the issues are squarely covered in favour of the assessee by two separate judgments as noted above. The first issue regarding allowability of depreciation on the assets which was considered as application of income in the earlier year, this issue is covered in favour of the assessee by the Tribunal order rendered in the case of DDIT(E) Vs. Karnataka Jesuit Educational Society (supra) in which the Tribunal ....
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....e deduction and therefore, this judgment is not applicable in the present case. Hence, we respectfully follow the judgment of Hon'ble Jurisdictional High Court rendered in the case of DIT Vs. Al-Ameen Charitable Fund Trust (Supra) and decide the first issue in favour of the assessee. 8. Regarding the second issue in dispute, i.e. regarding carry forward of deficit, we find that this issue is also covered in favour of the assessee by the Tribunal order rendered in the case of Jyothi Seva Society of Bangalore Vs. ADIT(E)(supra). The relevant portion of this Tribunal order as reproduced by CIT(A) on pages 15 to 19 are reproduced herein below for the sake of ready reference. "We have heard the rival contentions of both parties and perused and carefully considered the material on record; including judicial pronouncements, cited and placed reliance upon. We find that the case of Institute of Banking, (supra), the Hon'ble High Court of Bombay has held as under :- " Now coming to question No. 3, the point which arises for consideration is : whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment shou....
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....ed this issue and in para.8 of its order, held as under: "8. We are of the view that pendency of an appeal before the Hon'ble High Court of Karnataka cannot be the basis not to follow the decision on the issue already rendered in identical cases. Section 11(1)(a) does not contain any words of limitation to the effect that the income should have been applied for charitable or religious purpose only in the year in which the income has arisen. The application for charitable purposes as contemplated insection 11(1)(a) takes place in the year in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. Hence, even if the expenses for such purposes have been incurred in the earlier years and the said expenses are adjusted against the income of a subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. In other words, the set-off of excess of expenditure incurred over the income of earlier years against the income of a later year will amount to application of income of such later year. The above is the position of law as held in the case....
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....46 ITR 28 (Kar)." We find that the order of the CIT(A) is in consonance with the judicial precedents reproduced above. Therefore, we see no reason to interfere with the order of the CIT(A). The revenue's appeal is, accordingly, dismissed." It is clear from the relevant portions of the aforesaid decisions of the Hon'ble High Court of Bombay (supra) and the co-ordinate bench of the ITAT, Bangalore (supra) extracted above that the income of charitable trusts is required to be computed on commercial principles. The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income during the year can be regarded as application of the income of future years and can be adjusted. Therefore, in our view, the claim of the assessee for carry forward of excess application is in accordance with the judicia....
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....g out of application of sums not in the nature of income and therefore, there is no deficit, which can be carried forward. The tribunal in that case also noted that the tribunal is aware of the apprehension of the assessee that in the year in which transfer takes a concrete shape, capital gain would be determined and that might be subjected to tax ignoring the application of such income in the earlier years but that is a matter which is to be considered in that year. It means, the claim was not out rightly rejected but it was held that it should be seen in the later year when income arises. Hence, this tribunal order has to be considered in the light of the later tribunal order cited by the learned AR of the assessee as per which, the issue is covered in favour of the assessee and this is a settled law by now that if two views are possible, the view in favour of the assessee should be adopted. Therefore, this tribunal order is not helping the revenue. 10. The second judgment relied upon by the learned DR of the revenue is the judgment of Hon'ble Delhi High Court rendered in the case of CIT vs. Indian national Theatre Trust (Supra). In this case, there was no dispute about deficit ....