TaxTMI 
TaxTMI 
2018 (11) TMI 946
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....to application for the purpose of section 11 of the Act. 3. Briefly stated fact of the case is that assessee has filed its return of income declaring income of Rs.Nil on 02/06/2004. Subsequently, the case was selected for scrutiny by issuing notice u/s.143(2) of the Act, on 04/09/2015. During the course of assessment proceedings the AO has noticed that assessee has claimed carry forward of the excess application/expenditure of Rs. 5,15,71,748/- pertaining to different period. The details of such expenditure is reproduced below: Sr. A.Y Amount Rs. 1. 2002-03 23,35,825 2. 2003-04 15,00,929 3. 2004-05 63,06,441 4. 2005-06 1,07,02,292 5. 2006-07 1,02,74,573 6. 2013-14 2,04,51,688 Total 5,15,71,748 The AO was ....
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....st the income of current year. 8.2.1 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 in section 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 purposes in the year, in which such adjustment fakes place. In other w....
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.... religious and charitable Trust can only be achieved by incurring expenditure and in order to incur that expenditure , the Trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the Trust and the income from out of which that expenditure is incurred would, not be liable to tax. The expenditure, if incurred in an earlier year s adjusted against the income of a later year, it has to be held that the Trust has incurred expenditure on religious and charitable purposes from the income of the subsequent year , even though the actual expenditure was in the earlier years if in the books of account of the trust such earlier expenditure had been set off again....
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....arana of Mewar Charitable Foundation (1987) 164 ITR 439 (Raj) and it was opined that application could be considered to have taken place in the year of adjustment , where the earlier year's income was not adequate to absorb the actual expenditure made Thus, a distinction between actual expenditure and application, for the purposes of section 11(1)(a) was made. 8.2.2 The Court referred to a CBDT Circular dt 24.1.1973 wherein it was clarified that the Repayment of loans taken for meeting certain expenditures of earlier years would be considered as application. The Court v/as of the opinion that in the light of the aforesaid circular, if set off of past years' deficit was not allowed then, it would lead to an anomalous situation, whe....
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....e r would amount to ' application of 1(1 )(a) of the Act. The contention should be excluded which was the relevant assessment year in as it would lead to an anomalous loan can be repaid ,out of the income of the subsequent and the repayment of said loan out of the income of the subsequent year income ' for charitable and religious purposes u/s T that only that part of the income of a charitable trust applied for charitable and religious purposes during which the income was earned, cannot be accepted , situation . If the trust takes a loan for the purposes of incurring expenses for charitable and religious purposes in a particular year and the said loan is repaid out of the income of the subsequent year, the said repayment would be entit....
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.... to be excluded from the income of the trust u/s 11(1)(a). Accordingly, on the facts and in the circumstances of the instant case, the Tribunal deficit of earlier year and set itwas justified in law in allowing carrying forward of the off against the surplus of subsequent years. Similarly, in the case of CIT v/s (MP) (HC) , it was held that Shri Gujarati Samaj ( Regd) (2011) 64 DTR 76 u/s 11 (1 )(a) expenditure incurred in earlier year, can be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of earlier year would amount to such income being applied for charitable or religious purpose. Therefore, assesee is entitled for carry forward and set off excess of expenditure incurred durin....