TaxTMI 
TaxTMI 
2018 (11) TMI 946
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....cess 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 of the view that the provisions of section 70 to 80 do not apply in the cases covered by the provisions of section 11,12 and 13 of the Act. He has further stated that there was no mention of carry forward excess application and set off against surplus of any subsequent year under the provisions of section 11,12 & 13 of the Act. The AO also stated that no carry forward excess application is allowed in the case of the assessee for any period. Therefore assessee claim to carry forward losses/excess application of total amounting to Rs. 5,15,71,748/- was disallowed. 4. Aggrieved assessee has filed an appeal before the ld.CIT(A). The ld.CIT(A) has allowed the appeal of the assessee which is reproduced as under: ''(4) Therefore, all the High Courts have taken identical view in favour....
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....enevolent provision , and the expenditure incurred on religious or charitable purposes in earlier year or years can be adjusted against the income of the subsequent year. The principle that the loss incurred under one head can only set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes. The expenditure adjusted against the income of the Trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit.of a subsequent year. The object of the 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....
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....on, where if the trust took a loan for the purposes of incurring expanses for charitable and religious purposes in a particular year and the said loan was repaid put of the income of the subsequent year, the said repayment would be entitled to exemption for tax u/s 11(1) (a) of the Act. On the contrary, if the trust, instead of taking a loan, incurred expenditure for charitable and religious purposes out of the corpus of the trust and sought to reimburse the said amount of the income of the subsequent year, the trust would not be entitled to claim exemption in respect of such reimbursement u/s 11(1)(a) of the Act. 8.2.3 The Hon 'ble jurisdictional High Court of Gujarat in the case of CIT v/s Shri Plot Swetamber MUrti Pujak Jain Mandal (1994)119 CTR (Guj) has referred to Circular no. 100 dt 24. 1. 1973 which allowed repayment of loan taken in earlier years for fulfillment of charitable objects as application and held that the same principle should apply if instead of taking loan the organization spends money out of its j corpus and it is reimbursed in subsequent years. There is nothing in sec. 11 (1 )(a) which shall indicate that the expenditure incurred in the earlier ....
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....charitable and religious purposes in the subsequent year in which, adjustment has been made having regard to the benevolent provisions contained in sec. 11 and such adjustment will have 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 during the year over its income. 8.3 In view of the above discussion, it is clear that the Charitable Trusts are entitled to set off the excess expenditure of the earlier years against the income of current year. Set off of excess expenditu....