TaxTMI 
TaxTMI 
2021 (8) TMI 287
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....ost incurred by assessee trust recognized in accordance of accounting standard issued by ICAL (AS-15 "Employees Benefits") and reduced from the application of the income, such disallowance/addition being quite illegal, arbitrary, unreasonable, unjustified, factually and legally incorrect, bad in law and is liable to be and should be set aside. 2. Additional Ground: On the facts and in the circumstances of the case and in law, the AO [Dy. Commissioner of Income Tax (exemption) 1(1), Mumbai] has erred in not allowing assessed deficit for the year of Rs. 2,13,06,095/- (Deficit Claimed Rs. 2,91,79,405/- less Disallowed Employment Cost Rs. 78,73,3,10/-) to be carried forward to subsequent year and without giving any opportunity to the assessee, which is quite arbitrary, illegal, unreasonable, unjustified, non-judicious, factually and legally incorrect, bad in law and same is liable to be and should be cancelled and may kindly be cancelled as such." 3. Considered the submissions of both the parties. The additional ground raised being purely factual in nature and all relevant information for adjudication are available on record, hence, additional ground is admitted for adjudication....
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.... liability might have been clearly ascertained during the year under consideration. In view of the above, ground of appeal is dismissed." 6. The assessee is before us against the disallowance of provision for gratuity and leave encashment confirmed by the CIT(A). 7. During the course of hearing before us, the Authorized Representative of the assessee argued that the assessee is required to make provision based on statutory provisions and terms of employment for post-retirement benefits of existing employees. As per the Leave Policy of the assessee, employees are entitled to encashment of earned leave subject to certain conditions. Similarly, as per the Payment of Gratuity Act, 1972, the assessee is required to pay gratuity to all the employees who complete 5 years of employment with the assessee. The provision that the assessee has made in the books of account is for the leaves already earned by the employees and for the period of service already provided by the employees. The charge has already crystallized and the liability has been incurred by the assessee by 31st March 2014 and provision is required to be made in the books of accounts as the same are maintained on accrual bas....
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....e of Trust. However, there are various judicial precedents which allows the claim of depreciation while computing the taxable income of the trust. 13. The contention of the Ld. CIT(DR) appears to be on the assumption that the expenditure should necessarily involve actual delivery of or parting with the money. It seems to us that it need not necessarily be so. The expenditure should be understood as necessary outgoings. The provisions are necessary to be made for certain purposes like, provision for depreciation is to be made in respect of decrease in value of property through wear and tear, deterioration or obsolescence and allowance is made for this purpose in book-keeping, accountancy, etc. It is the provision made for the loss or expenses incurred through using the asset for earning profits, and should, therefore, be charged against those profits as they are earned. 14. If depreciation is not provided for, the books will not contain a true record of revenue or capital. If the asset were hired instead of purchased, the hiring fee would be charged against the profits, having been purchased, the asset is, in effect, then hired by capital to revenue, and the true profit cannot be ....
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....penditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure 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 in 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 subsequent y....