TaxTMI 
TaxTMI 
2021 (12) TMI 450
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....the case and in law, whether the Ld. CIT (A) has erred in law in allowing the assessee's claim of carry forward of current year's loss and set off of excess deficit pertaining to earlier years without appreciating the fact that the normal computation of income under respective heads as envisaged u/s 15 to 59 are not applicable to the computation of income in respect of charitable trust/institution for the purpose of claiming exemption under section 11, 12 and 13 and therefore the provisions relating to set off of loss from one source against the income from another source, set off of loss from one head against income from another head and carry forward and set off of loss against the income of subsequent years as envisaged u/s 70 to 79 are also not applicable to the charitable trusts/institutions. 3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing. 2. Briefly stated facts of the case are that the assessee is a religious trust and registered under section 12A of the Income Tax Act, 1961 (in short 'the Act') vide registration dated 05/07/1975. The assessee was engaged in publication of books and printings of religious b....
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.... No.1 of the appeal is concerned, we find that identical issue in dispute has been allowed in favour of the assessee by the Tribunal in ITA No. 6287/del/2017 for assessment year 2013-14 observing as under : "9. After considering the facts and submissions and referring to various judicial decisions, the ld. CIT(A), in particular, relied upon the decision of the Hon'ble Jurisdictional High Court in the case of DIT Vs. Raghuvanshi Charitable Trust 197 Taxmann.com 170. The following observations of the Hon'ble High Court were relied upon: "8. It would be fruitful to refer to the discussions contained in Institute of Banking (supra), Per. Hon‟ble Mr. Justice S.H. Kapadia, which is advanced before us by the learned counsel for the Revenue to repel the same in the following words: "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 should be treated as application of income in the subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years can....
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....08 and ITA No.25/2009 submitted that the questions involves in these two appeals are purely academic. In these cases even in the current year, more than 75% / 85% (as the case may be) of the income was applied for charitable purpose and therefore, no set off was required to be claimed. Further, it is not necessary to go into this issue once we have decided the question of law in favour of the assessee." 10. Since the first appellate authority has rightly followed the binding precedent of the Hon'ble High Court of Delhi [supra], we do not find any reason to interfere with the findings of the ld. CIT(A). 7. Further we find that, the Ld. CIT(A) in the year under consideration has allowed the ground of the assessee observing as under: "4.2.1 The Assessing Officer has not allowed the claim of carry forward of deficit in respect of excess application since there are no provisions for carry forward of deficit under sections 11 and 12. The appellant has relied upon the decision of the Hon'ble Delhi High Court in the case of DIT Vs. Raghuvanshi Charitable Trust [(2011) 197 Taxman 170 (Delhi)]. Reliance has also been placed on the decision of Id. CIT(A) for assessment years 2006....
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....unt to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of tire 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 the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for....
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....ns are governed by the provisions of sections 11, 12, 12A, 12AA and 13 under Chapter III of the Income-tax Act. These sections constitute a complete code governing the grant, cancellation or withdrawal of registration, providing exemption of income and also conditions subject to which a charitable trust or. institution is "required to function in order to be eligible for exemption. Section 11(1)(a) provides for exemption to the extent income derived from the property held under trust is applied for charitable purposes. Subject to fulfillment of conditions laid down in section 11, exemption is available in respect of income irrespective of whether the expenditure incurred is revenue or capital in nature. Hence, exemption is available even when the income is applied for acquiring a capital asset. In view of this, charitable institutions were not eligible for depreciation. 4.3.3 This view has been clarified in Para 7.5 of the Explanatory Notes to the provisions of the Finance (No. 2) Act, 2014 issued vide Circular No. 1/2015 dated 21st January, 2015. Section 11 was amended by the Finance (No. 2) Act, 2014 whereby a new sub-section has been inserted which provides that under section ....
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.... said order that in Escort Ltd the claim for depreciation under section 32 of the Act was denied as the entire expenditure on the capital asset had been allowed under section 35(2)(iv) while computing business profit and loss. It has further being noted by the Hon'ble court that the Supreme Court was not concerned with the case of charitable trust/institution, and the question as to whether income under the head "profit and gains of business" should be computed on commercial principles in order of determine the amount of income available in application for charitable purposes. Similar position exists with respect to the decision of the Hon'ble Supreme Court in the case of J. K. Synthetic Limited (supra) which has been referred by the Assessing Officer. 4.3.6 Recently in the case of Commissioner of Income-tax- Ill, Pune vs. Rajasthan and Gujarati Charitable Foundation, Poona in Civil Appeal No. 7186/2014 vide order dated 13/12/2017, the Hon'ble Supreme Court have held that depreciation is allowable in case of charitable institutions. 4.3.7 In view of the discussion above and relying on the decision of the Hon'ble Supreme Court in the case of Commissioner of Incom....