TaxTMI 
TaxTMI 
2021 (7) TMI 1434
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....wing the claim of carry forward of losses disregarding the facts that the set-off and carry forward of losses are dealt with by the provisions of section 70,71,72,73&74 of Income Tax Act. 2. On the facts and in the circumstances of the case and in law, 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 scheme of taxation of charitable or religious trust/institution as codified u/s 11,12 and 13 there is no provision for computing loss from property held under trust/institution on account of excess application of income/funds of the trust. 3. On the facts and in the circumstances ....
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....ollowing various judicial decisions and decision of the Tribunal in the case of the assessee for assessment year 2008-09. Aggrieved, the Revenue is in appeal before the Tribunal raising the grounds as reproduced above. 3. None appeared on behalf of the assessee before us. We have heard the Learned Department Representative and perused the relevant material on record. We find that the Ld. CIT(A) has allowed the appeal of the assessee of claim of carry forward of deficit/losses observing as under: "4.2.1 I have considered the order of the Assessing Officer and submissions of the appellant. Assessing Officer has denied carry forward of deficit. Charitable trusts or institutions are governed by the provisions of sections 11, 12, 12A....
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....as 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. The Hon'ble Court held that it would be incorrect to view the term 'application' from a narrow perspective so as relate it with the actual movement of funds and held as under: "...there is nothing in the language of section 11(1) (a) which lends support to the contention of... that the expenditure incurred in the earlier year cannot be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of earlier year would not amount to such income being applied for charitable or religious purposes. I....
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....under section 11(1)(a)." 4.2.3 In CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [(1994) 119 CTR 144 (Guj.)], the Hon'ble Gujarat High Court referred to CBDT Circular No. 100, dated 24.01.1973 which allowed repayment of loan taken in earlier years for fulfillment of charitable objects as application. The Hon'ble Court held that the same principle should apply if instead of taking loan the organization spent more out of its corpus and it is reimbursed in subsequent years. It was also held that there is nothing in section 11(l)(a) which indicates that the expenditure incurred in the earlier year cannot be met out of the income of subsequent years. Relevant extracts of the decision are as under: "According to the ....
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....he Hon'ble Bombay High Court in CIT v. Institute of Banking Personnel Selection [(2003) 264 ITR 110], held that income derived from a trust property should be computed on sound commercial principles and this included carrying forward and set-off of deficit in the earlier years. The relevant extracts are as under: "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 charitable and religious purposes in the subseque....
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....in the case of CIT vs. Maharana of Me war Charitable Foundation -164 ITR 439 (Raj.). In that case, it was held by the Hon'ble Rajasthan High Court that excess of expenditure in earlier years should be treated as application for charitable purpose against income of subsequent year so, the net deficit of the year under consideration should be allowed to be carried forward for adjustment in subsequent year as claimed by the appellant in its return of income. In view of the ratios laid down in this decision, we are of the view that the Assessing Officer was not justified in not allowing the carry forward of net deficit in the present case. The Learned CIT (Appeals) was thus justified in directing the Assessing Officer to allow carry forward....