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2019 (4) TMI 849 - AT - Income TaxExemption u/s 11 - allowability of depreciation on assets, the cost of which was already considered as application for charitable purpose in the year of acquisition - HELD THAT:- Reference to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Society of Sisters of Anne [1983 (8) TMI 44 - KARNATAKA HIGH COURT] wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income We may also add that the legal position has since been amended by a prospective amendment by the Finance (No.2) Act, 2014 w.e.f. 1.4.2015 by insertion of sub-section (6) to section 11. Carry forward of excess of expenditure incurred over its income for setting off against income of the succeeding years - HELD THAT:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and 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 is adjusted against the income of a later year, it has to be held that the trust had 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 against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The High Court relied on the decision in the case of CIT Vs. Society of Sisters of ST. Anne [1983 (8) TMI 44 - KARNATAKA HIGH COURT]. We are therefore of the view that there is no merit in the issue raised in this regard by the Revenue. Accordingly, the same are dismissed. Considering the expenditure incurred in subsequent year before filing of return of income as application for accumulation of income. Excess expenditure/application/deficit/loss of earlier years against income of the current year and in the light of the law laid down by Hon’ble Supreme Court in the case of Nagpur Hotel Owner’s Association case [2000 (12) TMI 99 - SUPREME COURT]. AO is also directed to consider the written submissions filed by the assessee on this issue. Disallowance of expenditure incurred in foreign currency - Expenses incurred in foreign currency has to be considered as application for charitable purpose and incurred for the charitable purposes in India. See DIRECTOR OF INCOME-TAX (EXEMPTION) VERSUS NATIONAL ASSOCIATION OF SOFTWARE & SERVICES COMPANIES [2012 (5) TMI 204 - DELHI HIGH COURT].
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