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Deputy Director of Income-tax (Exemptions) Circle 17 (1) , Bangalore Versus Baldwin Methodist Educational Society

2015 (10) TMI 2416 - ITAT BANGALORE

Carry forward of excess expenditure of earlier years against the current year income - 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 .....

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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 o .....

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(AO) to allow the claim of excess expenditure of earlier years to be carried forward and claimed against the current year income i.e. for the assessment year 2009-10. 2. Brief facts of the case are that the assessee, an AOP(Trust), filed its return of income for the assessment year 2009-10 on 31/3/2010 declaring nil income. The said return was processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] on 8/3/2011 resulting in refund of ₹ 5,78, .....

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rought forward expenditure in the return of income amounting to ₹ 6,63,12,628/- in the revised computation and claimed it as application of income during the current year. The AO, however, held that there is no express provision in the Act permitting adjustment of earlier year s brought forward expenditure as application of income during the current year. He held that the current year s expenditure only must be considered as application of income. He accordingly disallowed the claim of the .....

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hold the issues in favour of the assessee. Against the relief given by the CIT(A), the Revenue is in appeal before us. 4. Learned Departmental Representative, supported the order of the AO while the learned counsel for the assessee placed reliance upon the order of the CIT(A) as well as the decision of A bench of this Tribunal in the case of T.M.A.Pai Foundation and others (cited supra). Copies of the said orders are also filed before us. 5. On a consideration of the rival contentions and the m .....

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f Sathya Sai Trust in (1990) 33 ITD 320. In this case the Tribunal held the deficit arising as a result of excess spending for charitable purposes will not form part of the income and the same cannot be carried forward. With regard to the point whether excess spending will form or not form part of the total income and, therefore, it could be carried forward or not is decided by the Hon'ble Bombay High Court in the case Institute of Banking (supra) in assessee's favour. In that case, howe .....

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cy of an appeal before the Hon'ble High Court of Karnataka cannot be the basis not to follow the decision on the issue already rendered in identical cases. Section 11(1)(a) does not contain any words of limitation to the effect that the income should have been applied for charitable or religious purpose only in the year in which the income has arisen. The application for charitable purposes as contemplated in section 11(1)(a) takes place in the year in which the income is adjusted to meet th .....

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ll amount to application of income of such later year. The above is the position of law as held in the case of CIT Vs. Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj) CIT Vs. Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 (Guj.). In CIT Vs. Institute of Banking Personnel Selection 264 ITR 110 (Bom), it was held that in case of charitable trust whose income is exempt under s. 11, excess of expenditure in the earlier years can be adjusted against income of subsequent years and s .....

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