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M/s Society of St. Francis De Sales Versus The Deputy Director of Income-tax, Circle-17 (1) , Bangalore

2016 (2) TMI 399 - ITAT BANGALORE

Carry forward of the deficit being the excess application of income to be set off against the income from property - whether the excess application of income during the year for charitable purposes can be carries forward and allowed to be set off in future years? - Held that:- AO directed to allow the carry forward of the amount of excess income applied during the year to the future year for set off against the income. - Decided in favour assessee. - ITA No.315(BNG)/2015 - Dated:- 8-1-2016 - SHR .....

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st the assesee are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The ld. CIT(A) is not justified in upholding the denial of carry forward of the deficit being the excess application of income amounting to ₹ 14,58,490/- to be set off against the income from property held under trust in the future under the facts and in the circumstances of the assessee s case. 3. The ld. CIT(A) ought to have appreciated that the carry forward of the defic .....

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and also order for the refund of the institution fees as part of the costs . 3. Briefly, the facts of the case are that the assessee public charitable institution registered under the provision of Karnataka Societies registration Act, 1960. It filed its return of income for the assessment year 2011-12 declaring NIL income. During the previous year relevant to assessment year under consideration, the assessee society had applied excess income of ₹ 14,58,490/- for charitable purposes. This w .....

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5. Being aggrieved by the order of the lower authorities the assessee is in appeal before us. The learned counsel for the assessee submitted that this issue in hand is covered by the decision of the Co-ordinate Bench of this Tribunal in the case of Society of St. Francis De Sales in ITA No.315(B)/2015 dated 10- 07-2015. 6. On the other hand, learned SR.DR relied on the decisions in the case refereed above i.e ITO Vs Trustees of Sri Satya Sai Trust (33 ITD 320) and also in the case of Pushpavati .....

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ld as follows; 5.3.1 We have heard the rival contentions of both parties and perused and carefully considered the material on record; including judicial pronouncements, cited and placed reliance upon. We find that the case of Institute of Banking (supra), the Hon'ble High Court of Bombay has held as under :- 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 a .....

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ure 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 s. 11 to s. 13 of the IT Act and that the income of the charitable trust was not assessable under the head "Profits and gains of business" under s. 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 ex .....

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me of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in s. 11 of the Act and that such adjustment will have to be excluded from the income of the trust under s. 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1994) 119 CTR (Guj) 144 : (1995) 211 ITR 293 (Guj). Accordingly, we an .....

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the view that pendency 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 i .....

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me of a later year will 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 s .....

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s or charitable purposes in earlier year or years can be adjusted against the income of the subsequent year. 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 subse .....

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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. Societ .....

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uired to be computed on commercial principles. The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income d .....

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