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2016 (3) TMI 730 - ITAT CHENNAI

2016 (3) TMI 730 - ITAT CHENNAI - TMI - Carry forward of excess application of income over the income - Held that:- As observed at para 4.5 of the order of the Tribunal the six sources of income as enumerated could be the only possible income. All the income would be entitled for exemption under Section 11 of the Act provided the same is applied for charitable activity. The assessee is also eligible to accumulate to the extent of 15% of income from such property. If any income, which could not b .....

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and application of income in the earlier year is not available on record. Therefore, this Tribunal has no other choice except to presume that the income of the assessee was already allowed in the earlier year. Hence, nothing remains to carry forward. If that is the situation, this Tribunal is of the considered opinion that there is no occasion for the assessee to carry forward the income to the subsequent year. In the absence of any details, this Tribunal finds no reason to interfere with the or .....

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dated 25.03.2014 and pertains to assessment year 2008-09. 2. The only issue arises for consideration is with regard to carry forward of excess application of income over the income. 3. Shri Deepak John, the Ld.counsel for the assessee, submitted that the assessee incurred an expenditure of ₹ 9,06,971.88 for the assessment year 2007-08. However, this was not allowed as application of income. Therefore, the assessee claimed for the year under consideration exemption under Section 11 of the .....

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88 for the assessment year 2007-08, the Ld.counsel clarified that it is accumulated income of the earlier year. The Ld.counsel, however, could not clarify whether the accumulated income to the extent of 15% was allowed as exemption or not. According to the Ld. counsel, since the assessee is a registered Trust, the assessee is eligible for exemption under Section 11 of the Act. Referring to the judgment of Madras High Court in CIT v. Matriseva Trust (2000) (242 ITR 20), the Ld.counsel submitted t .....

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Departmental Representative, submitted that each assessment year is separate and distinct. The Income-tax Act does not provide for carry forward of expenditure incurred in one year to another year. Under Section 11 of the Act, the assessee has to apply the income derived from property held in Trust for charitable purpose. The assessee can also accumulate 15% of the income from such property. Therefore, according to the Ld. D.R., the assessee is eligible for exemption of the income which was appl .....

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71/Mds/2014 dated 02.06.2015, the Ld. D.R. submitted that on identical set of facts, this Tribunal examined the possible source of income and found that the accumulated funds, if any, would be allowed under Section 11(1) of the Act in the year in which it was accumulated. Therefore, the same cannot be claimed as exemption in the year in which it was applied for charitable purpose. The Ld. D.R. clarified that when the income was accumulated and it was allowed under Section 11(1) of the Act as exe .....

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provides that income derived from property held under Trust wholly for charitable or religious purpose shall not be included in the total income to the extent such income is applied for charitable or religious purpose in India. The Act also provides that upto 15% of such income is accumulated or set apart, then that shall also not be included in the total income. Further Section-11(1)(d) of the Act provides that income in the form of voluntary contribution made with specific direction that they .....

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titution created wholly for charitable or religious purpose shall be deemed to be the income derived from property held under trust . From the above it is clear that, when the assessee trust applies 85% of its income received by way of voluntary contributions other than the voluntary contributions received with specific directions and the income derived from property held under trust , then such income shall not be included in the total income of the Trust. Further the balance 15% of such income .....

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he corpus of the trust, loan obtained by the Trust, Sundry creditors of the Trust or accumulate fund of the Trust for claiming exemption U/s.11 (1) of the Act. 4.5. Application of fund by any charitable institution is possible only from the following sources:- i) Voluntary contributions received by the Trust towards its corpus, ii) Other voluntary contributions, iii) Accumulated fund, iv) Amount received by way of loan, v) Sundry creditors, vi) Income derived from the Property held under the Tru .....

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re, it signifies every possible interest which a person can acquire, hold and enjoy. Business would undoubtedly be property unless there is something to the contrary in the enactment. ] When the Trust applies its funds from its Corpus, accumulated fund, Sundry creditors or from the loan obtained by the Trust, then such funds which are applied cannot be said to be funds applied from the income of the Trust. Therefore, there cannot be a case where the trust can apply its income more than the incom .....

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y creditors are repaid from the income of the Trust. However when amount is applied from the corpus fund or accumulated fund the same cannot be treated as application of fund for the purpose of Section 11 of the Act, because such fund have already been exempt from the income of the Trust in the year in which it is received or such amount is set aside and therefore once again treating the same as application of fund will amount to double deduction. Similarly voluntary contribution received toward .....

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year. These aspects have not been considered by the Mumbai Bench of the Tribunal, and the unreported decision of the Hon ble Bombay High Court is also not placed before us. 4.6 Now analyzing the facts of the case before us, it appears that the assessee trust s gross receipts is ₹ 5,11,60,794/- and the assessee trust have spent ₹ 5,35,57,149/- which shows that the assessee trust has spent ₹ 23,96,355/- more than its income received during the relevant year. This amount of ͅ .....

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Creditors are repaid. It is pertinent to mention that if the amount is applied from the Corpus fund or accumulated fund it will not be treated as application of fund because Corpus fund and accumulate fund are already exempt from the income of the Trust and once again if it is treated as application of fund it would amount to double deduction. Therefore the claim of the assessee to carry forward the excess application of fund cannot be entertained applying the commercial principles. However if t .....

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