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2016 (6) TMI 133 - ANDHRA PRADESH HIGH COURT

2016 (6) TMI 133 - ANDHRA PRADESH HIGH COURT - TMI - Exemption u/s 11(1)(a) - deficit adjusted against the surplus - Held that:- CBDT circular dated 24.01.1973 enables a trust, which had taken a loan for incurring expenditure for charitable and religious purposes, to repay the said loan from out of its income in the subsequent year; and such repayment of loan is to be treated as application of income for charitable and religious purposes under Section 11 (1) (a) of the Act. Money for charitable .....

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oses, (deficit) of the earlier year should not be set off against the income for the subsequent year. In the absence of any specific prohibition in the Section 11 (1) (a) of the Act in this regard, and in the light of the CBDT circular dated 24.01.1973 we find no error in the order of the Tribunal, much less a substantial question of law, necessitating interference in this appeal. - I.T.T.A.No.258 of 2015 - Dated:- 12-11-2015 - SRI RAMESH RANGANATHAN AND SRI M.SATYANARAYANA MURTHY, JJ. FOR THE P .....

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mption under Section 10 (21) of the Act. Assessment, under Section 143 (3) of the Act, was made on 12.12.2007 and it was found that the assessee had not filed Form-10. A notice, under Section 148 of the Act, was issued and a re-assessment order was passed determining the total income of the assessee at ₹ 55,73,560/-. The assessing officer observed that the assessee had declared gross receipts of ₹ 1,50,33,273/-; and had arrived at a surplus of ₹ 55,73,560/- after claiming expen .....

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er it was contended that the assessee had a deficit of ₹ 46,42,125/- for the financial year 2003-04 which had been adjusted against the surplus for the financial year 2004-05; such adjustment of deficit amounted to application of money; after such adjustment, the surplus was below 15% of the income; the excess expenditure of earlier year should be considered as application of income during the current year; there is nothing in the language of Section 11 (1) (a) of the Act which lends suppo .....

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a deficit for the previous year, the surplus for the subsequent year was not in excess of 15% of the income. The Commissioner directed the assessing officer to verify the contention of the assessee and, if the claim of deficit of ₹ 46,42,125/- was found to be correct, the surplus should be arrived at after setting off the same from the surplus of ₹ 55,73,560/-. Aggrieved thereby, the Revenue carried the matter in appeal to the Tribunal. The Tribunal, relying on the judgment of the Ma .....

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,42,125/- for the earlier year from the surplus of ₹ 55,73,560/- during the current year. Before us Sri J.V.Prasad, learned Senior Standing Counsel for the Income Tax Department, would submit that Section 11 (1) (a) of the Act does not permit set off of the deficit for the previous financial year with the surplus for the current financial year; and, in the absence of any such provision, the assessee was not entitled to claim that the deficit of the earlier financial year should be set off .....

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iring that the income should be applied for charitable or religious purposes only in the year in which the income had arisen. According to the CBDT circular dated 24.01.1973, if a trust wants to spend more money for charitable and religious purposes in a particular year, it can take a loan which can be repaid out of the income of the subsequent year; payment of the said loan, from out of the income of the subsequent year, would amount to application of income for charitable and religious purpose .....

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