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TMI Blog2015 (7) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... n the future. 2. Brief facts of the case are that the assessee, an educational and social services society, is registered as a charitable trust. It filed its return of income for the relevant assessment year declaring taxable income at 'nil'. During the assessment proceedings, the Assessing Officer (AO) observed that there is excess of application of income during the relevant financial year and the assessee is seeking carry forward of the deficit to future years. The AO disallowed the same. 3. Aggrieved, the assessee preferred an appeal before the CIT(A) who confirmed the order of the AO and the assessee is in second appeal before us. 4. The learned counsel for the assessee submitted that this issue is covered in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to meet the expenses incurred for charitable or religious purposes. Hence, even if the expenses for such purposes have been incurred in the earlier years and the said expenses are adjusted against the income of a subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. In other words, the set-off of excess of expenditure incurred over the income of earlier years against the income 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 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orward of losses was relevant. That, in the case of a charitable trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of the subsequent years. We do not find any merit in this argument of the Department. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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