TMI Blog2021 (1) TMI 476X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred over the income of earlier years can be adjusted against income of subsequent years and such adjustment would not be application of income in subsequent years. - Decided against revenue. - ITA No.696/Bang/2020 - - - Dated:- 12-1-2021 - Shri. B. R. Baskaran, Accountant Member And Smt. Beena Pillai, Judicial Member For the Appellant : Shri C Sandeep, C.A For the Respondent : Shri Rajesh Kumar Jha, CIT (DR) ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal has been filed by revenue against order dated 16/09/2020 passed by learnt CIT (A)-14, Bangalore on following grounds of appeal: Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in allowing the claim of the assessee for carry forward of deficit, ignoring the fact that there is no express provisions in the Income tax Act, 1961 allowing such claim, and without appreciating the fact that this would have the effect of granting double benefit to assessee, first as accumulation of income U/s 11(1)(a) or Corpus donation U/s 11(1)(d) in earlier year/current year, or exempt income U/s 10(34), and then as application of income U/s 11(1)(a) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 17.07.2018 in ITA.No.31212016 and ITA No. 31312016, in which this Court held as under: ... 16. in so far as the second question proposed by the Revenue, quoted above is concerned also, we find that the Tribunal's findings in this regard do not give rise to any substantial question of law. The said findings are quoted below for ready reference: 5.1 In the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed application of income on account of expenditure of earlier years, which has been brought forward and set off in the year under consideration. The Assessing Officer disallowed the same on the ground that there is no express provision in the Act permitting the adjustment of earlier years brought forward expenses as application of income in the current year. According to the Assessing Officer, the application of income for charitable purposes must be during the relevant previous year. Since the income of the trust is exempt from tax, the question of deficit does not arise and also the trust is required to utilize 85% of the income of the previous year for charitable purposes during the year. In this view of the matter an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 6) of the Revenue's appeal for Assessment Year 2008- 09 and Ground No.0 for Assessment Year 2009-10 are dismissed. 17. In our opinion, the matter is squarely covered by a decision of the cognate Bench of this Court in the case of CIT vs. Society of the Sisters of St. Anne (1984) 16 Taxman 400 (Kar.) and (1984) 146 1TR 28, wherein the congnate Bench of this Court held that even the depreciation not involving any cash outflow is also in the character of expenditure and therefore such depreciation is nothing but decrease in the value of property through wear and tear, deterioration or obsolescence and the allowance made for that purpose in the books of accounts were deemed to be the application of funds for the purpose of Sec. 11 of the Act. The relevant portion of the said judgment is also quoted below for ready reference: 11. Mr. Srinivasan, however, urged that there are enough indications in Section 11 to exclude the mercantile system of accounting. The learned counsel relied upon sections 1 1(1)(a) and 11(4) in support of his contention. We do not think that there is anything in these sub-sections to support the contention of Mr. Srinivasan. Explanation to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call for interference. A similar view was also taken by the Division Bench of Bombay High Court in Commissioner of Income-tax v. Institute of Banking (2003) 264 ITR 110, wherein the Division Bench of Bombay High Court held that the 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. The relevant portion of the said judgment of Bombay High Court is also quoted below for ready reference. Normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 1 1(1)(a) of the Inome-tax Act, 1961. Income of a charitable trust derived from building, plant and machinery and furniture is liable to be computed in a normal commercial manner although the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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