TMI Blog1986 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... n of this court is as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in directing that the deficit of Rs. 59,770 arising out of excess of expenditure over income during the previous year relevant to the assessment year 1970-71 should be set off against the surplus of income over expenditure relating to the assessment year 1971-72 in computing the taxable income of the latter assessment year ? " The facts briefly stated as set out in the statement of the case are that the Maharana of Mewar Charitable Foundation (hereinafter referred to as " the assessee ") is a public charitable trust, constituted by the Maharaja of Mewar through a deed executed on October 20, 1969. The Maharaja of Mewar had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that the assessee could only claim exemption in respect of expenditure incurred for charitable purposes during the previous year relevant to the assessment year 1971-72. Since the expenditure of Rs. 59,770 had been incurred by the assessee during the previous year relevant to the assessment year 1970-71, the said expenditure could not be claimed as deduction from the income for the assessment year 1971-72. In support of the aforesaid contention, Shri Arora has placed reliance on the decision of the Calcutta High Court in CIT v. Samnugger Jute Factory Co. Ltd. [1953] 24 ITR 265 and the decision of the Mysore High Court in Siddaramanna Charities Trust v. CIT [1974] 96 ITR 275. Shri Mehta, learned counsel for the assessee, has, on the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been applied for charitable or religious purposes only in the year in which the income had arisen. Shri Arora has urged that the aforesaid provisions, as it stood at the relevant time, provided that only that income would be excluded which was applied for charitable and religious purposes during the relevant assessment year in which the income was earned and any expenditure incurred for religious and charitable purposes in the earlier year could not be adjusted against the income of the succeeding year. We are unable to accept the aforesaid contention of Shri Arora. In our view, there is nothing in the language of section 1 l(1)(a) which lends support to the contention of Shri Arora that the expenditure incurred in the earlier year ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the purpose of the trust, the repayment of the debt would amount to an application of income for the purposes of the trust. In the said circular, the Central Board of Direct Taxes has expressed the view that the repayment of the loan originally taken to fulfil one of the objects of the trust will amount to an application of the income for charitable and religious purposes. In other words, according to the said circular, if the trust wants to spend more money on charitable and religious purposes, then, in a particular year, it can take a loan and the said loan can be repaid out of the income of the subsequent year and the repayment of the said loan out of the income of the subsequent year would amount to application of income for chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred for some purposes which have nothing to do with the objects of the trust. The Tribunal also observed that it is not the case of the Department that the said expenditure of Rs. 59,770 was not incurred by the assessee for charitable purposes. In these circumstances, the Tribunal was right in holding that the sum of Rs. 59,770 adjusted against the income of the assessment year 1971-72 could be excluded from the income of the trust for the said assessment year for the purposes of assessment under section II (1)(a) of the Act. In CIT v. Samnugger jute Factory Co. Ltd. [1953] 24 ITR 265 (Cal), the question was with regard to the interpretation of section 15B(1) of the Indian Income-tax Act, 1922. In that case, exemption was being claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal as well as the Income-tax Authorities below on the ground that the said sum of Rs. 25,000 is from the funds of the assessee and not from the income of the relevant accounting year as on the first day of the accounting year there were no profits available from which the funds could be donated. The Mysore High Court agreed with the said view and held that the benefit of section 11 (1)(a) was available provided the trust earned profits in the previous year relevant to the assessment year and the profit and loss account showed that the donation of Rs. 25,000 formed part of the profits for the year in which the payment was made. The said decision lends no assistance to the contention of Shri Arora. According to this decision, in order to ava ..... X X X X Extracts X X X X X X X X Extracts X X X X
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