2014 (1) TMI 985 - AT - Income Tax

Disallowance of brought forward and set off loss - Exemption u/s 11 - The AO opined that if the view point of the assessee was accepted, it would result in granting double benefit, one being the exempt income and the other being carry forward of losses. - Held that - Following assessee s own case for A.Y. 2006-07 2012 (7) TMI 252 - ITAT, DELHI - 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 religious purpose in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of the income of the trust for charitable and religious purpose - Assessee has been permitted to carry forward the losses and also to claim set off such losses against the income in earlier AYs, which has been accepted by Revenue - Decided in favour of assessee.

Summary

Issues involved:
Disallowance of brought forward and set off loss, Excess application of funds disallowance.

Issue 1: Disallowance of brought forward and set off loss

The appeal was against the order of the ld. CIT (Appeals) sustaining the disallowance of brought forward and set off loss, treating it as a case of double deduction. The assessee claimed excess expenditure on charity over income for the current and earlier years, seeking to carry it forward and set it off against future income. The AO rejected this claim, stating that as the income was exempt u/s 11, excess expenditure could not be carried forward. The Tribunal noted that in a previous year, it had upheld the assessee's view on carry forward. The ld. DR cited judgments from non-jurisdictional High Courts, but the Tribunal, based on its previous decision and lack of contrary judgments from the jurisdictional High Court, held in favor of the assessee. The Tribunal directed the AO to verify the correct amount of loss for the current year and earlier years, setting aside the impugned order for recalculating the loss to be carried forward.

Issue 2: Excess application of funds disallowance

The second ground raised was the disallowance of the claim on account of brought forward and set off of loss due to excess application of funds. The Tribunal's decision on the first issue encompassed this aspect as well, as it directed the AO to reevaluate the correct quantum of loss to be carried forward, considering the decision taken by the Tribunal for earlier years. The appeal was allowed for statistical purposes, emphasizing the need for accurate computation of losses for proper carry forward.

In conclusion, the Tribunal's judgment addressed the disallowance of brought forward and set off loss, emphasizing the assessee's entitlement based on previous decisions and lack of contrary judgments from the jurisdictional High Court. The Tribunal directed the AO to verify and recalculate the loss for the current and earlier years, underscoring the importance of accurate computations for carry forward purposes.