2017 (5) TMI 1564 - AT - Income Tax

Carry forward of deficit and allowing set off against the income of the subsequent years - exemption u/s 11 - Held that - We find that the learned CIT(A) has rightly followed the judgement of Institute of Banking Personnel 2003 (7) TMI 52 - BOMBAY HIGH COURT and directed the A.O. to allow the carry forward and set off of deficit after due verification of facts - Decided in favour of assessee.

Summary

Issues:
- Allowance of carry forward of deficit and set off against subsequent years' income
- Interpretation of provisions in the Income Tax Act regarding deficit carry forward
- Reliance on precedent judgments for allowing the claim of carry forward

Analysis:

Issue 1: Allowance of carry forward of deficit and set off against subsequent years' income
The case involved an appeal by the revenue regarding the allowance of carry forward of deficit amounting to ?52,98,149 and its set off against income of subsequent years. The Assessing Officer had denied this carry forward in the assessment under section 143(3) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) allowed the carry forward and set off based on the judgment of the Hon'ble Bombay High Court in a similar case involving a charitable trust. The Appellate Tribunal upheld the decision of the CIT(A) and dismissed the appeal filed by the revenue.

Issue 2: Interpretation of provisions in the Income Tax Act regarding deficit carry forward
The key contention was whether there was an express provision in the Income Tax Act, 1961 permitting the allowance of the deficit carry forward claim. The revenue argued against allowing the claim, emphasizing the absence of a specific provision for such allowance. However, the Tribunal relied on the judgment of the Hon'ble Bombay High Court, which interpreted the provisions in a manner that allowed for the carry forward and set off of deficits for charitable trusts. The Tribunal affirmed the decision of the CIT(A) based on this interpretation.

Issue 3: Reliance on precedent judgments for allowing the claim of carry forward
The Tribunal highlighted the importance of precedent judgments in tax matters. It referenced the judgment of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection, which established the principle that excess expenditure in earlier years could be adjusted against income in subsequent years for charitable trusts. The Tribunal found merit in this interpretation and supported the CIT(A)'s decision to allow the carry forward and set off of deficits based on this precedent. The Tribunal dismissed the revenue's appeal, emphasizing the binding nature of established legal precedents in tax law matters.

This detailed analysis outlines the issues of the case, the arguments presented, and the legal interpretations that led to the final decision of the Appellate Tribunal to uphold the allowance of carry forward of deficit and set off against subsequent years' income based on precedent judgments and provisions of the Income Tax Act.