2015 (8) TMI 1462 - AT - Income Tax

Disallowance of carry forward of excess capital expenditure which needs to be set off against the future income - assessee is a society, running several educational institutions - Held that - This issue is no longer res integra. The Tribunal in assessee s own case for the AY 2005-06 2011 (8) TMI 1194 - ITAT DELHI by following the judgment of the Hon ble Bombay High Court in the case of CIT Vs. Institute of Banking 2003 (7) TMI 52 - BOMBAY HIGH COURT has decided the issue in favour of the assessee.

Summary

Issues Involved:
- Disallowance of carry forward of excess capital expenditure for set off against future income
- Disallowance of appeal based on previous ITAT order
- Allegation of not following judicial discipline by CIT(A)
- Arbitrary and illegal nature of CIT(A) order

Analysis:

Issue 1: Disallowance of carry forward of excess capital expenditure for set off against future income
The Assessing Officer (AO) denied the benefit of carry forward of loss claimed by the assessee, stating it was not based on normal commercial principles of accounting. The AO believed that the claimed loss was due to capital expenditure and thus could not be carried forward. However, the AO allowed exemption under section 11 as the total application of income exceeded 85% of total receipts. The CIT(A) upheld the AO's decision, leading the assessee to appeal to the Tribunal. The Tribunal referred to a previous case where a similar issue was decided in favor of the assessee. Citing the judgment of the Hon'ble Bombay High Court, the Tribunal allowed the carried forward of the current year's loss to be set off against future income, based on commercial principles of accounting.

Issue 2: Disallowance of appeal based on previous ITAT order
The CIT(A) dismissed the appeal of the assessee based on a previous ITAT order, which the assessee argued had been overruled in a different case of the same assessee for AY 2005-06. The Tribunal found that the issue in question was already decided in favor of the assessee in the previous case and quashed the CIT(A) order, allowing the appeal.

Issue 3: Allegation of not following judicial discipline by CIT(A)
The assessee alleged that the CIT(A) did not follow judicial discipline by not considering previous orders in the assessee's favor, including one from AY 2005-06. The Tribunal, after considering the relevant precedents and judgments, found that the CIT(A) had erred in not following the principles established in previous cases and allowed the appeal in favor of the assessee.

Issue 4: Arbitrary and illegal nature of CIT(A) order
The assessee contended that the CIT(A) order was arbitrary and illegal, seeking its quashing or modification. The Tribunal, after examining the facts and legal aspects, found in favor of the assessee, quashing the CIT(A) orders and allowing the carried forward of the current year's loss to be set off against future income.

In conclusion, the Tribunal allowed both appeals filed by the assessee, quashing the CIT(A) orders and permitting the carry forward of excess capital expenditure for set off against future income, based on established legal principles and precedents.