2015 (1) TMI 1438 - HC - Income Tax

Assessment of trust - Carry forward and set off of deficit of earlier years - Whether as per the accounting norms capital expenditure is not to be debited to income and expenditure account and hence no occasion arises when a deficit can be computed while allowing claim of application of income by way of capital expenditure as deduction? - HELD THAT - Although the issue stands covered by the decision of this court in Institution of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY HIGH COURT the fact is that revenue is aggrieved by it however Revenue did not challenge it in the higher forum in view of low tax effect. Be that as it may no fault can be found with the order of the tribunal giving rise to the substantial question of law.

Summary

Issues:
1. Allowance of claim for carry forward and set off of deficit of earlier years under the Income Tax Act, 1961.
2. Acceptance of claim for brought forward deficits of earlier years and treatment of capital expenditure in income and expenditure account.

Analysis:

Issue 1:
The High Court of Bombay heard an appeal filed by the revenue challenging the order passed by the Income Tax Appellate Tribunal for the Assessment Year 2007-08. The main contention raised by the revenue was regarding the allowance of the claim for carry forward and set off of deficit of earlier years by the assessee. The appellant revenue posed questions of law questioning the Tribunal's decision. The Tribunal's order was based on the agreement of both parties that the issue was favorably settled for the assessee by a previous decision of the Hon'ble Jurisdictional High Court. The court noted that although the revenue was aggrieved by the decision, it did not challenge it further due to low tax effect. Ultimately, the court upheld the Tribunal's decision, stating that no fault could be found as it followed the precedent set by the earlier decision of the High Court.

Issue 2:
The second issue raised in the appeal pertained to the acceptance of the claim for brought forward deficits of earlier years and the treatment of capital expenditure in the income and expenditure account. The revenue contended that the Tribunal erred in deciding the issue by allowing the claim of application of income by way of capital expenditure as a deduction. However, the court found that the Tribunal's decision was in line with the decision of the High Court in a previous case. Despite the revenue's dissatisfaction with the outcome, the court dismissed the appeal, upholding the Tribunal's decision. No costs were awarded in this matter.

In conclusion, the High Court of Bombay dismissed the revenue's appeal, upholding the decisions of the Tribunal based on the precedents set by earlier judgments of the High Court. The issues of allowing the claim for carry forward and set off of deficits of earlier years and the treatment of capital expenditure were decided in favor of the assessee, in accordance with the established legal interpretations.