2018 (2) TMI 2062 - AT - Income Tax

Exemption u/s 11 - Carry forward of deficit and allowing set off against the income of subsequent years - Assessee is a registered trust under section 12A of the Act and also registered with charity commissioner Mumbai - HELD THAT - We find that this issue is squarely covered by the decision of Hon ble Bombay High Court in the case of Institute of Banking Personnel 2003 (7) TMI 52 - BOMBAY HIGH COURT and Revenue s main grievance is that the department has not accepted the Judgement of Hon ble Bombay High Court and want to keep the issue alive the order of CIT(A) is challenged. We find that the Revenue is clearly accepting that the order of CIT(A) is covered by the decision of Hon ble Bombay High Court and respectively following the same we confirm the order of CIT(A) and dismiss this appeal of Revenue.

Summary

Issues:
- Carry forward of deficit and set off against income of subsequent years

Analysis:
1. The appeal by the Revenue challenges the order of the Commissioner of Income Tax (Appeals) regarding the allowance of carry forward of deficit and its set off against the income of subsequent years. The Revenue raised three grounds questioning the decision of the CIT(A). The primary contention was whether the CIT(A) erred in allowing the carry forward of a deficit amount and set off against future income without an express provision in the Income Tax Act, 1961.

2. The assessee, a registered trust under section 12A, showed a deficit in its income computation, which the Assessing Officer (AO) deemed inadmissible for carry forward. However, the CIT(A) allowed the claim based on the judgment of the Hon'ble Bombay High Court in the case of CIT vs Institute of Banking Personnel Selection. The CIT(A) observed that the excess expenditure from earlier years could be adjusted against income in subsequent years, considering it as application of income for charitable purposes.

3. The CIT(A) relied on the commercial principles and benevolent provisions of the Act to support the allowance of carry forward of deficit. The Tribunal noted that the Revenue did not contest the applicability of the Bombay High Court judgment but sought to keep the issue alive. Ultimately, the Tribunal upheld the order of the CIT(A) based on the precedent set by the Bombay High Court, dismissing the Revenue's appeal.

4. The Tribunal confirmed that the decision of the CIT(A) aligns with the judgment of the Hon'ble Bombay High Court and, therefore, upheld the allowance of carry forward of deficit and its set off against future income. The appeal by the Revenue was dismissed, affirming the decision of the lower authorities.

This detailed analysis outlines the key issues raised in the legal judgment, the arguments presented by both parties, and the final decision rendered by the Tribunal based on the applicable legal principles and precedents.