2015 (3) TMI 1419 - AT - Income Tax

Exemption u/s. 11 - charitable activity u/s 2(15) - Whether CIT(A) erred in directing the AO to allow benefit of exemption u/s. 11 to the assessee when the activities of assessee are akin to those of a mutual association and do not fall within the definition of charitable purpose as per section 2(15)? - HELD THAT - As held that the assessee is a charitable institution and duly recognized u/s. 12A therefore, the income has to be computed in accordance with the provisions of Sec. 11 of the Act. Respectfully following the earlier years order 2014 (11) TMI 379 - ITAT MUMBAI we direct the AO to compute the total income of the assessee in terms of Sec. 11 to 13 of the Act. This ground of the Revenue is dismissed. Set off and carry forward of deficit of earlier years - We find that this issue was considered by the Hon ble Bombay High Court in the case of Institute of Banking 2003 (7) TMI 52 - BOMBAY HIGH COURT held that 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 and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in Se. 11 of the Act and that such adjustment will have to be excluded from the income of the Trust u/s. 11(1)(a) of the Act. Our view is also supported by the judgement of the Gujarat High Court in the case of CIT Vs Shri Plot Swetamber Murti Pujak Jain Mandal 1993 (11) TMI 17 - GUJARAT HIGH COURT Revenue appeal dismissed.

Summary

Issues:
1. Allowance of exemption u/s. 11 to the assessee for activities akin to a mutual association.
2. Claim for set off and carry forward of deficit of earlier years without express provision in the I.T. Act, 1961.

Analysis:
1. The Tribunal addressed the first issue by considering the assessee's claim for exemption u/s. 11, which was contested by the Revenue. The Tribunal referred to the Tribunal's order for A.Y. 2008-09 in the assessee's own case and the High Court's decision for A.Y. 2003-04. It was established that the assessee is a charitable institution recognized u/s. 12A, and thus entitled to exemption u/s. 11. The Tribunal upheld the earlier decisions and directed the AO to compute the income of the assessee in accordance with Sec. 11 to 13 of the Act, dismissing the Revenue's ground.

2. Regarding the second issue of allowing the claim for set off and carry forward of deficit of earlier years, the Tribunal relied on the decision of the Hon'ble Bombay High Court in the case of Institute of Banking. The High Court's ruling emphasized that adjustment of expenses incurred in earlier years against the income of subsequent years for charitable purposes should be considered as application of income for charitable and religious purposes. The Tribunal, following the High Court's decision, dismissed the Revenue's ground, concluding that there was no reason to interfere with the findings of the Ld. CIT(A).

In conclusion, the appeals filed by the Revenue were dismissed by the Tribunal based on the above analysis and legal interpretations.