2017 (4) TMI 1629 - AT - Income Tax

Assessment of trust - expenditure incurred for religious or charitable purposes - set off of expenditure on the objects of the society incurred in earlier years as claimed by the appellant society against the current year surplus - HELD THAT - CIT(A) has decided the issue in favour of the assessee without examining this aspect as to whether the expenditure incurred in earlier years are on account of charitable or religious purposes or not. As per the Tribunal order rendered in the case of DDIT Vs KFCS Ltd. 2016 (1) TMI 396 - ITAT BANGALORE it was held that if the expenditure incurred is on religious or charitable purposes it is the expenditure properly incurred by the trust and the income out of which the said expenditure incurred would not be liable to tax and this is not relevant as to whether the expenditure was incurred in the present year or in an earlier year. Hence this is very important to find out as to whether the expenditure for which the assessee is asking for set off in the present year were incurred for the objects of the trust or not? - There is no finding of the ld. CIT(A) on his aspect of the matter and therefore we feel it proper to restore the entire matter back to the file of the ld. CIT(A) for fresh decision in all the three years after examining the nature of expenditure incurred by the assessee in the earlier years 1999-2000 to 2001-02 for which the adjustment is being claimed in the present year. Appeals filed by the revenue are allowed for statistical purposes

Summary

Issues:
- Appeal against combined order of ld. CIT(A) for assessment years 2008-09 & 2009-10
- Appeal against separate order of ld. CIT(A) for assessment year 2011-12
- Grounds raised by revenue in all three appeals
- Excessive addition/disallowance
- Levying of interest u/s 234B of the Act

Analysis:
The judgment involves three appeals filed by the revenue against orders of the ld. CIT(A). Two appeals are directed against a combined order for assessment years 2008-09 & 2009-10, while the third appeal is directed against a separate order for assessment year 2011-12. The grounds raised in all three appeals are identical, challenging the actions of the ld. AO and seeking relief regarding the set off of expenditure on the objects of the society against the current year surplus. The ld. DR of the revenue supported the assessment orders, while the ld. AR of the assessee supported the orders of the ld. CIT(A) and cited a Tribunal order in favor of the assessee. The revenue argued that the nature of expenditure incurred in earlier years needs examination to determine tax liability. The Tribunal found that the ld. CIT(A) did not assess whether the expenditure in earlier years was for charitable or religious purposes. Citing a previous Tribunal order, the Tribunal emphasized the importance of determining the nature of expenditure claimed for set off. Consequently, the Tribunal set aside the ld. CIT(A)'s order in all three years and remanded the matter for fresh decision after examining the nature of expenditure incurred in earlier years.

The Tribunal noted that the assessee sought adjustment for excess expenditure from preceding years and emphasized the need to ascertain whether this expenditure was for charitable or religious purposes. Referring to a previous Tribunal order, the Tribunal highlighted that if expenditure is for such purposes, the income would not be liable to tax, regardless of when the expenditure was incurred. As the ld. CIT(A) did not evaluate the nature of expenditure from earlier years, the Tribunal deemed it necessary to send the matter back for reevaluation. The Tribunal directed the ld. CIT(A) to reconsider the issue in all three years after examining the nature of expenditure from 1999-2000 to 2001-02, for which the adjustment was claimed in the present year. The orders of the ld. CIT(A) were set aside, and the matter was remanded for fresh decision after providing both parties with adequate opportunity to present their case.

In conclusion, all three appeals filed by the revenue were allowed for statistical purposes. The Tribunal's decision highlighted the importance of evaluating the nature of expenditure claimed for set off against the current year surplus and emphasized the need for a thorough examination before determining tax liability.