2016 (3) TMI 730 - AT - Income Tax

Carry forward of excess application of income over the income - Held that - As observed at para 4.5 of the order of the Tribunal the six sources of income as enumerated could be the only possible income. All the income would be entitled for exemption under Section 11 of the Act provided the same is applied for charitable activity. The assessee is also eligible to accumulate to the extent of 15% of income from such property. If any income, which could not be applied for charitable purpose and such income does not exceed more than 15%, then the Assessing Officer would have allowed the claim of the assessee in the year in which it was not utilized for charitable purpose. Therefore, it is for the assessee to explain before the Tribunal the income of the assessee for the earlier assessment year and what was applied for charitable purpose and how much exemption was allowed by the Assessing Officer. Unfortunately, the details of such income and application of income in the earlier year is not available on record. Therefore, this Tribunal has no other choice except to presume that the income of the assessee was already allowed in the earlier year. Hence, nothing remains to carry forward. If that is the situation, this Tribunal is of the considered opinion that there is no occasion for the assessee to carry forward the income to the subsequent year. In the absence of any details, this Tribunal finds no reason to interfere with the order of the lower authority. Accordingly, the order of the CIT(Appeals) is confirmed. - Decided against assessee

Summary

Issues:
- Carry forward of excess application of income over the income.

Analysis:
The judgment pertains to an appeal against the order of the Commissioner of Income Tax (Appeals)-VII, Chennai, for the assessment year 2008-09. The main issue for consideration was the carry forward of excess application of income over the income. The appellant, a Trust, claimed exemption under Section 11 of the Income-tax Act, 1961, for an expenditure incurred in the previous year. The appellant argued that since it is a registered Trust, it is eligible for the exemption. The appellant relied on judgments from various High Courts to support its claim for exemption.

On the other hand, the Departmental Representative argued that each assessment year is distinct, and there is no provision in the Income-tax Act for carrying forward expenditure from one year to another. The Departmental Representative contended that the appellant is eligible for exemption only for the income applied for charitable purposes and the income accumulated to the extent of 15%. Referring to a previous Tribunal decision, the Departmental Representative emphasized that accumulated funds, if any, would be allowed as exemption in the year of accumulation and cannot be claimed as exemption in the year of application to avoid double deduction.

The Tribunal analyzed the submissions and relevant provisions of the Act. It highlighted that the Act focuses on the application of income derived from property held under Trust for charitable purposes and voluntary contributions received by the Trust. The Tribunal emphasized that funds applied from the corpus of the Trust, accumulated funds, loans, or sundry creditors cannot be considered as funds applied from the income of the Trust for the purpose of exemption under Section 11. The Tribunal concluded that excess application of funds beyond the income of the Trust can only arise from specific sources like loans or sundry creditors and not from corpus or accumulated funds to avoid double deduction. As the appellant failed to provide details of income and its application in the earlier year, the Tribunal confirmed the lower authority's order denying the carry forward of excess application of income.

In light of the above analysis, the Tribunal dismissed the appeal of the assessee, confirming the order of the lower authority. The judgment highlighted the importance of understanding the specific sources of income for a Trust and the application of funds to ensure compliance with the provisions of Section 11 of the Income-tax Act, 1961.