2018 (2) TMI 1087 - AT - Income Tax

Scheme of taxation of charitable or religious trust/institution as codified u/s.11,12 and 13 Carry forward of excess expenditure for adjustment against income of subsequent years - Held that - We find that the issue before us of carry forward of excess expenditure for adjustment against income of subsequent years is covered by the decisions of the Co-ordinate Benches of this Tribunal in the case of Jyothi Charitable Trust 2015 (7) TMI 859 - ITAT BANGALORE and the case of ITO (Exemption) Vs. Shraddha Trust 2017 (4) TMI 1289 - ITAT BANGALORE . Thus uphold the order of the ld CIT(A) in directing the AO to allow carry forward of excess expenditure for adjustment against income of subsequent years - Decided against revenue

Summary

Issues involved:
- Carry forward of excess expenditure for adjustment against income of subsequent years in the case of a charitable trust.

Analysis:
1. Background: The appeal before the Appellate Tribunal ITAT Bangalore concerned the order of the CIT(A) regarding the assessment of a trust for the assessment year 2013-14. The trust had filed its return of income claiming exemption under section 11 of the Income-tax Act, 1961.

2. Assessment and Appeal: The assessment was concluded under section 143(3) of the Act, where the assessing officer disallowed depreciation and the claim for carry forward of excess expenditure for adjustment against income of future years. The CIT(A) partially allowed the appeal, upholding the disallowance of depreciation but allowing the carry forward of excess expenditure for application against surplus income of subsequent years.

3. Grounds of Appeal: The Revenue challenged the order of the CIT(A) before the Tribunal on the grounds that there is no provision in the Act for computing loss from property held under trust due to excess application of income/funds.

4. Arguments: The Revenue contended that the provisions relating to set-off of loss and carry forward of losses are not applicable to charitable trusts. On the other hand, the assessee argued that various decisions of the Tribunal supported the carry forward of excess expenditure for adjustment against income of subsequent years.

5. Tribunal's Decision: After considering the arguments and judicial pronouncements, the Tribunal held that the issue of carry forward of excess expenditure is permissible for charitable trusts. Citing precedents, the Tribunal emphasized that adjusting excess expenditure against income of subsequent years amounts to application of income for charitable purposes. Therefore, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order allowing the carry forward of excess expenditure.

6. Conclusion: The Tribunal dismissed the Revenue's appeal for the assessment year 2013-14, affirming the CIT(A)'s decision to allow the carry forward of excess expenditure for adjustment against income of subsequent years for the charitable trust.

This detailed analysis highlights the key legal arguments, precedents, and the final decision of the Tribunal regarding the issue of carry forward of excess expenditure for charitable trusts, providing a comprehensive overview of the judgment.