2018 (12) TMI 825 - AT - Income Tax

Carry forward of either the current year loss or that of earlier year loss denied to assessee trust - assessee satisfies the condition for exemption u/s. 11 and 12 - AO was of the view the loss suffered during the year was on account of capital expenditure and therefore loss cannot allowed to be carried forward - Held that - Respectfully following the Coordinate Bench order of the Tribunal in assessee s own case passed in assessment year 2008-09 AND SUBROS EDUCATIONAL SOCIETY 2018 (4) TMI 1622 - SUPREME COURT OF INDIA which is identical to the facts of the instant case hence we quash the orders of the lower authorities and allow the carried forward of current year s loss to be set off in the future years. It is ordered accordingly. - Decided in favour of assessee.

Summary

Issues involved:
1. Failure to appreciate judicial precedents by the CIT(A).
2. Computation of income and carry forward of losses under sections 11-13 of the Income Tax Act, 1961.
3. Allowability of carry forward of losses on account of capital expenses for charitable institutions.

Detailed Analysis:
Issue 1: The appeal was filed against the CIT(A)'s order, alleging a failure to consider relevant High Court and Tribunal judgments, violating judicial discipline. The appellant argued that principles of judicial discipline were disregarded by the CIT(A) in not appreciating the cited precedents.

Issue 2: The dispute centered around the computation of income and the carry forward of losses under sections 11-13 of the Income Tax Act, 1961. The appellant contended that income must be computed commercially even in cases covered by these sections. The AO disallowed the carry forward of losses on the grounds that capital expenses for charitable institutions are allowable as application of income but not for carry forward. The Tribunal referred to previous decisions and the commercial principles applied to income derived from trust property.

Issue 3: The question of allowing carry forward of losses on account of capital expenses for charitable institutions was extensively discussed. The Tribunal cited relevant case laws where it was held that losses from capital expenditure can be carried forward and set off against future income. The Tribunal also referenced a Supreme Court judgment dismissing a miscellaneous application on the same issue, affirming the allowance of carry forward of losses for charitable institutions.

In conclusion, the Tribunal quashed the lower authorities' orders and allowed the carry forward of the current year's loss to be set off in future years, based on the principles established in previous decisions and the Supreme Court judgment. The appeal filed by the Assessee was allowed, and the order was pronounced on 13-12-2018.