2019 (2) TMI 528 - HC - Income Tax

Assessment of trust - Eligibility for carry forward of deficit of the assessee to the subsequent years when the income of a charitable or religious trust / institution is required to be computed by applying general commercial principles - Held that - Substantial questions of law covered by the judgment of COMMISSIONER OF INCOME TAX VS. RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA 2017 (12) TMI 1067 - SUPREME COURT . - Decided in favour of the Assessee. Entitlement to carry forward of deficit to assessee trust - Held that - Substantial questions of law covered by the judgment of COMMISSIONER OF INCOME-TAX (EXEMPTIONS) AND ANOTHER VERSUS OHIO UNIVERSITY CHRIST COLLEGE 2018 (11) TMI 1055 - KARNATAKA HIGH COURT - Decided in favour of the Assessee.

Summary

Issues involved:
1. Eligibility of a charitable or religious trust for carry forward of deficit in subsequent years based on general commercial principles.
2. Applicability of sections 70 to 80 of the Income Tax Act to trusts for carry forward of deficit.
3. Claiming depreciation on capital assets by a trust when the income is already exempt and the amended provisions of the Act deny such claim.

Analysis:
1. The first issue revolves around the eligibility of a charitable or religious trust for carrying forward a deficit to subsequent years. The Tribunal had to decide whether the income of such trusts should be computed by applying general commercial principles or by referring to the regular provisions of the Income Tax Act. The Tribunal's decision was challenged, but the learned counsel for the appellants argued that the issue was settled by a judgment of the Hon'ble Supreme Court in a similar case. The counsel contended that the Supreme Court's decision supported the trust's eligibility for carrying forward the deficit based on general commercial principles. Consequently, the High Court ruled in favor of the Assessee, based on the precedent set by the Supreme Court.

2. The second issue raised concerns the applicability of sections 70 to 80 of the Income Tax Act to trusts for carrying forward a deficit. The Tribunal's decision was contested, and the High Court referred to its own judgment in a previous case to resolve the matter. The High Court found that the issue was already addressed in the earlier judgment, where it was established that the provisions of sections 70 to 80 of the Income Tax Act do not apply to trusts for carry forward of deficit. Therefore, the High Court ruled in favor of the Assessee and against the Revenue on this issue.

3. The final issue pertains to the claim of depreciation on capital assets by a trust, especially when the trust's income is already exempt and the amended provisions of the Act disallow such a claim. The Tribunal's decision was challenged, and the High Court had to examine the legality of claiming depreciation under these circumstances. However, the High Court did not provide specific details on the resolution of this issue in the summary provided.