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2019 (3) TMI 216 - AT - Income TaxExemptions u/s 11 - charitable activity - denial of exemption as widespread commercial activities in nature of business - set off of unabsorbed depreciation - Adjustment of deficit of earlier years against the income of the current year - HELD THAT - Appellant is eligible for exemption u/s 11 of the Act following the order passed by his predecessor for A.Y. 2010-11 in assessee s own case. Also the benefit of deficit of earlier years against the income of the current year was also correctly allowed by the Learned CIT(A) relying on the order passed by the Hon ble Jurisdictional High Court in the case of CIT-vs-Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992 (2) TMI 51 - GUJARAT HIGH COURT). - Decided in favour of assessee.
Issues:
1. Whether the CIT(A) was justified in allowing exemptions under section 11 to the assessee despite engaging in commercial activities? 2. Whether the CIT(A) was justified in allowing set off of carry forward losses against current year's income without an express provision in law? 3. Whether the CIT(A) should have upheld the Assessing Officer's order? 4. Whether the Revenue's appeal should be dismissed and the order of the CIT(A) be upheld? Analysis: 1. The appeal involved the Revenue and the assessee challenging the order passed by the Commissioner of Income Tax (Appeals)-9, Ahmedabad for the Assessment Year 2012-13. The assessee, a trust registered under sections 12AA and 80G of the Income Tax Act, filed its return of income declaring total income. The Assessing Officer treated the surplus income over expenditure as business income due to the nature of the trust's activities. However, the CIT(A) granted exemptions under section 11 to the assessee, allowing the benefit of deficit of earlier years against the current year's income based on precedents and the trust's charitable objectives. 2. During the appeal hearing, the assessee contended that the issue was similar to a previous case decided in their favor, which was upheld by the Jurisdictional High Court. The Revenue failed to counter these contentions. The Tribunal reviewed the relevant materials and noted the similarity to the previous case, where the Tribunal and High Court had ruled in favor of the assessee based on the trust's charitable objectives and activities not being profit-driven. 3. The Tribunal referred to previous orders in the assessee's case and a co-ordinate Bench's decision, which allowed the set off of brought forward deficit against the current year's surplus. The Tribunal directed the Assessing Officer to grant the set off in line with their previous order. The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's Cross Objection, considering the settled legal position on unabsorbed depreciation set off and tax computation. 4. The Hon'ble Gujarat High Court also rejected the Revenue's appeal, citing earlier judgments and confirming the Tribunal's decision based on the trust's charitable objectives and activities. The Court emphasized that the trust's activities were for general public utility and charitable purposes, leading to the dismissal of the tax appeal. The Tribunal upheld the Co-ordinate Bench's decision, resulting in the dismissal of the Revenue's appeal and the assessee's Cross Objection becoming infructuous. In conclusion, the Tribunal and High Court consistently ruled in favor of the assessee based on the charitable nature of the trust's activities, allowing exemptions under section 11 and the set off of deficits against income. The Revenue's appeal was dismissed, and the order of the CIT(A) granting relief to the assessee was upheld.
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