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2020 (2) TMI 209 - AT - Income TaxDenying the benefit of section 11 - corpus donation - HELD THAT - The assessee produced confirmation and bank account and relevant details to prove it was a corpus donation.Therefore, it could not be added to the income of the assessee. CIT(A) correctly directed to delete the addition. The Revenue did not challenge the deletion of addition on account of corpus donation. Therefore, findings of fact recorded by Ld. CIT(A) are confirmed. If the corpus donation is excluded nothing would survive against the assessee so as to make any addition. In this view of the matter, there is no merit in Departmental appeal. Carry forward loss to next year for setting off against income of subsequent year - HELD THAT - Authorities below have failed to appreciate that income has to be computed commercially even in cases covered u/s 11-13 of the Act and resultant loss, if any, arising due to surplus application of income has to be computed and carry forward to the next year to be set off therein. AO has not given any findings on the same. CIT(A) without examining the issue in detail dismissed the claim of assessee because section 11 provides for exemption of income of charitable organization. However, it is a fact that assessee claimed carry forward of the losses for subsequent year as per law which should have been appreciated and should be considered in favour of the assessee.
Issues Involved:
1. Deletion of addition of ?1,60,62,047/- by the CIT(A) and applicability of Section 13. 2. Direction to allow brought forward loss of ?5,80,12,138/- to be carried forward to subsequent years. Issue-wise Detailed Analysis: 1. Deletion of Addition of ?1,60,62,047/- and Applicability of Section 13: The Revenue contested the CIT(A)'s decision to delete the addition of ?1,60,62,047/- by arguing that the assessee did not carry out any charitable activity and thus should not be entitled to the benefits of Section 11 of the Income Tax Act. The Assessing Officer (AO) had disallowed the investment in land and flats, stating that the assessee did not provide evidence that these investments were for charitable purposes. The assessee countered by stating that similar investments in the previous assessment year (2011-12) were allowed by the Tribunal, which recognized the investments as steps towards establishing a university. The Tribunal had previously ruled that such investments were permissible under Section 11(5)(x), which authorizes investment in immovable property for charitable purposes. The CIT(A) agreed with the assessee, noting that the investments were in compliance with the UP Private Universities Act, 2010, which mandates a minimum of 50 acres of land for establishing a university. The CIT(A) observed that the investments were preparatory steps for establishing a university and not real estate operations, thus entitling the assessee to benefits under Section 11. The Tribunal upheld this decision, referencing its earlier ruling that investments in immovable property are permitted under Section 11(5)(x) and do not necessarily need to be for immediate charitable purposes. Consequently, the Tribunal dismissed the Revenue's appeal on this ground. 2. Direction to Allow Brought Forward Loss of ?5,80,12,138/-: The Revenue also challenged the CIT(A)'s decision to allow the carry forward of the assessee's losses amounting to ?5,80,12,138/- to subsequent years. The AO did not comment on the carry forward of losses, but the CIT(A) allowed it, referencing various judgments that support the carry forward of deficits for charitable trusts. The CIT(A) cited the case of Director of Income Tax Vs Raghuvanshi Charitable Trust, which held that carrying forward a deficit of a charitable trust to set off against future income is permissible under Section 11(1)(a). The CIT(A) also referenced a similar decision in the case of Devender Kumar Garg Charitable Trust, maintaining consistency with previous rulings. The Tribunal, in its previous decision for the assessment year 2011-12, had also supported the carry forward of losses for charitable organizations, stating that income should be computed commercially, and any resultant loss should be carried forward. The Tribunal directed the AO to verify the facts and allow the carry forward of losses accordingly. Respecting this precedent, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground as well. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues: the deletion of the addition of ?1,60,62,047/- and the direction to allow the carry forward of the assessee's losses amounting to ?5,80,12,138/-. The judgments were based on the interpretation of relevant sections of the Income Tax Act and consistent with previous rulings on similar matters.
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