2022 (1) TMI 244 - AT - Income Tax

Assessment of trust - allowance of carry forward of deficit to the assessee s trust - assessee is a trust registered under section 12A - AO rejected the claim holding that the provision 11 of the Act does not permit the determination of deposit - HELD THAT - CIT(A) has allowed the deficit to the assessee to be carried forward following the decision of the Hon ble Jurisdictional High Court 2013 (3) TMI 654 - BOMBAY HIGH COURT . He also supported such decision by the decision of Hon ble Supreme Court wherein the Special SLP filed by the Revenue was dismissed. 2018 (4) TMI 1622 - SC ORDER . Also with effect from 1-4-2022 explanation (2) is inserted after explanation 1 u/s 10(23C) of the by the Finance Act, 2021, which provides that Explanation 2.-For the purposes of this clause, it is clarified that the calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding to the previous year. However Notes on clauses to Finance Bill 2021 says that These amendments will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years. Therefore it does not apply for the impugned assessment year. No infirmity was pointed out by the learned Departmental Representative in the order of the learned Commissioner of Income Tax (Appeals). - Decided against revenue.

Summary

Issues:
Allowance of carry forward of deficit to the assessee's trust.

Analysis:
The appeal was filed by the Dy. Commissioner of Income Tax (Exemption) 2(1), Mumbai against the order passed by the Commissioner of Income Tax (Appeals)-1, Mumbai. The only issue raised was the allowance of carry forward of deficit to the assessee's trust. The assessee, a trust registered under section 12A of the Income-Tax Act, filed its return of income with a total income of ?3,93,86,346/-. The assessment order disallowed the deficit carry forward from earlier years and the current year's deficit. The Assessing Officer rejected the claim citing that provision 11 of the Act does not permit such determination. The CIT(A) allowed the claim following relevant court decisions. The learned DR supported the Assessing Officer's order, but despite notice, no one appeared on behalf of the assessee.

The CIT(A) allowed the deficit to be carried forward based on decisions of the Jurisdictional High Court and the Supreme Court. The CIT(A) noted that the Hon'ble Supreme Court had allowed similar claims in a related case. The order of the CIT(A) was upheld as no infirmity was found in it. The Finance Act, 2021 introduced an explanation regarding the calculation of income without set off or deduction, but it did not apply to the impugned assessment year. The order of the CIT(A) was upheld, and the appeal filed by the department was dismissed.

In conclusion, the Tribunal upheld the decision of the CIT(A) to allow the deficit to be carried forward to the assessee's trust. The legal basis for this decision was the relevant court judgments supporting the allowance of such claims. The Tribunal found no fault in the CIT(A)'s order and dismissed the appeal filed by the department.