1990 (2) TMI 100 - AT - Income Tax

Business Loss Carry Forward And Set Off Charitable Purpose Charitable Trust Total Income

Summary

Issues: Appeal against the direction to carry forward deficit for set off against future capital gains.

Summary:
The departmental appeal challenged the direction of the Appellate Assistant Commissioner (AAC) to carry forward the deficit of the current year for set off against future capital gains. The Department contended that the AAC's order was unjustified as it exceeded the provisions of the Act. The AAC's decision was argued to be erroneous as it allowed the carry forward of deficit beyond the limits prescribed under the statute.

On the other hand, the assessee, a charitable institution, defended the AAC's order, stating that the deficit from the earlier year should be considered for determining the income applied for charitable purposes in subsequent years. The amount spent in excess of the trust's income was received as an advance for the sale of property, which should be treated as income of the trust. The assessee emphasized that the income under section 11 of the Income Tax Act should not be interpreted in a commercial sense, and the AAC's decision was supported by a previous Tribunal decision.

After hearing both parties, it was concluded that the deficit resulting from excess spending for charitable purposes cannot be carried forward as there is no provision in the Act for such procedure. The exemption for charitable trusts is limited to income applied for charitable purposes, and any deficit arising from excess spending cannot be included in the total income or carried forward. The claim that the advance received for property sale should be considered as income was rejected, as it does not form part of the total income computation. The Tribunal dismissed the appeal, upholding the decision that deficits from excess spending cannot be carried forward for set off against future capital gains.