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2013 (12) TMI 992 - AT - Income TaxExemption u/s. 11 whether Trust itself is not lawful Trust - Held that - Following CIT vs. Gujarat Maritime Board 2007 (12) TMI 7 - SUPREME COURT OF INDIA Any institution created for public utility by the State Government has been held to be entitled for registration and grant of exemption under section 11 The assessee s function also does not involve any profit motive - As per MID Act the assessee was required to carry out Government functions which are of public interest - It cannot be said that assessee is a Corporate Body and is not entitled to exemption under section 11 to 13 - By virtue of section 19 of the MID Act to provide services of public utility and legal obligation on the part of Corporation to hold and apply all its property income and assets for the purpose of the Act i.e. object of general public utility Following Radhasoami Satsang vs. CIT 1991 (11) TMI 2 - SUPREME Court - There is no material change justifying the revenue to take a different view of the matter - The denial of exemption under section 11 is contrary to the doctrine of consistency - Decided against Revenue. Carry forward of deficit Held that - Following CIT vs. Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY High Court - In case of charitable trust whose income is exempt under section 11 excess expenditure in the earlier years can be adjusted against income of subsequent years and such adjustment would be application of income for subsequent years Decided against Revenue.
Issues Involved:
1. Whether the Ld. CIT(A) was justified in allowing the claim of exemption u/s. 11 of the Income Tax Act when the Trust itself is not lawful within the provisions of the Act? 2. Whether the Ld. CIT(A) was right in ignoring the ratio of Hon'ble Supreme Court judgments regarding double deduction? 3. Whether the order of the Ld. CIT(A) should be set aside and that of the Assessing Officer be restored? Analysis: Issue 1: The appeal by the revenue challenged the order passed by Ld. CIT(A)-I, Mumbai, regarding the claim of exemption u/s. 11 of the Act for the assessment year 2008-09. The Assessing Officer (AO) denied the benefit to the assessee under section 11, arguing that the MIDC, created by the legislature as a Local Authority, cannot be assessed as a trust. The AO contended that the MIDC does not qualify as a Public Trust or Charitable Trust, and its activities do not warrant total exemption from income tax. The AO relied on various decisions, including the Hon'ble Supreme Court's judgment in a similar case. However, the Ld. CIT(A) held that the assessee, MIDC, is eligible for claiming exemption under section 11 as it is required to carry out Government functions of public interest. The Ld. CIT(A) referred to relevant case laws and directed the AO to allow exemption to the assessee under section 11. Issue 2: The second issue raised by the revenue concerned the deficit claimed by the assessee and requested to carry forward. The AO denied this claim, stating that it would result in double deduction as the assets' cost had already been claimed as an application towards the trust's object in earlier years. However, the Ld. CIT(A) allowed the carry forward of the deficit, citing a decision of the Jurisdictional High Court, which held that excess expenditure in earlier years can be adjusted against income in subsequent years, considering it as an application of income for subsequent years. Judgment: The Tribunal upheld the Ld. CIT(A)'s decision on both issues. Regarding the first issue, the Tribunal found that the assessee, MIDC, was entitled to exemption under section 11, as it was granted a registration under section 12A and was carrying out activities without a profit motive, similar to the case law precedent of the Hon'ble Supreme Court. On the second issue, the Tribunal agreed with the Ld. CIT(A) that the carry forward of deficit was allowable, following the decision of the Jurisdictional High Court. The Tribunal emphasized the importance of consistency in assessing the assessee's status and benefits granted in earlier years, as per the doctrine of consistency upheld by the Hon'ble Supreme Court. Consequently, the appeal filed by the revenue was dismissed. This detailed analysis of the judgment provides a comprehensive overview of the legal issues involved and the Tribunal's decision on each issue, supported by relevant legal principles and case laws.
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