2016 (1) TMI 495 - AT - Income Tax

Disallowance of claim for carry forward of deficit - whether resulting out of excess application over income - Held that - The claim of the assessee that deficit from earlier years can be set-off against current year s income for working out the utilisation, found approval. In view of this, we are of the view that assessee is eligible for claiming carry forward of the deficit, and CIT (A) was justified in directing so. - Decided in favour of assessee

Summary

Issues involved:
- Denial of claim for carry forward of deficit of Rs. 2,15,68,002/- by the Assessing Officer.
- CIT (A) upheld the denial based on the judgment of Hon'ble Delhi High Court.
- Conflict between the decisions of different Tribunals regarding the eligibility for carry forward of deficit arising from excess application of funds by a trust.

Detailed Analysis:
1. The appeal was filed by the assessee challenging the denial of the claim for carry forward of a deficit of Rs. 2,15,68,002/- by the Assessing Officer. The Assessing Officer rejected the claim stating that the provision for computation of loss and carry forward was not applicable to trusts covered under specific sections of the Income Tax Act. The CIT (A) also upheld this decision, citing a judgment of the Hon'ble Delhi High Court in a similar case.

2. The assessee contended that a deficit arising from excess application of funds should be considered for carry forward, referencing a previous case where a similar view was upheld by a coordinate bench. On the contrary, the Department Representative supported the decisions of the lower authorities and referred to a Mumbai bench judgment that aligned with the Assessing Officer and CIT (A).

3. The Tribunal examined the judgments cited by both parties, particularly focusing on the Hon'ble Delhi High Court's decision and its implications on the eligibility for carry forward of deficits. The Tribunal referred to previous cases where the issue of carry forward of deficit was analyzed, emphasizing the need to consider surplus over expenditure to determine the taxable income of charitable trusts.

4. After considering the arguments and precedents, the Tribunal concluded that the assessee was eligible for claiming the carry forward of the deficit. The Tribunal disagreed with the lower authorities' decision and directed the Assessing Officer to allow the carry forward claimed by the assessee.

5. Consequently, the appeal filed by the assessee was allowed, overturning the denial of the claim for carry forward of the deficit. The Tribunal's decision was based on the interpretation of relevant legal provisions and previous judgments, emphasizing the treatment of deficits arising from excess spending for charitable purposes in the context of income tax assessments.