2017 (1) TMI 395 - AT - Income Tax

Carry forward of the loss - loss as claimed by the assessee treating the same as excess application of loss u/s.11 - carry forward of excess expenditure of earlier years for set off in the subsequent years - Held that - Finding and directions of the learned CIT(A) is in accordance with the decision of the Hon ble Bombay High Court in the case of Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY High Court wherein held that income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the Trust for charitable and religious purposes in the earlier years against the income earned by the Trust in the subsequent year will have to be regarded as application of income of the Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the Trust under section 11(1)(a) of the Act. - Decided against revenue

Summary

Issues:
Allowance of carry forward of deficit due to excess expenditure in subsequent years without express provision in the Income Tax Act, 1961.

Analysis:
The appeal by the Revenue was against the order of the CIT(A)-1, Mumbai for A.Y. 2009-2010, which disallowed the carry forward of a loss claimed by the assessee due to excess application of loss. The CIT(A) allowed the appeal, citing a decision of the Hon'ble High Court of Bombay. The Revenue raised two main grounds challenging the allowance of the deficit carry forward without an express provision in the IT Act. The Revenue argued against granting double benefits to the assessee and emphasized the absence of a specific provision for such claims.

The Revenue contended that the CIT(A) erred in allowing the claim for deficit carry forward, emphasizing the lack of an explicit provision in the IT Act. The Revenue sought to set aside the CIT(A)'s order and restore that of the Assessing Officer. The Revenue's arguments were supported by the order of the Assessing Officer.

In response, the assessee's representative relied on the CIT(A)'s order, highlighting that the issue was covered by the decision of the jurisdictional High Court and a Tribunal decision. The Tribunal carefully considered the arguments from both sides and examined the judicial pronouncements cited. The Tribunal found that the CIT(A)'s decision to allow the carry forward of excess expenditure was in line with the Bombay High Court's decision, which held that adjusting expenses against subsequent year's income was permissible for charitable trusts.

The Tribunal upheld the CIT(A)'s directions to allow the carry forward of excess expenditure, amounting to a specific sum. Citing the Bombay High Court's decision and finding no error in the CIT(A)'s order, the Tribunal dismissed the Revenue's appeal for A.Y. 2009-10. The Tribunal pronounced the order in open court on 04/01/2017, thereby concluding the matter.