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2021 (11) TMI 309 - AT - Income TaxAssessment of trust - Disallowance of carry forward of excess expenditure - HELD THAT - The issue raised in no longer res integra. The Hon'ble jurisdictional High Court in the case of Pr. CIT (Exemption) v. Agastya International Foundation 2018 (8) TMI 1894 - KARNATAKA HIGH COURT by following the earlier judgment of Ohio University Christ College 2018 (11) TMI 1055 - KARNATAKA HIGH COURT held that income derived from trust property has 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 to charitable and religious purposes in the subsequent year in which adjustment is made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a). Also see case of CIT (Exemption) v. Subros Educational Society 2018 (4) TMI 1622 - SC ORDER . In view of the above judicial pronouncements, we hold that the CIT(A) is justified in allowing carry forward excess expenditure. Therefore, we uphold the CIT(A)'s order as correct and in accordance with law. - Decided in favour of assessee.
Issues:
- Allowance of carry forward of excess expenditure by the assessee trust registered under section 12A of the Income Tax Act, 1961. - Interpretation of provisions related to carry forward of expenditure for trusts. - Examination of the legality of granting double benefit to the assessee. - Permissibility of accumulation of income and application of income under different sections for trusts. - Applicability of judicial precedents in determining the entitlement to carry forward excess expenditure. Analysis: The appeal before the Appellate Tribunal ITAT Bangalore involved a dispute regarding the allowance of carry forward of excess expenditure by an assessee trust registered under section 12A of the Income Tax Act, 1961 for the assessment year 2016-2017. The Revenue challenged the CIT(A)'s order allowing the claim of the assessee for carry forward of excess expenditure, raising multiple grounds of appeal. The primary contention was that there is no express provision in the Income Tax Act to permit the carry forward of expenditure for trusts registered under section 12AA. The Revenue also argued that granting such carry forward would result in providing a double benefit to the assessee, which is legally impermissible. Upon reviewing the facts of the case, the CIT(A) had allowed the appeal of the assessee, relying on a judgment of the jurisdictional High Court in a similar matter. The CIT(A) held that the assessee trust was entitled to carry forward excess expenditure, citing the judgment in the case of Pr. CIT (Exemption) v. Manipal Academy of Higher Education. Subsequently, the Revenue filed an appeal before the Tribunal challenging the CIT(A)'s decision. During the Tribunal proceedings, the learned Departmental Representative reiterated the grounds raised in the assessment order, while the assessee's representative argued that the issue was settled by judicial pronouncements. The assessee relied on the judgment in the case of Pr. CIT (Exemption) v. Agastya International Foundation and the judgment of the Apex Court in the case of CIT (Exemption) v. Subros Educational Society to support their position that carry forward of excess expenditure should be allowed for the trust. After hearing both sides and examining the legal precedents, the Tribunal concluded that the issue of allowing carry forward of excess expenditure for trusts was no longer res integra. Citing the judgments in the cases of Pr. CIT (Exemption) v. Agastya International Foundation and CIT (Exemption) v. Subros Educational Society, the Tribunal upheld the CIT(A)'s decision as correct and in accordance with the law. Consequently, the appeal filed by the Revenue was dismissed, affirming the allowance of carry forward of excess expenditure by the assessee trust. In conclusion, the Tribunal's decision was based on the interpretation of relevant legal provisions and the application of established judicial precedents, ultimately determining the entitlement of the assessee trust to carry forward excess expenditure for the assessment year in question.
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