2022 (3) TMI 80 - AT - Income Tax

Exemption u/s 11 - carry forward of deficit, being excess of expenditure over receipts, to subsequent years - HELD THAT - We find that on similar issue, the Hon'ble Supreme Court in Subros Educational Society 2022 (2) TMI 582 - SC ORDER held that any excess expenditure incurred by the trust / charitable institution in earlier assessment year would be allowed to be set off against income of the subsequent years by invoking the provisions of section 11. We find no reason to interfere with the findings of the CIT(A) allowing carry forward of deficit, being excess of expenditure over receipts, to subsequent years. Accordingly, the sole ground raised by the Revenue is dismissed.

Summary

Issues:
1. Allowance of deficit carry forward under section 11(1)(a) of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeal was filed by the assessee challenging an order passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) for the assessment year 2015-16.

2. The Revenue raised the issue of whether the CIT(A) was justified in allowing the assessee to carry forward the deficit to subsequent years for set-off, citing a judgment of the Bombay High Court. The Revenue also mentioned a Review Petition filed before the Supreme Court against a different decision.

3. Despite the absence of representation from the assessee, the Tribunal proceeded with the appeal as the issue had been decided in favor of the taxpayer by the Supreme Court in a previous case.

4. The Registry initially raised a concern about the appeal being time-barred, but the Departmental Representative argued that the appeal was filed within the extended deadline granted by the Supreme Court.

5. Due to the extension of the limitation period for judicial proceedings by the Supreme Court, the appeal was heard on its merits.

6. The main issue in the appeal was regarding the carry forward of deficit from excess expenditure over receipts to subsequent years.

7. The assessee, a public charitable trust, had claimed exemption under section 11(1)(a) of the Act, which was rejected by the Assessing Officer due to the expenditure exceeding gross receipts, leading to disallowance of deficit carry forward.

8. The CIT(A), considering various judicial precedents, allowed the appeal by the assessee, emphasizing that section 11(1)(a) does not impose specific conditions for exemption based on expenditure exceeding gross receipts.

9. The Tribunal noted that the Assessing Officer, in a subsequent assessment order, had allowed the exemption for the relevant assessment year.

10. Despite the Review Petition filed by the Revenue against a related Supreme Court decision, the Tribunal, following the Supreme Court's dismissal of the Review Petition, upheld the CIT(A)'s decision to allow the carry forward of deficit to subsequent years.

11. Consequently, the sole ground raised by the Revenue was dismissed, and the appeal was decided in favor of the assessee.

This detailed analysis covers the issues, arguments, decisions, and legal reasoning presented in the judgment by the Appellate Tribunal ITAT Mumbai.