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TMI Blog2018 (10) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent year. The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g years and claim it as application of income in the succeeding years? 3. The assessee is a trust registered u/s. 12A of the Act. For the A.Y. 2012-13, the assessee filed a return of income claiming set off of brought forward expenses of ₹ 1,78,15,835 and carry forward of current year expenditure of ₹ 1,30,33,485/- incurred in excess of its income for setting off against income of the succeeding years and claim it as application of income in the succeeding years. According to the AO, there was no provision in the Act for carry forward of excess expenditure of earlier year to be adjusted against income of the subsequent year and he therefore denied the claim of the Assessee. 4. On appeal by the assessee, the CIT(A) allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of excess application of income/funds of the trust. b) The CIT (A) has failed to appreciate the fact that the normal computation of income under respective heads as envisaged u/s 15 to 59 are not applicable to the computation of income in respect of charitable trust/institution for the purpose of claiming exemption under sec.11, 12 and 13 and, therefore, the provisions relating to set-off of loss from one source against the income from another source, set-off of loss from one head against income from another head and carry forward and set-off of loss against the income of subsequent years as envisaged u/s 70 to 79 are also not applicable to the charitable trusts/institutions. c) The CIT (A) has failed to discuss the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set-off of excess of expenditure incurred over the income of earlier years against the income of a later year will amount to application of income of such later year. The above is the position of law as held in the case of CIT Vs. Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj) CIT Vs. Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 (Guj.) . In CIT Vs. Institute of Banking Personnel Selection 264 ITR 110 (Bom) it was held that in case of charitable trust whose income is exempt under s. 11, excess of expenditure in the earlier years can be adjusted against income of subsequent years and such adjustment would be application of income for subsequent years and that depreciation is allowable on the assets the cost of which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The Hon ble Madras High Court in coming to the aforesaid conclusion placed reliance the decision in the case of CIT Vs. Society of Sisters of ST. Anne 146 ITR 28 (Kar.) . 8. In the light of the aforesaid judicial pronouncements on the issue, we are of the view that there is no merit in this appeal by the revenue. Accordingly, the same is dismissed. 9. In the result, appeal by the Revenue is dismissed. Pronounced in the open court on this 24th day of Septem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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