2019 (7) TMI 1941

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..... GH COURT] has rendered decision favourable to the assessee on the very issue. The Hon ble Gujarat High Court has held that there is nothing in the language of Section 11(1)(a) of the Act to indicate that the income from trust property should have been applied for charitable or religious trusts only in the year in which such income has arisen. The expenditure incurred in an earlier year can be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year would amount to such income being applied for charitable or religious trusts -income derived from Trust property has to be computed on commercial principles and consequently deficit arising out of expenditure over income for t .....

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..... law and on facts in allowing the benefit of the deficit of Rs.5,78,95,663/- for earlier years against the income of subsequent year in absence of any express provision in the Act regarding the same and also by overlooking the decisions in favour of revenue in this regard. 3. The assessee is a public charitable trust and has been granted registration under s.12A(a) of the Income Tax Act. During the year under consideration, the assessee trust has claimed allowability of deficit to be carried forward amounting to Rs.5,78,95,663/-. The AO while passing the order under s.143(3) of the Act disallowed the carry forward of deficit for being set off in the forthcoming year. 4. In the first appeal against the aforesaid action of the A .....

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..... income derived from Trust property has to be computed on commercial principles and consequently deficit arising out of expenditure over income for the previous year should, therefore, be set off against surplus of income over expenditure relating to the subsequent year. Similar view has been expressed in CIT vs. Maharana of Mewar Charitable Foundation (1987) 164 ITR 439 (Raj) and CIT vs. Matriseva Trust (2000) 242 ITR 20 (Mad). Whatever little controversy might be existing has been put to rest by the recent decision of the Hon ble Supreme Court in the case of CIT(Exemption) vs. Subros Education Society (2018) 303 CTR 1 (SC). Hence, the CIT(A) in our view has correctly applied the law as evolved by the judicial precedents. In the absence of .....

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