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TMI Blog2022 (8) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT] wherein it is held that, there is nothing in language of Section 11(1)(a) of the Act, 1961 to indicate that the income from the trust property should have been applied for charitable or religious purposes only in the year in which such income is received and the deficit incurred by the Trust due to excess spending on the object of the trust during the particular year or excess expenditure incurred in earlier years or in the current year by the trust cannot be permitted to be set off against the income of subsequent years. It was held in case of Sheth Manilal Ranchhoddas Vishram Bhavan Trust (Supra) that, income referred to in Section 11(1)(a) of the Act, 1961 was to be computed in accordance with normal rules of the accounting. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aggrieved by the judgment and order dated 23rd July, 2019 passed by the Income Tax Appellate Tribunal, B Bench, Ahmedabad (for short the Tribunal ) in ITA No.261/Ahd/2018 for A.Y. 2014-15. 3. Following substantial questions of law are proposed for consideration in this Tax Appeal : [A] Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in allowing the benefit of the deficit of Rs.5,78,95,663/- for earlier years against the income of subsequent year without considering the source of expenditure? [B] Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in allowing deficit of Rs.3,55,82,934/- resulting out of Corpus Donation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs.12,23,35,317/- and net deficits of Rs. (-)5,78,95,663/- was permitted to carry forward. 4.3 The assessee Trust being aggrieved by the assessment order preferred appeal before the Commissioner of Income Tax (Appeals), who by order dated 17th November, 2019, allowed the appeal following the decision of this Court in case of CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, reported in 198 ITR 598, with regard to the issue of allowability of depreciation of charitable trust, wherein it is held that, having regard to the scheme of the Act, 1961, income referred to in Section 11(1) (a) of the Act, 1961 was to be computed in accordance with the normal rules of the accountancy under which the depreciation has to be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the trust could be allowed to be set off against the income of subsequent year by invoking Section 11 of the Act. The issue is no longer res Integra. The Hon ble Gujarat High Court in CIT vs. Shri Plot Shwetamber Murti Pujak Jain Mandal (1995) 211 ITR O293 (Guj) 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 expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure without depreciation is Rs.5,09,52,580/- which together with capital expenditure would be Rs.7,13,82,737/- and total expenditure would be Rs.12,23,35,317/-. Therefore, the Assessing Officer has rightly calculated the deficit of Rs.5,78,95,663/- being difference between Rs.12,23,35,317/- and Rs.6,44,39,654/- without considering the depreciation. It was further submitted that on perusal of the balance-sheet of the assessee Trust, it had shown deficit of Rs.8,10,93,868/-, including the deficit to the extent of capital expenditure. It was therefore, submitted that the Tribunal without considering the provisions of Sections 11(1)(a) and 11(1)(d) of the Act, 1961 has confirmed the order passed by the CIT (Appeals). It was therefore, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent years and utilization of such income for meeting the expenditure of the earlier year would amount to such income being applied for charitable or religious purpose. 9. This Court in case of Shri Plot Swetambar Murti Pujak Jain Mandal (Supra) has held that the 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 can be set off against the surplus of income over expenditure of the subsequent year. The Tribunal has also relied upon the decision of the Apex Court in case of CIT (Exemption) Vs. Subros Education Society (2018) 303 CTR 1 (SC), wherein, the Supreme Court has affirmed the judgment of the Delhi High Court to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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