INCOME TAX ACT, 1961

Section 11

Charitable trust - Exemption under section 11 - Allowability of carrying forward of excess of expenditure over income -

Assessee, a Charitable Trust which is registered under section 12A and under section 80G claimed an amount of Rs. 2 crores as excess expenditure over income being deficit to be carried forward for setting it off in subsequent years. AO denied this on the ground that in case of a Charitable Trust, their income was assessable under self-contained code mentioned in section 11 to section 13, and not under the head 'Profits and gains of business' under section 28 in which provision for carry forward of losses was relevant. Held: Income derived from trust property has to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by Trust for charitable and religious purposes in earlier years against the income earned by Trust in subsequent year will have to be regarded as application of income of Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to benevolent provisions contained in section 11 and such adjustment will have to be excluded from the income of the Trust under section 11(1)(a). Accordingly, AO was directed to allow excess of expenditure over income to be carried forward to subsequent years.

Relied:DIT(E) v. Gem & Jewellery Exports Promotion Council in ITA(LOD) No. 1113 of 2010 vide Judgment, dt. 15-2-2011 and CIT v. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bom) : 2003 TaxPub(DT) 1343 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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