THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) vs. PADMA EDUCATION AND WELFARE SOCIETY

This tax appeal under Section 260A of the Income Tax Act, 1962 (for short “the Act, 1962”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal 'B' Bench, Ahmedabad dated 6th August, 2019 in the ITA No.665/Ahd/2018 for the A.Y.2014-15. 2. The Revenue has proposed the following question for the consideration of this Court: “Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in allowing the claim of the assessee for carry forward of deficit, ignoring the fact that there is no express provision in the Income Tax Act, 1961 allowing such claim, and without appreciating the fact that this would have the effect of granting double benefits to the assessee, first as accumulation of income u/s. 11(1)(a) or Corpus donation u/s.11(1)(d) in earlier/current year, or exempt income u/s. 10(34), and then C/TAXAP/327/2020                                                                                                 ORDER as application of income u/s.11(1)(a) in subsequent years which is legally not permissible?”

The Tribunal, in its impugned order in para-7 has observed thus:- “7. This is the well settled position that income derived from trust property has to be determined on commercial principles and if commercial principles for determining the income are applied, it is but natural that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and will have to be excluded from the income of the trust under section 11(1) (a). Such ratio has been laid by the Jurisdictional High Court in the matter of Shri Plot Swetamber Murti Pujak Jain Mandal (supra). The order passed by the learned CIT (A) applying such ratio while allowing carry forward deficit of Rs.6,49,06,986/- does not call for any interference. Hence, revenue's appeal is dismissed. We find that the assessee's case is squarely covered by the judgment passed by the Coordinate Bench as mentioned herein above which has been decided in favour of the assessee by allowing carry forward deficit and carefully following the same we find no infirmity in the order passed by the Ld. CIT (A) in allowing the appeal preferred by the assessee so as to warrant interference. Hence, the Revenue's appeal fails and thus dismissed. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Court on 06.08.2019 at Ahmedabad.” 4. from its properties should be determined on the basis of C/TAXAP/327/2020                                                                                                 ORDER commercial principles and if commercial principles are made available in determining the income, it would be obvious that the assessment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year will have to be considered as the application of income of the trust for charitable and religious purposes in the subsequent year in which such adjustment is made.

We do not find any material infirmity in the impugned order passed by the Tribunal while taking the aforesaid view. This appeal fails and is hereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J) Vahid