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Income Tax Appellate Tribunal, “SMC” BENCH,
Before: SHRI SANJAY ARORA, AM
Order : 10.12.2015 आदेश / O R D E R Per Sanjay Arora, A. M.: This is an Appeal by the Revenue directed against the Order by the Commissioner of Income Tax (Appeals)-7, Mumbai (‘CIT(A)’ for short) dated 25.3.2015, partly allowing the Assessee’s appeal contesting its assessment u/s.143(3)(ii) of the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 2008-09 vide order dated 27.12.2010.
The only issue arising in this appeal is the maintainability in law of the direction by the ld. CIT(A) to the Assessing Officer (A.O.) to allow the assessee, after due verification, it’s claim for brought forward ‘losses’ for A.Ys. 2006-07 & 2007-08, as well as carry forward of ‘loss’ computed for the current year.
(A.Y. 2008-09) ITO(Exemption) vs. Dr. A. V. Baliga Charities 3. Brief facts of the case are that the assessee is a trust registered u/s.12A of the Act. No income was claimed exempt u/s.11 of the Act per the return of income in view of the deficiency (of income) vis-a-vis that applied for charitable purposes, which the assessee had claimed at Rs. 139.79 lakhs. The AO made certain adjustments to the returned income, assessing it at Rs. 51,045/-, while allowing carry forward of loss under the head of income ‘Short Term Capital Gain’ (STCG) at Rs. 47.48 lakhs. In appeal, the ld. CIT(A) directed as above (refer para 2 above), vide para 6.2 of his order. Aggrieved, the Revenue is in appeal.
The parties were heard, and the matter on record perused. At the very outset, a distinction ought to be drawn between ‘loss’ and ‘deficiency’. Income, by definition, implies net income, i.e., net of expenditure incurred toward earning the same. Loss implies a negative income, i.e., where the expenditure incurred towards earning the income exceeds in quantum the income arising, as, for example, the loss under STCG for the current year. Deficiency, on the other hand, implies a shortfall in the application of income (i.e., net income) for its objects by the trust/ institution. This, in fact, is a contradiction in terms as only positive income, to the extent materialised or available, can be so applied. When, therefore, the assessee speaks of deficiency brought forward from the past, it refers to the amount expended (including perhaps qua capital expenditure) toward its objects in excess of the income available, even as confirmed by the ld. Authorized Representative (AR) during hearing. The same could be financed by borrowed capital. It is in such a case on the repayment of the borrowing that the income, to that extent, would be deemed to be applied for charitable purposes, qualifying for exemption u/s. 11(1)(a) for that year. The ‘loss’ referred to by the assessee adverts to such excess for the preceding years. Surely, the right of the assessee to claim set off of such excess against the income for the subsequent years, where the income is so applied towards discharging financial or other liabilities incurred in working out its objects, cannot be lost. This would be irrespective of whether the assessee claimed such brought forward per its return of income for the current year or not.
(A.Y. 2008-09) ITO(Exemption) vs. Dr. A. V. Baliga Charities There is no estoppel against law. This not be confused with the claim not made or omitted to be made by the assessee per its return (for the current year), and which, therefore, was never considered by the A.O. The decision in the case of Goetze (India) Ltd. vs CIT [2006] 284 ITR 323 (SC), relied upon by the Revenue, is clearly distinguishable. The assessee in fact did not claim such set off in-as-much as there was, per its’ return, a deficiency. The difference between ‘loss’ and ‘deficiency’ has already been explained. Subject to our fore-going observations, the impugned order by the ld. CIT(A) is confirmed. I decide accordingly.
In the result, the Revenue’s appeal is disposed of on the aforesaid terms. Order pronounced in the open court on December 01, 2015 at the conclusion of the hearing itself.