Is deficit allowed to be carried forward to subsequent years?


Quick Summary
This judgement addresses whether a deficit, defined as excess expenditure over receipts, can be carried forward to subsequent years and set off against future income. The Income Tax Appellate Tribunal considered the case where the Assessing Officer denied this claim, despite reliance on a Bombay High Court judgment. The assessee ultimately withdrew their appeals, leading to their dismissal.

Court :
ITAT Mumbai

Brief :
Aforesaid appeals by revenue in case of two different assessee for Assessment Years (AY) 2011-12 to 2016-17 assail separate orders of first appellate authority. However, the facts as well as issues are common in all the years and it is admitted position that adjudication in any one year shall equally apply to other years also.

Citation :
I.T.A. No. 06/Mum/2021

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI

BEFORE HON’BLE SHRI SAKTIJIT DEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

DCIT Cen Cir. 7(1) R. No. 676B, 6th floor Aaykar Bhavan, M. K. Road Mumbai-400 020

vs

Dr. D. Y. Patil International Academy Dr. D. Y. Patil Knowledge City Charholi BK, Via Lohegaon Pune-412 105.

I.T.A. No. 1966/Mum/2020

Revenue by:Shri Rajat Mittal – Ld. Sr. DR
Assessee by:Shri Prakash Jhunjhunwala – Ld. AR

Date of Hearing: 27/10/2021

Date of Pronouncement: 01/11/2021

Whether On the facts and in the circumstances of the case and in law, the Ld. ClT(A) is justified in allowing the assessee to carry forward the deficit, being excess of expenditure over receipts, to subsequent years and the same is eligible to be set-off with the income of subsequent years by relying upon the judgment of Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection (IBPS), ignoring the fact that there was no express provision in the I T Act, 1961 permitting allowance of such claim.

2. The material facts are that the assessee being resident Trust was subjected to search action on 27/07/2016 and accordingly, an assessment was framed u/s 143(3) r.w.s. 153A on 28/12/2018. In the assessment, Ld. AO determined deficit of Rs.1404.02 Lacs and denied the carry forward of the same for set-off in subsequent years.

3. So far as the assessee’s appeals are concerned, Ld. AR has submitted that the assessee is not pressing these appeals and therefore, the same may be dismissed. Keeping in view the same, the captioned appeal of the assessee stand dismissed as being not pressed.  Resultantly, all the captioned appeals stands dismissed. Order pronounced on 01st November 2021.

Please find attached the enclosed file for the full judgement
 

FAQ :

A deficit is defined as the excess of expenditure over receipts.

The judgement discusses the allowance of carrying forward a deficit for set-off in subsequent years, with the Assessing Officer initially denying this claim.

The judgement notes the argument that there was no express provision in the IT Act, 1961, permitting the allowance of such a claim.

The assessee decided not to press their appeals, and consequently, all the captioned appeals were dismissed.

The Assessing Officer determined a deficit of Rs. 1404.02 Lacs.

 
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