IN THE HIGH COURT OF JUDICATUR AT MADRAS DATED: 16.08.2010 CORAM: THE HONOURABLE Mr. JUSTICE F.M.IBRAHIM KALIFULLA and THE HONOURABLE Mr. JUSTICE M.M.SUNDRESH TAX CASE (APPEAL) No.796 of 2010 ----- Commissioner of Income Tax, Salem. .. Appellant. /Versus/ Sreemathi Kamalam Venugopal Charitable Trust, 2-A, Chennakrishnapuram, Salem  636 007. .. Respondent. Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai 'B' Bench, dated 11.2.2010 in ITA No.1899/ Mds/2009. For appellant : Mr.K.Subramaniam. For respondent : Mr.N.Quadir Hoseyn. (JUDGMENT OF THE COURT WAS DELIVERED BY M.M.SUNDRESH,J.) ---- The Revenue has filed this appeal challenging the order of the Tribunal in ITA No.1899/Mds/2009, dated 11.2.2010, by raising the following reframed substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in setting aside the order of the Commissioner of Income Tax under Section 80-G(5)(vi)of the Income Tax Act, directing him to pass a fresh order allowing set off of excess expenditure incurred for the earlier years against the deficiency for the subsequent years even though there is no provision under Section 11 of the Income Tax Act under which the assessee could claim such set off? (ii) Without prejudice to the preceding question, whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not holding that even after considering expenditure of earlier years there was deficiency in meeting the requirement of 85% of the income being applied, for the assessment year 2008-09, as was evident from the details given by the Trust along with the application in Form 10-G? 2. The facts of the case in brief are that the assessee is a Trust having filed an application in Form No.10-G for initial exemption under Section 80-G of the Income Tax Act. The Commissioner of Income Tax has rejected the application filed by the assessee seeking exemption under Section 80-G of the Act on the ground that the assessee has not spent at least 85% of its income for the relevant assessment years viz. 2006-07 and 2008-09. The Commissioner of Income Tax has also held that the assessee cannot seek to set off excess expenditure incurred for the earlier years against the deficiency for the subsequent years under Section 11 of the Income Tax Act. Challenging the said order of the Commissioner of Income Tax, the assessee has filed an appeal to the Income Tax Appellate Tribunal and the said Tribunal has allowed the appeal by holding that the assessee is entitled to set off the excess expenditure incurred for the earlier years against the deficiency for the subsequent years. While allowing the appeal, the Income Tax Appellate Tribunal has also observed that it is not in dispute that after the adjustment of the excess expenditure incurred by the assessee on charitable purpose in the earlier years, the expenditure incurred by the assessee for the assessment years 2006-07 and 2008-09 is more than 85%, entitling the assessee for initial exemption under Section 80-G of the Income Tax Act. Challenging the abovesaid order of the Income Tax Appellate Tribunal, the Revenue has filed the present appeal. 3. Mr.K.Subramaniam, learned Standing Counsel for the Income Tax, submitted that in so far as substantial question of law No.1 is concerned, the same has been dealt with, by this Court in the decision in GOVINDU NAICKER ESTATE v. ASSISTANT DIRECTOR OF INCOME TAX (248 ITR, 368 (Mad). In the said judgment this Court has observed as follows:- "It is thus clear that the income of the trust has to be arrived at having due regard to commercial principles, that Section 11 of the Act is a benevolent provision, and that the expenditure incurred on religious or charitable purposes in an earlier year or years can be adjusted against the income of the subsequent year. " Therefore, in view of the above said decision, the substantial question of law No.1 raised by the Revenue is answered against the Revenue. 4. Insofar as substantial question of law No.2 is concerned, learned standing Counsel for the Revenue submitted that it is not the case of the Revenue that after adjusting the excess expenditure incurred by the assessee on charitable purposes in the earlier years, the expenditure is more than 85% for the relevant years. 5. Even a perusal of the details furnished by the assessee in the Application Form No.10-G of the Income Tax Act, would show that the percentage of income applied is less than 85%. Therefore, the Income Tax Appellate Tribunal has committed a factual error when it is not the case of the assessee itself in holding that for the assessment years 2006-07 and 2008-09 the expenditure incurred by the assessee on charitable purposes is more than 85%. Inasmuch as the Income Tax Appellate Tribunal has already remanded the case for fresh consideration, we are of the opinion that considering the materials available on record, the Commissioner of Income Tax will also have to decide the issue regarding the expenditure incurred by the assessee on charitable purpose for the assessment years 2006-07 and 2008-2009 and pass orders as to whether the same is more than 85% entitling the assessee to claim initial exemption under Section 80-G of the Income Tax Act. Therefore, the appeal is allowed in part with a direction to the Income Tax Appellate Tribunal to consider the issue as to whether after adjusting the excess expenditure incurred by the assessee on charitable purpose as claimed by it in the Application Form 10-G of the Income Tax Act, is more than 85% for the assessment years 2006-07 and 2008-09, for the purpose of granting exemption under Section 80-G of the Income Tax Act. The Commissioner of Income Tax/ appellant is directed to dispose of the matter within a period of three months from the date of receipt of a copy of this order. No costs. sai