Whether the society/ Trust can adjust the deficit from the previous year against the funds received during the year for the purpose of computing the quantum of application of funds u/s 11(1)(a) of the I.T. Act?

Once it is proved that the deficit has arisen due to the expending of the funds for charitable and the religious purposes, the deficit so brought forward can be treated as the application of funds in the subsequent year. This is despite the fact that there is no enabling provision existing in the I.T. Act.

In case the trust also takes a loan in a particular year and spends the amount so raised, the expenses so incurred shall be taken as the application of income in the year of repayment of the loan.