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2012 (7) TMI 62 - AT - Income TaxExemption under section 11(1)(a) - assessee-trust was created under a Will with a view to undertake two objects of spreading Sanskrit language and practicing ayurvedic system of medicines - with efflux of time, the main activity of the assessee has become predominantly of providing medical relief through allopathic system of medicines – Held that:- for claiming exemption u/s 11(1)(a) the assessee will have to adhere to the objects for which it was formed. Accordingly, it is held that since medical relief through allopathic treatment does not fall within the ambit of the objects mentioned in the Will, the income and expenditure from this activity will have to be treated separately. A consequence of this finding is that surplus from this activity cannot form subject matter of exemption u/s 11. Principle of res-judicata - Action of cancelling registration - held that:- The conduct of the revenue itself shows that cognizance was taken of the fact that the trustees exceeded their authority under the Will. However, due to inadequacy in legal framework, the department had to ultimately assess income under Chapter III. The decision in the case of Allahabad Agricultural Institute (2007 (3) TMI 208 (HC)) shows that the AO could have made a departure from past even in earlier years. In the light of the aforesaid decision, grant of benefit u/s 11(1)(a) would be beyond the purview of law. In such a situation, the rule of consistency cannot prevail over the well entrenched principle of res-judicata. As discussed earlier by references to the decision in the case of Pragati Construction Co. (2003 (12) TMI 281 (Tri)) and All India J.D. Educational Society (2010 (11) TMI 668 (HC)). Therefore, we are of the view that the AO was well within his right to examine the facts of this year independently. Since there were pressing reasons to make a departure, he was well within his right to do so. Whether deduction of depreciation on fixed assets is allowable when full cost of the assets had been allowed in earlier years u/s 11 as application of income, thereby allowing the deduction of the same expenditure twice over - assessee is not entitled to exemption u/s 11 in respect of expenditure incurred on medical relief through allopathic system of medicine. The income and expenditure from these activities have to be segregated, which has to be taken as profit available for the purpose of pursuing the main object of Sanskrit and ayurvedic system of medicines – Held that:- depreciation on assets used for providing relief through ayurvedic system of medicine or research are entitled to deduction of depreciation notwithstanding the fact that the cost has been allowed to be written off in the past u/s 11(1)(a). Thus, this ground is also partly allowed - appeal is partly allowed
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