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2017 (11) TMI 1421 - HC - Income TaxEligibility of benefit of section 11(1) - huge surpluses earned was withdrawn by way of payments to the persons referred u/s 13(3) - corpus fund - Held that:- In the present case, the Assessee is not claiming any benefit Under Section 11(2) as it cannot; because in respect of this assessment year, the Assessee has not complied with the conditions laid down in Section 11(2). The Assessee, however, is entitled to claim the benefit of Section 11(1)(a). In the present case, the Assessee has applied ₹ 8 lakhs for charitable purposes in India by purchasing a building which is to be utilised as a hospital. This income, therefore, is entitled to an exemption Under Section 11(1). In addition, under Section 11(1)(a), the Assessee can accumulate 25% of its total income pertaining to the relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. The balance income of ₹ 1,64,210.03 constitutes less than 25% of the income for Assessment Year 1970-71. Therefore, the Assessee is entitled to accumulate this income and claim exemption from income tax Under Section 11(1)(a). Any educational institution which is required to be run they have to have a surplus fund for educational activity to sustain the consistency in the efficiency and very purpose of collecting donation is to sustain activity of institution. Merely, because surplus fund it cannot be envisaged as profit, the institution has not crossed one crore limit and they are well within their prescribed limit. The income was received by the trust which is reflected in the books of accounts. In our view, the view taken by the authority is required to be reversed and it is required to be looked into the foundation of the ratio laid down by the Supreme Court in the case of Queen’s Education Society (supra) where funds which has been surplus is within a corpus fund and it has been kept as reserve fund which is not in dispute and they have not crossed the limit of one crore. Depreciation claim - Held that:- In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd. and Anr. (1992 (10) TMI 1 - SUPREME Court) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answered against the revenue and in favour of the assessee.
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