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2011 (3) TMI 1797 - ITAT CUTTACKEntitlement to exemption u/s 011 - it is found that the assessee trust is established under the provisions of Major Port Trusts Act, 1963. It commenced its operations from 1st Nov., 1967.The service is for the national purpose of acting as a major port of India and helps in earning substantial export revenues necessary for the country and also in import of essential goods. Earlier to 2002, the assessee trust was availing of exemption in respect of its income u/s 010(20) being a 'local authority'. Later on due to insertion of an Explanation to s 010(20), the assessee was excluded from the definition of "local authority". Consequently, it was not entitled to exemption under the said section but the assessee was still entitled to exemption u/s 011 being a "charitable trust". The assessee obtained registration as charitable trust u/s 012A and accordingly registration was granted to it by the order of the CIT, Cuttack. higher rate of depreciation - from the admitted facts and circumstances of the case, the fixed assets serve some special purpose of the working and thereby they are considered as "plant and machinery" in the working process of the assessee. This claim of the assessee is fortified by the decision of Hon'ble Supreme Court rendered in the case of CIT v. Dr. B. Venkata Rao [1999 (2) TMI 11 - SUPREME COURT], Chief CIT (Admn.) & Ors. v. Visveswarayya Iron & Steel Ltd. [1991 (9) TMI 21 - KARNATAKA HIGH COURT] and Kalinga Tubes Ltd. v. CIT [1973 (5) TMI 18 - ORISSA HIGH COURT]. In the light of the cases, the assessee's claim is substantiated and hence found entitled to higher rate of depreciation at 15 per cent on the fixed assets as claimed by the assessee. revenue income of the assessee - Considering the issue of treatment of ₹ 42 crores being interest on investment on capital asset replacement reserve fund and on investment on development repayment of loan and contingency reserve fund, as income of the assessee. we are of the considered view that this is a diversion of the interest amounts at source and thereby the said interest amounts cannot be added to the revenue income of the assessee. Hence, the contention taken by the Department is not sustainable for legal scrutiny. Accordingly, the additions made by the Department are hereby directed to be deleted. Disallowance of fund recognition - claim of the assessee of ₹ 40 crores and ₹ 2,22,524 to pension provision fund and contributory provident fund respectively, it is found that the disallowance was made on the ground that the "funds" were yet to be recognized by the CIT. the action of the CIT in granting the recognition to the said funds from 3rd Feb 2009 is unfounded and hence, it is to be recognized from the date of application made by the assessee. Consequently for the current period also the fund recognition is applicable. Accordingly, the disallowance made by the Department is not sustainable under law and it is hereby directed to be deleted. In the result, the assessee's appeal is hereby allowed. it is found that the AO has taken into consideration all the amounts and added back only those items where understatement of income has been reported by the C&AG of India. On perusal of the said report of C&AG of India, it is found that the AO has completely neglected those items where overstatement of income had been reported. Accordingly the AO's one-sided action is not sustainable under law. The learned CIT(A) having very same opinion has directed the deletion of the additions made by the AO. Hence, we are of the considered view that the action of the CIT(A) in doing so is not at all infirm in any way requiring intervention and the same is upheld finding the issue raised by the Department as devoid of merits. In the result, the appeal of the Department is dismissed.
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