TMI Blog2011 (6) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 - N. VIJAYAKUMARAN, SANJAY ARORA, JJ. S.C. Sonkar for the Appellant. Dr. Anitha Sumanth for the Respondent. ORDER Sanjay Arora, Accountant Member. These are a set of two Appeals qua two Assessees, arising out of separate Orders by the Commissioner of Income-tax (Appeals)-II IV, Kochi ('CIT(A)' for short) dated 12-12-2008 and 18-2-2009 respectively. The issues arising in the appeals being common, the same were heard together and are being disposed of vide a common, consolidated order. The Issue 2. The assessee in both the cases is a Charitable Trust registered under section 12A of the Income-tax Act, 1961 ('the Act' hereinafter). In both the cases, it returned Nil income, claiming depreciation at Rs. 96.83 lakhs and Rs. 146.75 lakhs respectively. The corresponding cost (of the capital assets) on which depreciation stood claimed, was, as in the past, claimed as application of income toward its objects at Rs. 372.99 lakhs and Rs. 126.15 lakhs respectively. That is, the cost of the relevant assets stood claimed as an application of income for a preceding and/or the current year. The issue calling for consideration in the present set of appeals, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(d), for claiming exemption in its respect. As regards the first point of distinction, the decisions in the cases of CIT v. Marketing Committee, Pipli [2011] 330 ITR 16 (Punj. Har.) and CIT v. Tiny Tots Education Society [2011] 330 ITR 21 (Punj. Har.) stand rendered by the hon'ble High Court after considering the same, explicitly stating that there is no double deduction, so that the said decision by the Apex Court is not applicable in the facts and circumstances of the case. With regard to the second difference, the said decisions by the Hon'ble Punj. Har. High Court, being for the assessment years 2005-06 and 2006-07 respectively, are for subsequent years, where at the amended section 11 is in force, so that the said distinction would also not obtain. How would it matter, he posed, whether the voluntary contribution or donation received by the charitable trust is with or without a direction that the same shall form part of the corpus of the trust, where the same is in fact applied for the acquisition of a capital asset? So however, going by the Tribunal's view (in the case of Lissie Medical Institutions (supra) refer para 4.6 of the order), while in the case of former ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utions (supra). The same is an extensive review of the law in the matter, dealing with the issue in all its relevant aspects, including by discussing the various judgments rendered in the matter and cited before it, and which are the same as being now relied upon. The assessee has not been able to point out any infirmity in the said order, so that there is no ground or occasion for the Tribunal to review or re-visit its elaborate and well-considered order, which in any case could be challenged before the hon'ble jurisdictional high court. Findings 4. We have heard the parties, and perused the material on record, including the case law relied upon. 4.1 The Tribunal in the case of Lissie Medical Institutions (supra) has attempted to provide an answer to the various issues arising for consideration in the matter. We have given our careful consideration to the matter, and find no reason to depart from our earlier view. That being the case, we shall proceed on the basis that the said order by the Tribunal (supra) has been read and, further, in the background and the backdrop of the Tribunal's findings in that case, taking liberty to freely refer/advert to the same. Further on, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incurred for the purposes of income, i.e., as a part of the income generating process, directly or indirectly, the other is an application of the income so generated, and has nothing to do with either income generation or the maintenance of the capital structure or the income generating apparatus. Even where the income arises only out of voluntary contributions, recognising the need to maintain corpus, as in the case of any business activity, the law provides therefor, so that the trust/institution is not required to apply the same to claim its exemption from tax under sections 11 and 12. That is, the very fact that the said contribution is toward capital or corpus, is by itself sufficient to accord it exclusion, and is, thus, not liable for, or is free from the requirement of, it's application toward the object/s of the trust. Income of a charitable trust, it may be noted, is not per se exempt from tax, but only on its application toward its objects. The same, thus, is only in the nature of a deduction, i.e., required to a allowed for computing income subject to tax under the Act, which also finds support from the insertion of section 11(1)(d). It is, as such, not a question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by applying the provisions of Chapter IV-D (refer section 11(4A)), and which expenses would include a charge toward depreciation on capital assets deployed or maintained by the trust as well. Secondly, as noted earlier, the income of the charitable institution is not exempt per se, but only on its application. Coming back to the point in issue, the differential treatment qua depreciation is only due to the difference in law attending the two scenarios, which rather seeks to bring the same (law) at par with that qua any other entity acquiring and using a capital asset for its purposes. No infirmity, thus, inflicts the Tribunal's order qua the differential treatment of the claim for depreciation, i.e., w.r.t. the application or otherwise of the provision of section 11(1)(d) in the facts of a case, and there is nothing incomprehensible about it. Rather, the assessee's argument or contention for a uniform treatment (qua depreciation), thereby, seeks to eliminate the difference that the law itself specifically provides for, i.e., is contrary to the express provisions of law. Further, the finding of the two claims as representing a deduction qua the same expenditure, which stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso discussing the nature of the two claims being made, being again in respect of 'depreciation' and the 'capital expenditure on the assets put to scientific research', would, most respectfully, not operate to bind this Tribunal to arrive at a different finding of fact. We may also add that there is no reference in the cited decisions by the hon'ble court as to the reasons that inform its decision. Further, reference in this context may also be made to the decision in the case of CIT v. Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom.), wherein the hon'ble court has abundantly clarified, on the issue being raised before it, inter alia, that the decision by the non-jurisdictional high court, though of persuasive value, is not binding on the Tribunal, explaining that the said status could be accorded only to the decision by the apex court under Art. 141 of the Constitution of India. 4.3 Further, we observe that in the present case, both the assessees are not engaged in any business activity, so that the depreciation claimed cannot be with reference to section 32, but only as applicable under general principles. However, that would not detract from or impact the said finding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring on the issue of double deduction, which only is relevant, and to be seen, for our purposes. The question, it may be emphasized, is not whether the depreciation is allowable or not? But whether, allowing it, would still entitle a charitable trust to consider the said capital assets, i.e., on which the depreciation stands claimed and allowed, as toward application of income, amount as it would to a total deduction. Reference to the concluding part (para 4.8 of the order) in the case of Lissie Medical Institutions (supra) would be relevant in this regard. We have sought to illustrate by way of an example (refer para 4.2 above) that in a particular case the claim for depreciation may not obtain, i.e., as where the relevant capital asset is not retained and used by the trust for its purposes. However, where it is retained and so used, the next question would be if it is sourced from corpus funds, in which case a claim for depreciation would definitely obtain; the donee-entity being not obliged to apply the same to claim exemption in its respect, being exempt per se. Where, however, the same is from regular (as distinct from corpus) funds, the entity is not obliged to maintain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex court in the said case, that the two claims represent different deductions, under separate sections, serving different objects, so that one would not limit or influence the other; the concept of taxable income being a legal one, which may not correspond to the accounting income, which though stood rejected by it, finding the two deductions as representing the same claim, i.e., the write off of the capital expenditure, and toward the same purpose, no such claim can possibly be raised in the instant case. That is, the two simultaneous claims, and the case supporting them, is on a still weaker footing, with there being a distinct dichotomy between the two a capital expenditure as being toward income (so that it has to be allowed proportionately over the period of utility of the expenditure), and at the same time out of it. The 'income' to be applied is only one determined following the principles of commercial accounting, i.e., to arrive at what can be said to be available 'for application' with it, so that there is no overlap between the two. That the user (of the asset) for the stated purpose is an implicit requirement to satisfy the essential condition for a claim towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied the condition of sections 36(1)(vii) and 36(2). We are unable to see as to how the same is relevant for our purpose. (c) The decision in the case of CIT v. Manav Mangal Society [2010] 328 ITR 421/[2009] 184 Taxman 502 (Punj. Har.) (PB pgs. 58-62), as a reference to the question of law posed to the hon'ble court would show, is not concerned with the issue before us. The revenue's case in that case was that the assessee had not applied 25 per cent of the profits as required by section 11(4A) rule with section 11(2). We have also gone through the Tribunal's findings in the matter, which stand approved by the hon'be court, to find no question or issue of double deduction, or with regard to the simultaneous deduction in respect of depreciation as well as of the capital expenditure on which the same is claimed. (d) The decisions in the cases of Marketing Committee, Pipli (supra) and Tiny Tots Educational Society (supra) (PB pgs. 63 to 71) stand already discussed while considering the assessee's case as made before us with reference thereto (refer paras 3.1, 4.2). The decision in the case of Bhoruka Public Welfare Trust (supra) (PB pgs. 72 to 78), upholds the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts Ltd. (supra), section 35(2)(iv) itself contains an embargo for non-allowance of deduction under section 32(1)(ii), i.e., where the claim for deduction under section 35 is being claimed and allowed, so that a double deduction stood excluded by the relevant provisions of the Act itself, while no such prohibition attends the present case. As also explained in the case of Lissie Medical Institutions (supra) (refer para 4.2), on a similar argument being advanced, that the said embargo under section 35(2)(iv) stood provided for by Finance (No. 2) Act, 1980 with retrospective effect from 1-4-1962. It was the retrospective application thereof; the same being contended to be taking away a vested right; it being trite that no new levy could be imposed retrospectively, that led to a bunch of 33 writ petitions before the apex court, which stood disposed of by it in the case of Escorts Ltd. (supra). Per its elaborate decision, the apex court upheld the retrospectivity, as the same did not, in its view, amount to or result in either a new levy or taking away or divestment of any existing right. There is a fundamental, though unwritten, axiom, it stood explained by it, that no Legislation wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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