TMI Blog2011 (3) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... Regarding depreciation - assessee has never written off capital assets from its accounts by treating them as application of income. Therefore, it is argued that the assessee is entitled to the deduction of depreciation - Appeal is allowed for statistical purposes - IT APPEAL NO. 1233(DELHI) OF 2010 - - - Dated:- 31-3-2011 - I.P. BANSAL, K.G. BANSAL, JJ. H.K. Lal for the Appellant. Vinod K. Bindal and Sweety Kothari for the Respondent. ORDER K.G. Bansal, Accountant Member. The revenue has taken two grounds in this appeal. Ground No. 1 is lengthily worded, but the sum and substance of it is that since the assessee is not carrying out any charitable activity, it is not entitled to deduction under section 11 of the Income-tax Act, 1961 (the Act). Therefore, the learned CIT(A) erred in granting him the deduction. In ground No. 2 it is mentioned that since the assessee has claimed the deduction of amount spent on acquiring assets under section 11, it is not entitled to deduction of depreciation on such assets. Therefore, the learned CIT(A) erred in granting the deduction of depreciation. 2. The facts of the case are that the assessee-Chamber had filed its re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmit it to do so. The services have been rendered to both members and non-members. In view of these facts, he came to the conclusion that the assessee is not entitled to deduction under section 11 of the Act. Therefore, the same was denied. The total income was computed at Rs. 1,03,77,510 as under:- Total income as declared 5,96,77,818 Add: Amount directly credited to the Reserves/addl. Subscription on admission as declared. 53,000 5,97,30,818 Less: Expenses as claimed (-) 4,93,53,311 Total Income Rs.1,03,77,507 Rounded off Rs. 1,03,77,510 3. Aggrieved by this order, the assessee moved an appeal before the CIT(A)-XXI, New Delhi, who disposed of the same on 29-12-2009 in Appeal No. 125-08-09. The gist of his finding is that the objects of the chamber are charitable in nature as understood under section 2(15) of the Act. The chamber is also registered under section 12A, which remains in force in this year also. The provision contained in section 11(4A) permits the assessee to carry on the business, which is incidental to the attainment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on a business activity and its income is taxable as business income under section 28. (c) The assessee was not maintaining separate books of account for the business activity. 5.1 Section 11 provides that the income derived from the property held under trust wholly for charitable or religious purposes will not be included in the total income to the extent to which such income is applied to such purposes in India. Thus for claiming exemption under section 11 the following conditions have to be fulfilled: (a) The income should be derived from a property held under trust wholly for charitable or religious purposes. (b) Such income should be applied for charitable purposes in India. Thus, one has to see the purpose for which the property has been held and whether the income has been applied for the said purpose for availing exemption under section 11 of the Act. Section 11 does not spell any specific manner or head under which the income has to be specified. Thus the assessee is free to earn income under any head. However, section 11 (4A) provides that in case the income is earned from business activity, then the exemption will not be granted (a) if the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable purposes for which the appellant has been created. 5.4 On perusal of the Memorandum of Association and the objects of the assessee, along with the nature of income derived by the appellant, it is clear that the appellant is rendering all the services as per the objects mentioned in its Memorandum of Association, which has been amply brought out by its submissions discussed in paragraphs 4.11 to 4.14 of this order. 5.5 Thus, the averment of the Assessing Officer that the appellant is not carrying out its activities as per its objects and memorandum of association is not correct and is not tenable. Since the appellant was carrying on the activities and rendering services as per its objects only, it was not at all carrying on any business activity as has been stated by the Assessing Officer. None of the said activities was undertaken to earn profit but when carried out to attain the objects of the appellant and thus no business was carried out by the appellant and there was no need to maintain separate books of account for the sale activities at all. It is now a settled law that generation of income of a Society is no test in itself for determining the charitable nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment in section 2(15) of the Act. The definition of charitable purpose under section 2(15) has been amended with effect from 1-4-2009 and as per the said amendment, it has been specifically provided that with effect from 1-4-2009, the advancement of any other object of general utility shall not be a charitable purpose if any activity is carried out or service is rendered in relation to any trade, commerce or business for a fee, irrespective of the nature of use or application of the income from such activity. Thus as per the said section if a service is rendered in relation to any trade, commerce or business for a fee, the same will not be a charitable purpose with effect from the assessment year 2009-10 even if the same was utilized for the charitable purposes. However, the said amendment does not effect the position for the assessment year 2006-07 as this amendment has been brought in statute with effect from 1-4-2009 and effect of the same need to be considered only in that assessment year or thereafter. The same cannot have any retrospective application. Thus, there arises no difference in the nature of income, services rendered or utilization of income as compared to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d inability to file the details by 31-12-2008. At this stage, we may reproduce the provision contained in section 11(4A) as under:- "(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business." 5.1 The aforesaid provision has been discussed even by the learned CIT(A) on page No. 22 while coming to his finding in the matter. He has also noted the finding of the Assessing Officer that the assessee has not maintained separate books of account for the business activity. However, thereafter, he did not take into account the import of the provision and granted deduction under section 11 as if no business has been carried on by the assessee in this year. He has mentioned that the position in this year is similar to position in earlier years. Thus, he indirectly invoked the rule of consistency while coming to his conclusion. 5.2 The provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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