TMI Blog2011 (8) TMI 703X X X X Extracts X X X X X X X X Extracts X X X X ..... ewan for the Appellant. Anil Khabya for the Respondent. ORDER Joginder Singh, Judicial Member. This bunch of four appeals by the Revenue is directed against the different orders of the learned Commissioner of Income Tax (Appeals)-I, Bhopal, dated 15.4.2010, 15.4.2010, 15.4.2010 and 12.4.2010, respectively, on the common ground that on the facts and in the circumstances of the case, the ld. first appellate authority erred in directing the Assessing Officer to allow depreciation of Rs. 48,91,869/-, Rs. 49,71,180/-, Rs. 67,94,496/- Rs. 1,96,75,742/-, respectively, as claimed by the respective assessee, which was correctly disallowed by the Assessing Officer relying on the decision of Apex Court in the case of Escorts Ltd./J.K. Synthetics Ltd. v. Union of India [1992] 65 Taxman 420/[1993] 199 ITR 43. 2. During the hearing of this appeal, we have heard Shri Keshave Saxena, CIT/DR along with Shri Arun Dewan, ld. Sr. DR and Shri Ajay Chajjed, Advocate and Shri Anil Khabya, Ld. Counsel for assessee. The crux of arguments on behalf of the Revenue is that in view of the decision from the Hon'ble Apex Court in the case of Escorts Ltd. (supra), no double deduction is all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n unless the following conditions are fulfilled, namely: (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA : Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution, (i) from the date of the creation of the trust or the establishment of the institution if the Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied: Provided further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. Explanation. For the purposes of clauses (a) and (b), (1) in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is utilised for acquiring the new capital asset, so much of such capital gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset; (b) where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely: (i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of the appropriate fraction of such capital gain; (ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset. Explanation. In this sub-section, (i) "appropriate fraction" means the fraction which represents the extent to which the income derived from the capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded: Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words "ten years" at both the places where they occur, the words "five years" had been substituted. Explanation. Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.] (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer may allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in which such trust or institution was dissolved. (4) For the purposes of this section "property held under trust" includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assessing Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. (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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which such investment or deposit becomes repayable by such company; (viii)deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; (ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is eligible for deduction under clause (viii) of sub-section (1) of section 36; (ixa)deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India. Explanation. For the purposes of this clause, (a) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; (b) "public company" shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 11(2) of the Act. So far as charitable nature is concerned, the present assessees have already been granted registration u/s 12A of the Act and the same is still continuing. It is not the case that depreciation has been claimed by the assessee to cover up the application of income as specified under the Act. If that would have been case then the contention raised by the Revenue would have some force. We are hundred per cent in agreement with the contention of the ld. CIT/DR that there should be no double deduction but in the present appeals, there is no double deduction because the requirement of the Act is application of income within specified limit but in the present appeals, the claim of depreciation is after application of more than 85% of the income, therefore, the claim of depreciation has remained for academic interest only. 4. Even otherwise, depreciation allowance is a concession granted by the State in the computation of income based on many factors relevant to the wholesome fiscal administration. Depreciation represents the diminution in the value of an asset when applied to the purpose of making profit or gain. Depreciation is thus related to an asset and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HEH, the Nizam's Charitable Trust [1981] 131 ITR 497/7 Taxman 178 (AP) CIT v. Radhaswami Satsang Sabha [1954] 25 ITR 472 (All). The 'accumulation' contemplated u/s 11(1)(a) has to be a conscious accumulation and not just a mass of unspent or unapplied profit. Additional condition by way of Explanation to section 11(2) inserted w.e.f. 1.4.2003 is intended to apply only to accumulations in excess of 15% u/s 11(2) and not to accumulations up to 15% u/s 11(1)(a). This view is fortified by the ratio laid down in DIT (Exemption) v. Bagri Foundation [2010] 192 Taxman 309 (Delhi), the ratio laid down in CIT v. Programme for Community Organisation [2001] 248 ITR 1/116 Taxman 608 (SC) and the ratio laid down in S.RM.M.CT.M. Tiruppani Trust v. CIT [1998] 230 ITR 636/96 Taxman 635 (SC). In order to satisfy the requirement of section 11(2)(b), the investment must necessarily come out to the current year's income. An investment made in the past obviously cannot satisfy this requirement. This view is further fortified from the decision in CIT v. Indian National Theatre Trust [2008] 305 ITR 149/169 Taxman 42 (Delhi). Therefore, in view of uncontroverted finding that the respective assessee duly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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