TMI Blog2013 (9) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of allowing any statutory deductions as contemplated by the different provisions of the IT Act dealing with different heads of income cannot arise while deciding the percentage of application or accumulation under section 11 - Following decision of DIT Vs. Girdharilal Shewnarain Tantia Trust [1991 (6) TMI 8 - CALCUTTA High Court] - Decided in favour of Revenue. Disallowance of depreciation - Held that:- If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income - Following decision of CIT v. Market Committee, Pipli [2010 (7) TMI 374 - Punjab and Haryana High Court] - Decided against Revenue. - ITA No.878/Bang/2012 - - - Dated:- 14-8-2013 - Shri N. Barathvaja Sankar And Shri N. V. Vasudevan,JJ. For the Appellant : Smt. Jacinta Zimik Vashai, Addl. CIT (DR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se property, the assessee had reduced from the actual rent received from the property a sum equal to 30% of the annual value being a deduction u/s. 24(a) of the Act. The AO after making the following observations, refused to allow the claim of the assessee for deduction u/s. 24(a) of the Act:- 3. On going through the computation of income, it is seen that the assessee has claimed deduction of ₹ 43,25,983/- u/s. 24(a) of the I.T. Act, 1961 while computing income from house property. Relying on the decisions of the Calcutta High Court in the ITR No.159 ITR 280, Gujarat High Court in ITR No.162 ITR 612 and Madras High Court in the ITR No.136 ITR 120, the income of the trust has to be computed in a commercial manner and not as per Income tax Act. Therefore, the deduction claimed by the assessee u/s. 24(a) of the I.T. Act, is disallowed. 5. Before the CIT(Appeals), the assessee submitted that the provisions of section 24(a) of the Act do not restrict its application to any particular assessee and therefore even a charitable trust whose income is claimed as exempt u/s. 11 of the Act, can avail of the benefit of deduction u/s. 24(a) of the Act. It was argued that secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of the above submissions, held as follows:- 5. ............ I have carefully considered the stand taken by the A.O and the submissions made on behalf of the appellant. With regard to deduction u/s. 24(a) of the Act I am in agreement with the A.R. of the appellant as there is no prohibition under the IT Act to deny this benefit to the appellant trust. Therefore, the disallowance made by the A.O amounting to ₹ 43,25,983/- is deleted. 7. Aggrieved by the order of the CIT(Appeals), the revenue has raised grounds 1 to 4 referred to above. 8. We have heard the submissions of the ld. DR, who relied on the order of the AO and in particular the decision of DIT v. Girdharlal Shewnarain Tantia Trust (supra). The ld. counsel for the assessee, on the other hand, drew our attention to the provisions of section 2(45) of the Act which defines total income and submitted that the aforesaid definition refers to the total amount of income referred to in section 5 computed in the manner laid down in this Act. Attention was drawn to section 4 of the Act which creates a charge on the total income of the previous year of every person. Emphasis was laid on the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the commercial concept of income which is to be considered and not the income as computed under the various heads of income as specified in Section 14. In other words, the income for the purpose of section 11 is the income as per the accounts of the trust. It means the income in the commercial sense, without reference to the heads of income specified in section 14, i.e., the book income and not the total income as defined in Sec.2(45). Therefore in computing the income of the trust, the income arising from property held under trust for public charitable or religious purposes is to be first computed and thereafter, the amount applied for charitable purpose is determined. 11. In support of the above conclusion reference may be made to the decision of the Hon'ble Calcutta High Court in the case of DIT( E) Vs. Giridharilal Shewnarain Tantia Trust 199 ITR 215 (Cal). The facts of the aforesaid case were the assessee was a trust. The Assessing Officer rejected the assessee's claim for deduction under section 80T of the Income-tax Act, 1961. Section 80T provided that where the gross total income of an assessee not being a company includes any income chargeable under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal to the amount, if any, by which the amount so utilised exceeds the aggregate of the cost of acquisition of the capital asset transferred and the cost of any improvements made to such asset, will be regarded as having been applied to such purposes. From a combined reading of sections 11 (1)(a), 11(1 )(b) and section 11(1 A), it is clear that the income of a trust including capital gains is treated on a separate footing and the assessee-trust has to fulfil the conditions laid down therein for the purpose of availing of exemptions from taxation. The income from property held for charitable or religious purposes cannot, therefore, be equated with the income which is computed under the general provisions of the Act in respect of other assessees who are not entitled to the benefit of the aforesaid provisions. In a case where an assessee-trust has income from different sources and has applied such income and a part of such income comes within the ambit of taxation, it will not be possible to earmark any part of such income to a particular head. Therefore, the question of allowing any statutory deductions as contemplated by the different provisions of the Act dealing with different h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y held for charitable or religious purposes cannot be equated with the income which is computed under the general provisions of the IT Act in respect of other assessees. In a case where an assessee-trust has income from different sources and a part of such income comes within the ambit of taxation, it will not be possible to earmark any part of such income to a particular head. Such income has to be computed in a normal commercial manner. Therefore, the question of allowing any statutory deductions as contemplated by the different provisions of the IT Act dealing with different heads of income cannot arise while deciding the percentage of application or accumulation under section 11 [DIT Vs. Girdharilal Shewnarain Tantia Trust 199 ITR 215 (Cal)]. 15. For the reasons given above, we are of the view that the CIT(Appeals) fell into an error in directing the AO to allow deduction to the assessee u/s. 24(a) of the Act while computing income of the trust. Thus, grounds 1 to 4 raised by the revenue are allowed. 16. In ground No.5, the revenue has raised the issue with regard to allowing depreciation while computing income of the trust. The assessee had claimed depreciation of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon'ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P H) , following CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P H) : (2011) 238 CTR (P H) 103 that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. The decision of the Hon'ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 (SC) have been referred to and distinguished by the Hon'ble Court in the aforesaid decisions. 21. The issue raised by the revenue in the ground of appeal is thus no longer res integra and has been decided by the Hon'ble Punjab Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P H). The Hon'ble Punjab Haryana High Court after considering several decisions on that issue and also the decision of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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