TMI Blog2015 (3) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in the case of the assessee by advancement of such interest free loans to such charitable institutions, we sustain the order of the Commissioner of Income-tax (Appeals) on this issue. - Decided against revenue. Disallowance of depreciation - Held that:- As relying on ITO v. Coimbatore Stock Exchange Ltd. [2013 (6) TMI 903 - ITAT CHENNAI] we allow the grounds of appeal of the assessee on this issue in allowing the claim of depreciation as a part of utilisation of the assessee. - Decided against revenue. Corpus donations - whether the corpus donations shall not be included in the total income as per the provisions of section 11(1)(d) of the Act? - Held that:- The Commissioner of Income- tax (Appeals) was of the view that since ₹ 82,70,000 out of corpus donations there is no specific directions/purposes for which it has to be used he has construed that it should form part of income though they are corpus donations. This finding of the Commissioner of Income-tax (Appeals) appears to be not correct. Section 11(1)(d) stipulates that voluntary contributions made with a specific direction that it shall form part of corpus of trust should not be treated as income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/Mds/2012 dated May 10, 2012 and in the case of Young Men's Christian Association in I.T.A. Nos. 294 and 2004 /Mds/2012 dated April 29, 2013. Copies of the orders are placed on record. Counsel for the assessee also relied on the decision of the hon'ble Delhi High Court in the case of DIT (Exemption) v. Acme Educational Society [2010] 326 ITR 146 (Delhi) in support of his contention that if loan is given to the charitable organisations registered under section 12A having similar objects there is no violation under section 13(1)(d) of the Act. 5. Heard both sides. Perused the orders of the lower authorities and the decisions relied on. The Assessing Officer while completing the assessment denied exemption under section 11 to the assessee for the reason that the assessee advanced interest free loans to other charitable organisations and such advancement of loans are in violation of the provisions of section 13(1)(d) read with section 11(5) of the Act. The Assessing Officer was of the view that advancement of loans or investments which are not falling in any one of the modes specified under section 11(5) of the Act. The Commissioner of Income-tax (Appeals) referring to vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overty beside collecting the interest on the advanced loan. Since the registration has already been granted to the assessee under section 12A the assessee is eligible for exemption under section 11.' It was also held by Mumbai A Bench of the Income-tax Appel late Tribunal in the case of Smt. Chandrakala Somani Charitable Trust v. Seventh ITO [1991] 30 ITD 70 (Bom), that donation made by one trust to another trust will not amount to violation under section 13(1)(c) of the Act. Therefore, the interest free loans, given by the assessee trust to its sister/other organisations (i.e. M/s. RVS Educational Trust (Pondy), M/s. K Khadar Ghani Charitable and Educational Trust and M/s. RVS Educational Trust (Chennai)), would not be hit by the provisions of section 13(1)(c) or 13(1)(d) read with section 11(5), in view of the above discussion. Further, as the said sister/other organisations are also charitable organisation and registered as a public charitable trust (and also registered under section 12A/12AA of the Act), the said loans or advances will not amount to 'the benefit of any person specified under section 13(3), either directly or indirectly'. Hence the said loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 13(3) of the Act. Therefore, the decision of the co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust squarely applied. He held that the assessee could not be denied exemption under section 11 of the Act and directed the Assessing Officer to grant such exemption. 4. Before us, the learned Departmental representative, strongly assailing the order of the Commissioner of Income-tax (Appeals), submitted that it was an accepted position that Sivaraja Ramalinga Trust and the assessee-trust were having some common trustees. Relying on section 13(3) of the Act, the learned Departmental representative submitted that any concern in which any trustee, who had substantial interest, would fall with the mischief of section 13(1)(c) of the Act. The assessee-trust had placed part of its funds with another trust in which the trustees had substantial interest and therefore, the trustees had directly or indirectly derived benefit. According to him, the Commissioner of Income-tax (Appeals) fell in error in allowing the assessee exemption under section 11 of the Act. 5. Per contra, the authorised representative strongly supported the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the assessee are registered under section 12A/12AA of the Act having similar objects. In such circumstances, there is no violation of the provisions of section 13(1)(d) read with section 11(5) of the Act in the case of the assessee by advancement of such interest free loans to such charitable institutions, we sustain the order of the Commissioner of Income-tax (Appeals) on this issue. The grounds raised by the Revenue are dismissed. I.T.A. No. 1819/Mds/2012 (Assessee's appeal) 8. The first issue in the appeal of the assessee is that the Commissioner of Income-tax (Appeals) erred in sustaining the disallowance of depreciation while working out the application of income as prescribed in relation to purposes/objectives of the assessee-trust in terms of section 11(1)(a) of the Act in the computation of taxable income. At the time of hearing, counsel for the assessee submits that this issue is squarely covered by the decision of the coordinate Bench of this Tribunal in the case of ITO v. Coimbatore Stock Exchange Ltd. in I.T.A. No. 1812/Mds/2012 dated June 6, 2013 [2014] 2 ITR (Trib)-OL 166 (Chennai). He also submits that the Chennai Bench of this Tribunal is consisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (P H) had held clearly in favour of the assessee that depreciation was allowable as utilisation for the purpose of computing exempt income under sections 11 and 12 of the Act. The decisions relied on by the Assessing Officer for disallowing the claim of the assessee were all considered by the hon'ble Punjab and Haryana High Court in the above case. In fact, this issue had come up before the Tribunal in the case of G. K. R. Charities v. Deputy DIT (Exemption) [2012] 51 SOT 538 (Chennai) wherein it was held as under : 7. After considering the rival submissions and perusing the materials available on record, we find that the Tribunal in the above mentioned case, while deciding the similar issue, has allowed the claim of depreciation to the assessee by observing as under : '5. We have perused the orders and heard the rival contentions. For the purpose of determining the income of a trust eligible for exemption under section 11 of the Act, income arising from property held under trust, constitutes the income of the trust. It will mean income from property, business, dividends, interest on securities or other interest. In other words, the income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Raipur Pallottine Society [1989] 180 ITR 579 (MP). In CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust [1992] 198 ITR 598 (Guj) it was held by the hon'ble Gujarat High Court that depre ciation should be allowed while computing such income under section 11(i)(a) of the Act. The Assessing Officer's stand that 'provi sion of computation of income under section 11' does not contain any provision which may entitle an assessee to claim weighted deduction for any expenses incurred is not acceptable as section 11 provides that the income of the trust is to be computed on commercial basis, i.e., as per normal accounting principles. Normal accounting principles clearly provide for deducting depreciation to arrive at income. The income so arrived at (after deducting depreciation) is to be applied for charitable purpose. The capital expense is application of the income so determined. So there is no double deduction or double claim of the same amount as application. Thus depreciation is to be deducted to arrive at income and it is not application of income. No doubt, the Department has relied on the decision of the Supreme Court in the case of Escorts Ltd. v. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer while completing the assessment assessed the income of the assessee including the corpus donations of ₹ 1,77,70,000 received by the assessee. On appeal, the Commissioner of Income-tax (Appeals) directed the Assessing Officer to exclude ₹ 95,00,000 representing corpus donations received for the specific purpose of building construction from M/s. RVS. Educational Trust, Pondicherry and to consider the balance corpus donations of ₹ 82,70,000 received without specific directions/ purpose as income of the assessee. 14. Counsel for the assessee submits that the assessee had received ₹ 1,77,70,000 as corpus donations and the corpus donations shall not be included in the total income as per the provisions of section 11(1)(d) of the Act. 15. The Departmental representative supported the order of the lower authorities. 16. Heard both sides. Perused the orders of the lower authorities . The Assessing Officer in the assessment order stated that the assessee has received corpus donation of ₹ 1,70,70,000 and this was added to the capital fund directly without considering as income, therefore he treated this sum as income of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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