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TMI Blog2015 (3) TMI 929X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 13(1)(d) read with section 11(5) of the Act. On appeal, the Commissioner of Income-tax (Appeals) held that interest free loans given by the assessee to other charitable organisations were registered under section 12A/12AA of the Act and therefore such loans/advances are outside the purview/scope of section 13(1)(c)/13(1)(d) of the Act. 3. The Departmental representative supporting the order of the Assessing Officer submits that advancing monies to other charitable institution which is not one of the modes for investments specified under section 11(5) of the Act and therefore, there is a violation of the provisions of section 13(1)(d) read with section 11(5) of the Act. 4. Counsel for the assessee relied on the order of the Commissioner of Income-tax (Appeals). Counsel also submits that the co-ordinate Bench of this Tribunal had considered similar situation in the case of Mamallan Educational Trust in I.T.A. No. 456/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance is also placed on the decision of the Delhi High Court, in the case of DIT (Exemption) v. Acme Educational Society [2010] 326 ITR 146 (Delhi), where the hon'ble court, by applying the principles laid down in the case of DIT v. Pariwar Sewa Sansthan [2002] 254 ITR 268 (Delhi), held that advancing interest free loan by the society to another society having similar objects, is not an 'invest ment' or 'deposit' and hence there was no violation of the provisions of section 13(1)(d) read with section 11(5) of the Act to deny the exemption under section 11. Similar decision has been given in the case of Spandana (Rural and Urban Development Organisation) v. Asst. CIT [2010] 40 DTR (AT) 153 (Visakhapatnam), where it was held that- 'Advancing a fund on interest to other organisations, engaged in similar activities, the assessee has accomplished its object of micro finance to the socio-economically weaker sections of the society and also to alleviate poverty beside collecting the interest on the advanced loan. Since the registration has already been granted to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also registered under section 12A and whether in such circumstances the money advanced by one institution to other can be said to be in violation of the provisions of section 13(1) and consequently the exemption under section 11 can be denied. The Tribunal also held as under : '3. In its appeal before the Commissioner of Income-tax (Appeals), argument of the assessee was that section 13(1)(c)(ii) could be invoked only when any part of the income was used for the benefit of trustees, or other persons mentioned in section 13(3) of the Act. As per the assessee, the term "concern" mentioned in section 13(3) of the Act did not include another charitable trust. Sivaraja Ramalinga Trust was a charitable trust and therefore, any payments made to the said trust could not be considered as a violation of section 13(1) of the Act. Reliance was also placed on the decision of the co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust (supra). The Commissioner of Income-tax (Appeals) was appreciative of these contentions. According to him, the money given by the assessee was to a "concern" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of section 13(1), in such a situation, was not at all warranted. The Commissioner of Income-tax (Appeals) was justified in relying on the decision of the co-ordinate Bench of this Tribunal in the case of Jeppiaar Educational Trust and holding that the assessee was eligible for exemption under sections 11 and 12 of the Act. We find no reason to interfere with the order of the Commissioner of Income-tax (Appeals).' 8. In view of the above decision of this Tribunal, we hold that the monies advanced by the assessee to the other trusts which are registered under section 12A and having similar objects cannot be said to be in violation of provisions of section 13(1) of the Act. Therefore, we direct the Assessing Officer to examine whether other organisations to whom the assessee has lent monies are registered under section 12A and in case, such organisations are registered under section 12A, the exemption under section 11 cannot be denied on this ground." 7. Respectfully following the above decision, we hold that advancement of interest free loans to other charitable institutions registered under section 12A of the Act having similar objects are not in violation of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that an assessee could claim depreciation as application of income of funds while computing its eligible exemption under sections 11 and 12 of the Act. The same view has been followed by this Tribunal in the case of ITO v. Sri Ranganathar Trust [2014] 2 ITR (Trib)-OL 161 (Chennai) in I.T.A. No. 1954/Mds/2012 dated January 28, 2013. The relevant paragraph 6 of this Tribunal is reproduced hereunder : 'We have perused the orders and heard rival contentions. No doubt, the hon'ble Kerala High Court in the case of Lissie Medical Institutions v. CIT [2012] 348 ITR 344 (Ker), after considering the decision of the hon'ble Punjab and Haryana High Court in the case of CIT v. Tiny Tots Education Society [2011] 330 ITR 21 (P&H), which had in turn followed its own decision in the case of CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P&H), has held that notional claim of depreciation on an asset, the value of which was claimed as an application of income could not be allowed while computing the income of a charitable institution. Their Lordships held so, for a reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets of the trust. Depreciation on assets of a trust is to be deducted for the purpose of calculating income of a trust. This is because of the fact that the concept of commercial income necessarily envisages deduction of depreciation on assets of the trust. Even reasonable depreciation on assets and interest on sinking fund or repairs reserve are to be deducted as held by the Mumbai Bench of this Tribunal in First ITO v. Balkan-Ji-Bari [1979] 2 Taxman 377 (Bom). The hon'ble Bombay High Court had rejected a reference application of the Revenue in the case of CIT v. Framjee Cawasjee Institute [1993] 109 CTR (Bom) 463, holding that the answer to the question whether depreciation was allowable to a charitable trust was self-evident, even if the capital value of the assets on which depreciation was claimed had been allowed as a deduction under section 11, as an application of income for religious or charitable purposes. Once again in CIT v. Institute of Banking [2003] 264 ITR 110 (Bom), the hon'ble Bombay High Court held that depreciation should be allowed even on assets, the cost of which had been allowed as exempt under section 11 in the preceding years. Their Lordships also h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heads cannot be applied. Thus the assessee is eligible for claiming depreciation for all these assessment years. The orders of the authorities below are set aside and the Assessing Officer is directed to allow the claim of depreciation.' No doubt, the decision of the hon'ble Kerala High Court was not considered by the co-ordinate Bench. Nevertheless, as pointed out by the learned authorised representative at the best, the decision of the hon'ble Kerala High Court brings in a cleavage of opinion on the issue where there was otherwise a unity among other High Courts on this issue. It is a trite law when there is a cleavage of opinion on an issue between various High Courts, till such time the jurisdictional High Court has taken an adverse view, this Tribunal can elect to follow the view in favour of the assessee. We are of the opinion that the learned Commissioner of Income-tax (Appeals) was justified in directing the Assessing Officer to consider the claim of depreciation as a part of utilisation of the assessee. We are, therefore, of the view that the learned Commissioner of Income-tax (Appeals) was justified in allowing the claim of the assessee. No interference is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll not be included in the total income of the previous year. On reading of the assessment order as well as the order of the Commissioner of Income-tax (Appeals), there appears to be no dispute that the donations received are not corpus donations. However, the Commissioner of Income- tax (Appeals) was of the view that since Rs. 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 previous year. The provision did not say that the purpose for which such donation is given should be specified. The requirement of the section will be satisfied once the donation is specifically for the corpus fund. In the circumstances, we hold that the entire corpus donations of Rs. 1,77,70,000 received by the assessee shall not form part of the income of the assessee as they are given towards the corpus fund. The grounds ..... 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