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The Assistant Commissioner of Income Tax Versus M/s City Hospital Charitable Trust

2015 (6) TMI 235 - ITAT BANGALORE

Depreciation claim - assessee is a charitable trust - according to the AO, allowing such a claim would amount to allowing double deduction - Held that:- The issue raised by the revenue in the ground of appeal is thus no longer res integra and has been decided in the case of CIT v. Market Committee, Pipli,(2010 (7) TMI 374 - Punjab and Haryana High Court) after considering several decisions on that issue and also the decision of of Escorts Ltd. (1992 (10) TMI 1 - SUPREME Court), came to the concl .....

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herein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. - Decided in favour of assesse.

Whether the CIT(Appeals) was justified in holding that assessee, a trust, is entitled to carry forward expenditure incurred in excess of its income for setting off against income of the succeeding years? - Held that:- Section 11(1)(a) does not contain any words .....

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subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an .....

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year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other - Decided ag .....

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nning various medical institutions including paramedical and nursing colleges. In the course of assessment u/s. 143(3) of the Act for AY 2011-2012 the AO noticed from the details of depreciation claimed, that the depreciation was claimed on assets, the cost of acquisition of the said assets had been claimed by the assessee as capital expenditure towards application of funds towards the objects of the trust and allowed as such. According to the AO, allowing such a claim would amount to allowing d .....

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Saints Church, 148 ITR 786 (Kar) and Society of Sisters of St. Ann, 146 ITR 28 (Kar) has taken the view that where capital expenditure on acquisition of depreciable asset is considered as application of income for charitable purpose, allowing depreciation on the very same capital asset would not amount to double allowance. The assessee also pointed out that the decision of Escorts Ltd. (supra) will not be applicable as it was rendered on a different set of facts. 4. The AO however, held that al .....

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ose amounts to double depreciation and therefore depreciation cannot be allowed. The AO also distinguished the cases cited by the Assessee. 5. On appeal by the Assessee, the CIT(A) held that the claim of the Assessee for depreciation has to be allowed, following the decisions rendered in the following cases:- i) Manipal Hotel & Restaurant Management College Trust, (Manipal in ITA Nos. 187/UDP/CTI(A)MNG/10-11, dated 14.3.2013. ii) Manipal Academy of Higher Education, Manipal in ITA No. 43/UDP .....

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AT Bangalore Bench in the case of DDIT(E) v. Cutchi Memon Union (2013) 60 SOT 260 Bangalore ITAT, wherein similar issue has been dealt with by this Tribunal. In the aforesaid case, the assessee claimed depreciation and the AO denied depreciation on the ground that at the time of acquiring the relevant capital asset, cost of acquisition was considered as application of income in the year of its acquisition. The AO took the view that allowing depreciation would amount to allowing double deduction .....

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ugh 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. 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 .....

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nd 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 Escorts Ltd. (supra), came to the conclusion that depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the pu .....

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that a trust claiming depreciation cannot be equated with a claim for double deduction. The Hon ble Punjab & Haryana High Court has also made a reference to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Society of Sisters of Anne, 146 ITR 28 (Kar), wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. In view of the afores .....

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et apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. 9. As already stated, the aforesaid amendment is prospective and will apply only from A.Y. 2015-16. In view of the above legal position, we are of the view that the order of the CIT(A) does not call .....

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the Act. For the A.Y. 2011-12, the assessee filed a return of income showing application of income by more than ₹ 1,57,89,730/- of its receipts. The assessee sought to carry forward the excess application for setting off as application of income in the subsequent assessment years. The assessee relied on various judicial decisions including the decision of the ITAT, Bangalore in the case of Medical Relief Society of South Kanara wherein the Tribunal had allowed carry forward of excess appl .....

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jurisdictional High Court, the claim for carry forward was refused by the AO in order to keep the issue alive. 11. On appeal by the assessee, the CIT(A) directed the AO to allow claim of the assessee and in doing so, followed the decision rendered by the ITAT Bangalore in the following cases:- This issue was also before me in the following Trusts cases, wherein I have decided the issue in favour of the assessee trusts. i) Manipal Hotel & Restaurant Management College Trust, (Manipal in ITA .....

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and of the AO that there is no provision in the Act to allow carry forward of excess application of income for set off as application of income in subsequent years. The ld. DR reiterated the stand of the Revenue as contained in the grounds of appeal. 14. We have considered his submission. Section 11(1)(a) does not contain any words of limitation to the effect that the income should have been applied for charitable or religious purpose only in the year in which the income has arisen. The applicat .....

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other words, the set-off of excess of expenditure incurred over the income of earlier years against the income of a later year will amount to application of income of such later year. The above is the position of law as held in the case of CIT Vs. Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj); CIT Vs. Shri Plot Swetamber Murti Pujak Jain Mandal 211 ITR 293 (Guj.). In CIT Vs. Institute of Banking Personnel Selection 264 ITR 110 (Bom), it was held that in case of charitable trust whos .....

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