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2015 (9) TMI 189 - ITAT CHENNAI

2015 (9) TMI 189 - ITAT CHENNAI - [2015] 43 ITR (Trib) 8 (ITAT [Chen]) - Disallowance of income generated in the running of Working Women Hostel while computing the taxable income - assessee-society is registered as charitable institution under Section 12A - Held that:- It is not in dispute that as per the Memorandum, the predominant object of the assessee-society is education. It is not clear from the orders of the lower authorities whether the assessee was running any educational institution. .....

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l would fall under the head “public utility service” under Section 2(15) of the Act. Since these aspects were not examined by the authorities below and the facts are not clear from the orders of the lower authorities with regard to activity of the assessee, this Tribunal is of the considered opinion that the Assessing Officer has to re-examine the issue and he has to bring out the entire facts with regard to object and activity of the assessee-society on record.

Accordingly, the order .....

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Claim of depreciation on the asset on which the assessee claims deduction under Section 11 as application of income - Held that:- Section 32 of the Act, which provides for depreciation on capital asset falls under Chapter IV (D) of the Act. Section 32 of the Act which provides for depreciation is also falling in Chapter IV (D) of the Act. Therefore, for the purpose of computation of total income, depreciation has also to be allowed on the capital asset. In fact, depreciation has to be al .....

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ds, Section 11 which falls in Chapter III overrides Section 32 which falls in Chapter IV(D) of the Act. Therefore, this Tribunal is of the considered opinion that the assessee cannot claim depreciation, especially when the cost of asset was allowed as application of income under Section 11 of the Act. - Decided in favour of revenue. - ITA No.1965/Mds/2014, ITA No.2222/Mds/2014 - Dated:- 21-8-2015 - SHRI N.R.S. GANESAN, J. For The Assessee : Sh. A.S. Sriraman, Advocate For The Revenue : Sh. P. Ra .....

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see, submitted that the assessee-society is registered as charitable institution under Section 12A of the Income-tax Act, 1961 (in short the Act ). According to the Ld. counsel, the primary object of the assessee is education. In order to carry on the predominant object, the assessee was running a Working Women Hostel and the income was, in fact, applied for the purpose of carrying out the object of the institution. Therefore, according to the Ld. counsel, the assessee is eligible for exemption .....

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education, it is not known how the funds of the society was applied for charitable purpose. It is not clear from the orders of the lower authorities whether the assessee is running any educational institution or not. It is also not clear from the assessment order whether any funds were advanced to the students for carrying out the educational activities by the recognised institutions. Moreover, establishing and running a Working Women Hostel has nothing to do with education. According to the Ld. .....

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ot clear from the orders of the lower authorities whether the assessee was running any educational institution. Even though the Ld. Counsel claims that the assessee is providing funds to the students, it is not clear from the orders of the lower authorities whether such funds are provided by way of or scholarship or any other form of assistance. This Tribunal is of the considered opinion that the activity of the assessee-society has to be examined in the light of the Memorandum of the assesseeso .....

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has to bring out the entire facts with regard to object and activity of the assessee-society on record. 6. Accordingly, the orders of the lower authorities are set aside and the entire claim of deduction under Section 11 of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the issue afresh in the light of the Memorandum of the assessee-society and the activity which is actually carried on by the assessee and thereafter decide the issue in accor .....

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the ground that the investment made by the assessee for acquiring capital asset was already allowed under Section 11 as application. Therefore, the cost of asset becomes NIL. The Ld. D. R. further submitted that the depreciation has to be computed only on the Written Down Value of the capital asset. Since the Written Down Value is NIL, on allowing the entire cost as application of income under Section 11 of the Act, the computation itself fails. The Ld. D. R. has placed reliance on the judgment .....

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ct is an allowance that has to be deducted for arriving at taxable income. If anything remains after allowing depreciation, the same has to be allowed under Section 11 of the Act as application of income. Referring to the decision of this Bench of the Tribunal in ITO v. KGISL Ltd. in I.T.A. No.1813/Mds/2012 dated 3.6.2013, the Ld. Counsel submitted that on identical circumstances, this Tribunal found that there are divergent judicial opinions by the various High Courts, therefore, by following t .....

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the Act, on which the assessee earlier claimed deduction on the cost of asset as application of income, falls in Chapter III of the Act. In fact, Chapter III of the Act deals with income which does not form part of the total income. Therefore, when a charitable institution applies its income for acquisition of capital asset, the same cannot form part of the total income since Section 11 provides for exemption as application of income. It is not in dispute that the assessee claimed the cost of th .....

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lso falling in Chapter IV (D) of the Act. Therefore, for the purpose of computation of total income, depreciation has also to be allowed on the capital asset. In fact, depreciation has to be allowed on the value of the capital asset. This Tribunal is of the considered opinion that Chapter III of the Act deals with an income which does not form part of total income, while Chapter IV deals with situation for computation of total income. Hence, an income which does not form part of total income as .....

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act, the Apex Court in J. K. Synthetics Ltd.(supra) had examined the issue and observed as follows at para 11:- For the reasons discussed above we are of the view that, even before the 1980-amendment, the Act did not permit a deduction for depreciation in respect of the cost of a capital asset acquired for purposes of scientific research to the extent such cost has been written off under section 10(2)(xiv)/35(1) and (2). Prior to 1968, such assets qualified for an allowance of one-fifth of the c .....

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iation could be allowed on them thereafter with a further absurdity that it could be allowed starting with the original cost of the asset despite its user for scientific research and the allowances made under the scientific research clause. In our view, there was no difficulty at all in the interpretation of the provisions. The mere fact that a baseless claim was raised by some overenthusiastic assessees who sought a double allowance or that such claim may perhaps have been accepted by some auth .....

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DIT in I.T.A. No. 2271/Mds/2014 dated 02.06.2015 and considered this aspect elaborately and observed as follows:- 6.3 We have heard both the parties and carefully perused the materials available on record. Chapter-III refers to income which does not form part of total income . Section-11 of the Act placed under Chapter-III deals with income from property held for charitable or religious purpose . Section-11(1)(a) provides that income derived from the property held under trust wholly for charitab .....

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