Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (9) TMI 277 - ITAT CHENNAI

2015 (9) TMI 277 - ITAT CHENNAI - [2015] 42 ITR (Trib) 732 (ITAT [Chen]) - Disallowance of depreciation - purchase of assets were allowed as application of income under Section 11 of assessee - allowing depreciation would amount to double depreciation as held by AO - Held that:- As decided in The Anjuman-E-Himayath- E-Islam v. ADIT [2015 (7) TMI 594 - ITAT CHENNAI ] this issue is elaborately discussed in the case of Lissie Medical Institution Vs. CIT reported in [2012 (4) TMI 115 - KERALA HIGH C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able institution to generate income outside the books in this fashion and there would be violation of section 11(1)(a). It was for the assessee to write back the depreciation and if that was done, the Assessing Officer would modify the assessment determining higher income and allow recomputed income with the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes - Decided against assessee.

Excess application - Tthe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

irections that they shall form part of the corpus of the trust’ - Decided against assessee. - ITA No.2930/Mds/2014 - Dated:- 21-8-2015 - SHRI N.R.S. GANESAN, J For The Appellant : Sh. A. Kanagaraj, CA For The Respondent : Sh. P. Radhakrishnan, JCIT ORDER This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-VII, Chennai, dated 18.08.2014 and pertains to assessment year 2009-10. 2. Shri A. Kanagaraj, the Ld. representative for the assessee, submitte .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r Section 32 of the Act. According to the Ld. representative, the Assessing Officer disallowed the claim of the assessee on the ground that allowing depreciation would amount to double depreciation, by placing reliance on the judgment of the Apex Court in Escorts Ltd. and Another v. Union of India and Others (1993) 199 ITR 43. The Ld. representative placed his reliance on the decision of his Bench of the Tribunal in DDIT(Exemptions) v. Sri Rangalatchumi Educational Trust in I.T.A. No.1930/Mds/20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the expenditure incurred in the earlier year has to be allowed as application of income for the year under consideration. 4. I heard Sh. P. Radhakrishnan, the Ld. Departmental Representative also. Admittedly, the assessee is a charitable institution and the assessee is not doing any business. If the assessee engaged itself in business activity, then it would not be eligible for exemption under Section 11 of the Act. It is not the case of the assessee that any business undertaking was held under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ces, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession the following deductions shall be allowed- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed. (ii) in the case of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42: Provided further that where any asset referred to in clause (i) 6or clause (ii) or clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub- .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation - For the purposes of this proviso,- (a) the expression commercial vehicle means heavy goods vehicle , heavy passenger motor vehicle , light motor vehicle , medium goods vehicle and medium passenger motor vehicle but does not include maxi cab , motor-cab , tractor and road-roller ; (b) the expressions heavy goods vehicle , heavy passenger motor vehicle , light motor vehicle , medi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991. Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. Explanation - 1. Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expendit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-section (6) of section 43; Explanation - 3. For the purposes of this sub-section, 10the expressions assets shall mean- (a) tangible assets, being buildings, machinery, plant or furniture ; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation - 4. For the purposes of this sub-section, the expression know-how means any industrial information or technique likely to assist in the manuf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : Provided that no deduction shall be allowed in respect of-(A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twentyfive thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso ; (2) sold in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ection 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act, of any asset by the banking company to the banking institution. (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

applicable only in respect of the asset which is used for the purpose of business. Therefore, this Tribunal is of the considered opinion that Section 32 is not applicable if the assessee is not carrying on any business activity. In this case, it is not in dispute that the assessee is not carrying on any business activity. Therefore, Section 32 of the Act is not applicable. Apart from that, a Division Bench of this Tribunal in The Anjuman-EHimayath- E-Islam v. ADIT in I.T.A. No.2271/Mds/2014 by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ar No. 5-P (LXX-6) of 1968, dated 19-6-1968. Subject : Section 11-Charitable trusts-Income required to be applied for charitable purpose-Instructions regarding. In Board s Circular No. 2-P(LXX-5) of 1963, dated the 15th May, 1963, it was explained that a religious or charitable trust claiming exemption under section 11(1) of the Income- tax Act, 1961, must spend at least 75 per cent of its total income, for religious or charitable purposes. In other words, it was not permitted to accumulate more .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

income . . . computed in the manner laid down in this Act . It would accordingly be incorrect to assign to the word income used in section 11(1)(a), the same meaning as has been specifically assigned to the expression total income vide section 2(45). 3. In the case of a business undertaking held under trust, its income will be the income as shown in the accounts of the undertaking. Under section 11(4), any income of the business undertaking determined by the Income-tax Officer in accordance with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s, capital gains, or other sources, the word income should be understood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purposes of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax under section 11(3) to the extent that they represent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

spend at least 75 per cent of this income and not accumulate more than 25 per cent thereof. The excess accumulation, if any, will become taxable under section 11(1). After considering the Circular, the Hon ble Kerala High Court held as follows:- Held, that after writing off the full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claimed the same amount in the form of depreciation, such notional claim became .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes. Further Hon ble Calcutta High Court has held in the case DCIT VS. Girdharilal Shewnarain Tantia Trust reported in [1993] 199 ITR 15(Cal.) that The income contemplated by the provisions of section 11 is the real income and not the income as assessed or assessable. Respectfully following the decision of the Hon ble Kerala High Court and taking cue from the decision of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

orders of the lower authorities are upheld. 6. Now coming to the excess application, an identical factual situation was considered by the Division Bench of this Tribunal in The Anjuman-E-Himayath-E-Islam (supra). This Tribunal found that excess application of income cannot be allowed since it is not the case of the assessee that the money was generated in the course of charitable activity. In fact, this Tribunal observed as follows:- 4.5. Application of fund by any charitable institution is pos .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t the income as assessed or assessable . Further, Hon ble Apex High Court has held in the case of J. K. Trust Vs. Ld. CIT /CEPT reported in [1957] 32 ITR 535(SC) that Property is a term of the widest import, and subject any limitation or qualification which the context might require, it signifies every possible interest which a person can acquire, hold and enjoy. Business would undoubtedly be property unless there is something to the contrary in the enactment. ] When the Trust applies its funds .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ated fund, Loan obtained by the Trust or goods and services received from Sundry Creditors. It can be logical to deduce that when funds are applied from borrowed funds or by way of Sundry creditors the same can be treated as application of fund in the year in which such Loan/Sundry creditors are repaid from the income of the Trust. However when amount is applied from the corpus fund or accumulated fund the same cannot be treated as application of fund for the purpose of Section 11 of the Act, be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uble deduction. From the above factual and mathematical matrix it is evident that carry forward of excess application of fund in the commercial principles cannot be allowed as per the provisions of the Act because it would result in notional application of income in the subsequent year. These aspects have not been considered by the Mumbai Bench of the Tribunal, and the unreported decision of the Hon ble Bombay High Court is also not placed before us. 4.6 Now analyzing the facts of the case befor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version