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TMI Blog2015 (11) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit to the Assessee and hence the decision is erroneous and contrary to the decision of Hon'ble Supreme Court in the case of Escorts Ltd. Vs. Union of India (1993) 199 ITR 43. 2. On the facts & in the circumstances of the case, the Ld. CIT(A) has erred in holding that income on sale of capital assets has to be taken at net value instead of gross value amount at Rs. 84,0001- as full value of cost of capital assets already stood allowed to the Assessee as application on income. 3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that no addition could be made u/s 68 of the Act in respect of corpus donations amounting to Rs. 25,32,000/- despite failure of the Assessee to discharge the onus cast regarding proving the genuineness of the said donations. 4. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in holding that corpus donations at Rs. 25,32,000/- were already taken as income by the Assessee ignoring the fact that the same were not considered as revenue receipts but as capital receipts by the Assessee and hence not accounted for in the Income & Expenditure Account for A. Y. 06-07." 2. Briefly stated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,605/-. The claim of the assessee on account of capital expenditure was being allowed and as such the entire sale proceeds be taken as income of the assessee since the sale proceeds of the assets was Rs. 84,000/- against which a profit of Rs. 13,605/- has been earned the amount of Rs. 70,395/- (Rs.84,000/- - Rs. 13,605/- = Rs. 70,395/-) is added to the income of the assessee. 5. The assessee being in receipt of corpus donation of Rs. 25,32,000/- during the year under consideration has filed confirmation letter in respect of corpus donors with their addresses. In order to verify the genuineness and creditworthiness of the corpus donations, notices were issued to 20 persons / parties duly described in the order of the A.O. and in all the cases, no reply has been received till date and thereafter, assessee was asked to prove the genuineness and creditworthiness of corpus donors but he has not brought out any evidence to support this fact till date and as such an amount of Rs. 25,32,000/- amounted to undisclosed income and consequently made the addition. 6. The assessee challenged the assessment order before Ld. CIT(A) by way of appeal which has been allowed vide impugned order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,88,207/- as depreciation at the rates applicable as per Income Tax Rules. The AO seems to have got confused between the two things, the income chargeable to tax, and the conditions, fulfillment of which make the said income exempt from tax. The AO has failed to appreciate the difference between the income chargeable to tax, and the application of income which is a condition for the purposes of exemption under section \ 11. Application of income is not computation of income and the provision of application of income would come into play only after the income chargeable to tax is determined. Therefore, the question whether depreciation is to be allowed or not has nothing to do with the application of income. The total amount of income has to be computed in the manner laid down under the Act. Income has to be understood in the general sense and depreciation is one of the deductions recognized under law & there is no reason for not allowing the same to the appellant. The case of Escorts Ltd Vs. Union of India, relied upon by the AO, is in respect of section 35(2)(iv), which specifically disallows the deduction u/s.32, whereas, there is no such explicit provision in respect of exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the aforesaid order of the Tribunal. We are not inclined to admit the appeal and frame any substantial question of law since none arises from the order of the Tribunal. There is no dispute that the assessee has been granted registration under Section 12AA vide order dated 11th September, 2009 and, therefore, it was entitled to exemption of its income under Section 11. The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilized for the charitable purposes should be allowed. On this issue, there seems to be a consensus of judicial thinking as is seen from the authorities relied upon by the CIT(Appeals) as well as the Tribunal. In CIT vs. The Society of the Sisters of St. Anme (Supra), an identical question arose before the Karnataka High Court. There the society was running a school in Bangalore and was allowed exemption under Section 11. The question arose as to how the income available for application to charitable and religious purposes should be computed. Jagannatha Setty, J. speaking for the Division Bench of the Court held that income derived from property held under trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. 13. The judgment of the Supreme Court in Escorts Limited vs. Union of India (supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charitable trust / institution involving the question as to whether its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-O of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under normal commercial accounting principles, there is authority for the proposition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallow the deduction u/s 32 whereas there is no such provision in respect of exemption claimed u/s 11 and 12 of the Act, hence, not applicable to the facts and circumstances of the case. 15. Similarly, during the period under assessment, the assessee had offered an income of Rs. 13,605/- as profit on the sale of asset and the A.O. has taken the entire sale proceeds as income to be assessed on the ground that the claim of assessee has already been allowed on account of capital expenditure, thus made an addition of Rs. 70,395/- i.e. (Rs.84,000 - Rs. 13,605 = Rs. 70,395/-), which is the profit on the sale of asset. 16. Keeping in view the fact that the income of the appellant is exempt u/s 11 of the Act and when certain assets purchased by the assessee was claimed to be the part of application of income for charitable purposes, and the same has been sold, the income thereof has been disclosed, the addition cannot be made for the reason that the application of income is not computation of income and the provisions of calculating the income applied for charitable purpose is attracted only after the income eligible for exemption is determined. Since the entire amount of Rs. 70,395/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on same evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to states a case." 21. The issue in controversy in the present appeal is duly covered under the judgement supra because when the assessee has provided the complete details of corpus donors lying in the paper book at pages 50-145 in the form of individual confirmations from such donors, their names and addresses as well as PAN, it was for the A.O. to confirm the same. Merely issuance of notices by the A.O. to the corpus donors u/s 133(6) of the Act is not enough to discharge the onus. The A.O. has not even disputed the existence, genuineness and creditworthiness of the said donors nor he has disputed the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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