Feedback   New User   Login      
Tax Management India. Com TMI - Tax Management India. Com
Home Acts / Rules Notifications Circulars Tariff/ ITC HSN Forms Case Laws Manuals Short Notes Articles News Highlights
Extracts
Home List
← Previous Next →

Jyothy Charitable Trust Versus The Deputy Commissioner of Income Tax (Exemptions) , Circle 17 (1) , Bangalore

2015 (11) TMI 1295 - ITAT BANGALORE

Disallowance of depreciation - whether application of income for charitable purpose amounts to double depreciation and therefore depreciation cannot be allowed - Held that:- In the case of CIT v. Market Committee, Pipli, (2010 (7) TMI 374 - Punjab and Haryana High Court ) held 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 CIT v. Society of Sisters of Anne, (1983 (8) TMI .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have 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

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. See Govindu Naicker Estate VS. ADIT [1998 (10) TMI 4 - MADRAS High Court] - Decided in favour of assessee.

Accumulation of income - 15% accumulation for application in future has to be calculated on gross receipts or net recei .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ded in favour of assessee. - ITA No.662/Bang/2015 - Dated:- 14-8-2015 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER For the Appellant : Shri Babu Prasad, Advocate For the Respondent Shri Sunil Kumar Agarwala, Jt. CIT(DR) ORDER Per N.V. Vasudevan, Judicial Member This appeal by the assessee is against the order dated 18.03.2015 of the CIT(Appeals), LTU, Bangalore relating to assessment year 2011-12. 2. The assessee is a charitable trust with objects to provi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he facts of the present case, he was of the view that the decision of the Hon ble Supreme Court in the case of Escorts Limited & another Vs. Union of India 199 ITR 43 is squarely applicable, wherein it has been categorically held that when deduction u/s 35(2)(iv) is allowed in respect of capital expenditure on scientific research, no depreciation is allowable u/s 32 on the same asset. 3. The assessee pointed out that Hon'ble High Court of Karnataka in the case of All Saints Church, 148 I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on when the cost has already been recovered by way of exemption as application of income amounts to double deduction and double benefit on the same asset. The AO referred to the decision of the of Hon'ble High Court of Kerala in the case of DDIT(E) v. Lissie Medical Institutions, 348 ITR 344 (Ker) wherein it was held that allowing depreciation of a depreciable asset when the cost of acquisition of depreciable asset was allowed as application of income for charitable purpose amounts to double .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sidered the order of the AO. Identical issue came up for consideration before ITAT 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 too .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eriving the income as it is nothing but a decrease in the value of property through 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ue raised by the revenue in the ground of appeal is thus no longer res integra and 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 charitabl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cientific research u/s. 35(1)(iv) of the Act. The Hon ble Court thereafter held 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 debit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) In this section where any income is required to be applied or accumulated or set 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 abo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

trust registered u/s. 12A of the Act. For the A.Y. 2011-12, the assessee filed a return of income claiming carry forward of excess application of income from earlier years to the tune of ₹ 2,09,46,593/-. The assessee sought to carry forward the excess application for setting off as application of income in the subsequent assessment years. According to the AO there was no provision in the Act for carry forward of excess expenditure of earlier year to be adjusted against income of the subseq .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee s own case for AY 2010-11 in ITA No.522/Bang/2014 order dated 11.6.2015 wherein the Tribunal accepted the claim of the Assessee on identical issue on identical facts. 13. 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 application for charitable purposes as contemplated in section 11(1)(a) takes place in th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rlier 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 whose income is exempt under s. 11, excess of expenditure in the earlier years can be 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

diture incurred on religious or charitable purposes in earlier year or years can be adjusted against the income of the subsequent year. 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 earlier year being set off ag .....

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 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. The High Court relied on the decision 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

at 15% of the gross receipts. The AO was of the view that accumulation will be allowed only to the extent of 15% of the income after revenue expenditure. In other words income to be set apart u/s.11(1)(a) of the Act has to be computed at 15% of the net income i.e., gross receipts minus revenue expenditure and not on the gross receipts as claimed by the Assessee. Since in the case of the Assessee, the gross receipts after revenue expenditure was nil, the AO denied the benefit of accumulation to 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

in the case of Bai Sonabai Hirji Agiary Trust Vs. ITO 93 ITD 0070 (SB). The facts in the aforesaid case were that the assessee was a public charitable trust enjoying exemption under s. 11 of the IT Act. As per the requirement of s. 11(1) of the IT Act, as it prevailed at that point of time, the assessee had to apply 75 per cent of its income for the objects and purposes of the trust and the assessee was permitted to accumulate or set apart up to 25 per cent of its income, which was subject to fu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ulated or set apart. The Special Bench of the ITAT on the issue held as follows:- 9. Coming to the merits of the issue, we are of the view that the same is clearly covered by the decision of the Hon ble Supreme Court in the case of CIT vs. Programme for Community Organization (supra). In the decision, their Lordships, after taking note of provisions of s. 11(1)(a), have held as under : "Having regard to the plain language of the above provision, it is clear that a charitable or religious tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from the above that deduction of twenty-five per cent was held to be allowable not on total income as computed under the IT Act. Any amount or expenditure, which was application of income, is not to be considered for determining twenty five per cent to be accumulated. Their Lordships, as noted earlier, affirmed the decision of Kerala High Court in (1997) 141 CTR (Ker) 502 : (1997) 228 ITR 620 (Ker) (supra) wherein it is held as under : "At the outset, the statutory language of s. 11(1)(a) o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

consideration sets apart 25 per cent of the income from the source of property with reference to the extent to which such income is applied for such purposes, charitable or religious. In other words, for the purpose of s. 11(1)(a) of the Act, the income in terms of relevance would be the income of the trust from and out of which 25 per cent is set apart in accordance with the spirit of the statutory provision." This means that, when it is established that trust is entitled to full benefit .....

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 same. It has been held that as per the statutory language of the above section the income which is to be taken for purpose of accumulation is the income derived by the trust from property. If both the decisions are carefully read, it becomes evident that any expenditure which is in the shape of application of income is not to be taken into account. Having found that trust is entitled to exemption under s. 11(1), we are to go to the stage of income before application thereof and take into acc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

Forum
what is new what is new
  ↓     bird's eye view     ↓  


|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members ||

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

Go to Mobile Version