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2016 (3) TMI 143 - ITAT AHMEDABAD

2016 (3) TMI 143 - ITAT AHMEDABAD - TMI - Disallowance of depreciation to trust - whether while computing income under section 11(1) (a) of the Income tax Act, 1961, depreciation has to be allowed? - Held that:- it is explicitly clear that Section 11 (1) (a) of the Act provides a condition for claiming exemption of income in the case of certain assessees from their total income for a particular assessment year under Chapter III of the Act viz. “incomes which do not form part of total income”, wh .....

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favour of assessee - I.T.A. No. 861/Ahd/2013 - Dated:- 15-2-2016 - Pramod Kumar AM and Kul Bharat JM For the Appellant : J.P. Jangid For the Respondent : M.G. Patel ORDER Per Pramod Kumar AM: 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 17th January, 2013 passed by the ld. CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year 2007-08, on the following grounds :- The Ld. .....

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duction in view of the decision of the Hon ble Supreme Court in the case of Escorts Ltd., 199 ITR 43 and the decision of Kerala High Court in the case of Lissie Medical Institutions V/s. Commissioner of Income Tax, Kochi, 348 ITR 344. iii) Whether, on the facts and in the circumstances of the case, deduction of depreciation u/s.32 which falls under the head Profit and Gains from business and profession of the Income Tax Act, 1961, would be available to charitable trust whose income is otherwise .....

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n case for the assessment year 2009-10 in ITA No.2655/Ahd/2012. Vide this decision dated 22nd March, 2013, the Tribunal has, inter alia, observed as follows :- 5. We have heard the rival submissions and perused the materials on record. At the time of hearing both the parties agreed that the issue is covered against the revenue by the orders of the Tribunal cited supra. Further, in the aforesaid order of the ITAT Ahmedabad A Bench ITA No.2658/Ahd/2012 dated 31-01-2013 cited supra the Tribunal hel .....

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the assessee trust does not fall under the head income from business but still such income has to be computed on the basis of commercial principles and therefore, depreciation has to be allowed. In the case of CIT Vs Seth Maniklal Ranchoddas Vishram Bhavan Trust (supra), Hon ble Gujarat High Court has agreed with the view taken by Hon ble Madras High Court on this issue. Hon ble Madras High Court has taken this view in the case of CIT Vs Rao Bahadur Calavala Cunnan Chetty Charities as reported .....

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ld like to observe that the written submissions filed by the learned DR as reproduced above does not render any help to the revenue because sitting in Gujarat, we are duty bound to follow the judgment of Hon ble Gujarat High Court in preference to the Judgment of Hon ble Kerala High Court cited by learned DR. Moreover, we also find that in the present case, it is not an allegation of the A. O. in the assessment order that any cash of the assessee has gone outside the books of the assessee. Facts .....

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of asset when it is worn out because of wear & tear or obsolesce and hence, it cannot be alleged that there will be leakage if depreciation is allowed. Regarding various submissions to say that the judgment of Hon ble Gujarat High Court is not applicable in the present case, we do not find any in the same because we have already seen that granting of exemption u/s 11 and then depreciation u/s 32 does not amount to granting double deduction because exemption u/s 11 is not a deduction but exem .....

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the assessee and against the revenue, wherein AT Para 11 to 14, it was held as under: 11. We have considered the rival submissions of the parties and perused the material available on record. In the case of CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (198 ITR 598) (Guj), the facts are that the assessee was a trust registered under the Public Trusts Act. The income of the assessee is mainly from immovable property. In the returns of income filed for the assessment years 1971-72 and 197 .....

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questions were referred to the Hon ble Court for their decision. 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, while computing income under section 11(1) (a) of the Income tax Act, 1961, depreciation has to be allowed? 2. Whether the Tribunal was right in law in holding that, having regard to the scheme of the Act, income referred to in section 11(1) (a) of the Act is to be computed not in accordance with the provisions of the Act .....

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in the popular or general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction. The provisions of Income-tax Act are to compute income under different heads cannot be introduced to find out the income derived from the property held under the Trust. Similar view was taken by the Hon ble Bombay High Court in the case of CIT v. Institute of Banking Personnel Selection. 12. H .....

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n the property held by the Trust should be computed in the normal commercial sense and therefore, depreciation is required to be deducted to compute income accordingly, but what is computed for the purposes of taxing u/s. 11 is the deficiency between 85% and actual amount applied for charitable purposes. For example - Where a trust applies only, say 60% of its receipts as application to charitable purposes then 25% of the receipts would be treated as deficiency which should be subjected to tax a .....

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s in subsequent year would apparently be a double application which, in our humble view, would be apparently inconsistent as not so provided in the law and hence untenable apparently illogical. Notwithstanding our view, we respectfully follow the decision of Hon ble High Court in the case of CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (198 ITR 598), and hold that depreciation would be further allowed to the trust in a subsequent year in respect of the property when we calculate its inc .....

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