TMI Blog2016 (3) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... generally used in terms of business or profession as provided u/s. 28. The word "income", therefore, is a much wider term than the expression "profits and gains of business or profession". Net receipt after deducting all the necessary expenditure of the trust (sic). Depreciation is the exhaustion of the effective life of a fixed asset owing to 'use' or obsolescence. It may be computed as that part of the cost of the asset which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective lifetime; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee. The plain language of the amendment establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 108/2014 are filed by the revenue challenging the orders passed by the Tribunal whereby, the orders passed by Revisional Authority under Section 263 of the Act are set-aside, restoring the assessment order, thus, allowing the depreciation under Section 11 of the Act as claimed by the assessee. 9. In all these appeals, the common substantial question of law that arises for our consideration is as under: Whether the Tribunal is correct in holding that depreciation is allowable under Section 11 of the Act, and there is no double claim of capital expenditure as held by the Assessing Officer and the principles enunciated by the Apex Court in escorts Ltd., 199 ITR 43 was not applicable and the principles enunciated by this Hon'ble Court in Society of Sisters St. Ann's 146 ITR 18 was applicable? 10. Heard the learned counsel appearing for the parties and perused the material on record. 11. Learned counsel Sri. K.V. Aravind appearing for the revenue would contend that the depreciation is not allowable as deduction in computing the total income of a charitable trust under Section 11 of the Act, as the amount spent on the capital asset is already allowed as appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing exemption on the application of income on the capital asset acquired during the relevant year and further, allowing depreciation in the subsequent years, at any stretch of imagination, could not be construed as double deduction. 13. Mr. Parthasarthy, learned counsel appearing for the assessee in some of the appeals adopts the arguments advanced by Mr. A. Shankar. 14. Learned counsel appearing for the assessee has placed reliance on the following Judgments: [1] COMMISSIONER OF INCOME-TAX vs. VATIKA TOWNSHIP P.LTD., [(2014) 367 ITR 466 (SC)] [2] COMMISSIONER OF INCOME-TAX vs. INSTITUTE OF BANKING [(2003) 264 ITR 110] [3] COMMISSIONER OF INCOME-TAX, TAMIL NADU-I vs. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES [1982) ITR 485 (MAD)] [4] COMMISSIONER OF INCOME-TAX vs. MARKET COMMITTEE PIPLI [(2011) 238 CTR (P H) 103] [5] COMMISSIONER OF INCOME-TAX vs. SOCIETY OF THE SISTERS OF ST. ANNE [(1984) 39 CTR (KAR) 9] [6] DIRECTOR OF INCOME TAX [EXEMPTION] Vs. COUNCIL OF SCIENTIFIC AND INDUSTRIAL RESEARCH in ITA No.331/2013 DD 27.11.2013 15. The question involved in this case is no more res integra. This question was considered by this Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other High Courts viz., Gujarat, Punjab and Haryana, Delhi, Madras, Calcutta and Madhya Pradesh in the following judgments. [1] COMMISSIONER OF INCOME-TAX, vs FRAMJEE CAWASJEE INSTITUTE, 109 CTR 463 [GUJ]; [2] COMMISSIONER OF INCOME-TAX, vs RAIPUR PALLOTTINE SOCIETY, 180 ITR 571 [MP] [3] COMMISSIONER OF INCOME-TAX, vs SETH MANILAL RANCHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 [GUJ]; [4] COMMISSIONER OF INCOME-TAX, vs BHORUKA PUBLIC WELFARE TRUST [1999] 240 ITR 513 [CAL]; [5] COMMISSIONER OF INCOME-TAX, vs RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD)] [6] COMMISSIONER OF INCOME-TAX, vs MARKET COMMITTEE PIPLI [(2011) 238 CTR (P H) 103 Allowing depreciation in subsequent years, on the capital asset, which has already availed the benefit of deduction in computing the income of the trust in the year of its acquisition is considered by the Punjab and Haryana High Court in the case of Market Committee, Pipli (supra) and held thus: 9. In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(2)(vi) and Section 10(2)(xiv) of the 1922 Act or under Section 32(1)(ii) and Section 35(2)(iv) of the 1965 Act. It was the case of the assessee claiming a specified percentage of the written down value of the asset as depreciation besides claiming deduction in 5 consecutive years of the expenditure incurred on the acquisition of the capital asset used for scientific research. In such circumstances, the Apex Court held thus: There is an apparent plausibility about these arguments, particularly in the context of the alleged departure in the language used by S.10(2)(xiv) from that employed in S.20 of the U.K. Finance Act, 1944. We may, however, point out that the last few underlined words of the English statute show that there is really no difference between the English and Indian Acts; the former also in terms prohibits depreciation only so long as the assets are used for scientific research. In our opinion, the other provisions of the Act to which reference has been made - some of which were inserted after the present controversy started - are not helpful and we have to construe the real scope of the provisions with which we are concerned. We think that all misconception wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Escorts Ltd. (supra) is distinguishable and as such is not applicable to the Charitable Trusts where income is to be computed under Chapter III of the Act. Accordingly, the judgment of Lissie Medical Institutions case (supra) based on Escorts Ltd.'s case (supra), is not applicable to the facts of the present case. 20. It is also to be noticed that while in the year of acquiring the capital asset, what is allowed as exemption is the income out of which such acquisition of asset is made and when depreciation deduction is allowed in the subsequent years, it is for the losses or expenses representing the wear and tear of such capital asset incurred if, not allowed then there is no way to preserve the corpus of the Trust for deriving its income as held in Society of the Sisters of St. Anne's case (supra). This judgment of co-ordinate Bench of this Court is binding on us and we have no reasons to disturb the settled position of law at this length of time/depart from the said reasoning. As such, the arguments advanced by the Revenue apprehending double deduction is totally misconceived. 21. Section 11(6) inserted with effect from 1.4.2015 by Finance Act No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years . The Memo explaining the provisions in Finance (No.2) Bill, 2014 reads thus: The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc. is claimed and such amount of notional deduction remains to be applied for charitable purpose. Therefore, double benefit is claimed by the trusts and institutions under the existing law. The provisions need to be rationalized to ensure that double benefit is not claimed and such notional amount does not excluded from the condition of application of income for charitable purpose . 23. Paragraphs 7.5, 7.5.1, 7.6 of Central Board of Direct Taxes Circular reported in 371 ITR 22 makes it clear that the said amendment shall take effect from 1.4.2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent assessment years. 24. The Constitution Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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