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TMI Blog2013 (1) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of application of income as this would amount to double deduction in view of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd., 199ITR 43. (iii) whether, on the facts and in the circumstances of the case, deduction of depreciation u/s.32which falls under the head "profit and Gains from business and profession' of the Income Tax Act, 1961, would be available to a charitable trust whose income is otherwise not assessable under the above head. (IV) On the facts and circumstances of the case, the Ld CIT (A) ought to have upheld the order of the Assessing Officer. (V) It is therefore, prayed that the order of the Ld. Commissioner of Income -Tax (Appeals) ought may be set aside and that of the Assessing Officer be restored." 3. Ld. D.R. supported the assessment order and reliance was placed on the judgement of Hon'ble Apex Court rendered in the case of Escorts Ltd. Vs Union of India & Ors. as reported in 199 ITR 43. He also placed reliance on the judgment of Hon'ble Kerala High Court rendered in the case of Lissie Medical Institutions vs. CIT as reported in 348 ITR 244. He also filed written submissions, which is reproduced herein below:- "Kindly refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m part of the income to be accounted for application for charitable purposes. This is obviously not done by the assessee and so much so, the income which should be available for application for charitable purposes gets reduced by the depreciation amount, which is not permissible under Section 11(1)(a) of the Act. In fact the net effect is that after writing off full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claims the same amount in the form of depreciation, such notional claim becomes cash surplus available with the assessee, which goes outside the books of accounts of the Trust unless it is written back which is not done. We do not think it is permissible for a charitable institution to generate income outside the books in this fashion." Besides, the said decision has carefully analyzed the existing decisions rendered by various Hon'ble High Courts in the matter, and then distinguished them on a specific aspect. B, Demonstration with Example Year 1: Let us say, in year 1, a charitable organization for the welfare of blind people receives Rs. 1000 as donation. It is fully used for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been incurred in earlier year and said expenses are adjusted against income of a subsequent year, income of that year be said to have been applied for charitable and religious purposes in year in which expenses has been adjusted - I Held yes"* This is a case where expenditure was incurred prior to receipt and whether it amounted to application of income or not* D. Miscellaneous In the case of CIT vs. Kalpetta Estates Ltd, 211 ITR 635, 78 Taxman 265, the Hon'ble Kerala HC held as under: 4. ... What the Bench did was to affirm that the principles of res judicata will not apply to Income-tax proceedings Nevertheless, the Tribunal may place reliance on an earlier decision to support its conclusion . It could not, therefore, be said that the decision in the assessee's case before us. relating to the prior years would operate as res judicata. The Tribunal is entitled to take a different view of the matter. If new materials were placed or on a closer and more intelligent analysis. It is evident from the various decisions placed before us that a different aspect of the matter has been presented for consideration, as laid down in the decisions mentioned earlier The Tribunal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder is also based on this judgment of Hon'ble Apex Court rendered in the case of Escorts Ltd. (supra) and before us also, reliance has been placed by the Ld. D.R. on this judgement and hence, we first examine the applicability of this judgement in the present case. - We find that on page 5 of his order, Ld. CIT (A) has observed that this judgement of Hon'ble Apex Court rendered in the case of Escorts Ltd. (supra) has already been distinguished by Hon'ble Punjab & Haryana High Court in the judgement rendered in the case of CIT vs. Tiny Tots Education Society as reported in 330 ITR 21 (P&H). We also find that since there is specific provision in Section 35(2) for not allowing depreciation on those assets for which deduction is allowed u/s 35(2), this judgement cannot be applied in the present case because in the present case, the claim of the assessee is not for double deduction. At the time of purchase of the asset in question, claim is allowed to the assessee u/s 11, if such purchase of asset is considered to be for the purpose or for the objects of the trust i.e. an exemption allowable to the assessee for the income earned by the assessee. For allowability of depreciation, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and hence, this ground of the revenue is also liable to be rejected. We order accordingly. 7. Before parting, we would 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 are not brought to our notice on the basis of which it is observed by Hon'ble Kerala High Court that cash surplus has gone outside the books. Generally, claiming of depreciation in books or in computation of income does not affect cash position because it only reduces the profit and reduces the WDV of the concerned asset. Regarding the example given by learned DR in the written submissions, we would like to observe that claiming of depreciation is mainly to build fund to facilitate replacement of the asset when it is worn out because of wear & tear or obsolesce and hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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