TMI Blog2010 (11) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of excess payment made under the head Bus Rent to the person as referred to in section 13(3) of the IT Act. (3) The ld. CIT(A) was not justified in deleting the addition made on account of disallowance of depreciation and directing the AO to allow depreciation as per IT Rules. 2. The facts of the case are that assessee is a Trust which runs educational institution from KG to Higher Secondary level. While examining the accounts of the Trust, the AO noticed that assessee trust has made payment of ₹ 16,50,000/- for building rent and ₹ 12,25,000/- for bus rent to M/s Adarshila Associates. M/s Adarshila Associates is a concern in which some of the trustees are partners. Therefore, according to the AO provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent was reasonable. The ld. CIT(A) deleted both the additions by observing as under :- 5.2 The matter has been considered. In my view, the logic adopted both by the appellant and the AO is not correct. Reasonableness of the payments for the services rendered has to be worked out in the context of the market rates. The computation provided by the appellant is in terms of cost to M/s Adarshila Associates which could be their internal working. Obviously, if we go by this working, there will be change of rent for buses and buildings every year. Particularly for buses if we were to adopt the high rates of depreciation as provided in Income-tax Act, the rent shall decrease one year to another by half which is not the normal condition in actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here it need not be as per Income-tax Rules. Hence, in principle the ground is allowed. 6. The ld. DR supported the orders of authorities below, and submitted the payment made by the trust is excessive and rate of interest is a reasonable criteria to decide such excessive payment. 7. Before us, on behalf of assessee written submissions were filed. In respect of depreciation it was submitted that depreciation is allowable on the basis of ownership and use of the assets. Since assessee trust fulfills the criteria of ownership as well as user, depreciation is allowable. Reliance was placed on the decision of Hon. Gujarat High Court in Sheth Manilal Ranchhoddas Visharam Bhuvan Trust 198 ITR 598 (Guj) wherein it is held that income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt the proportion of such expenditure which has expired during that period. If depreciation is not allowed as a necessary deduction in computing the income of a charitable trust, then there would be no way to preserve the corpus of the trust. A charitable trust is, therefore, entitled to depreciation in respect of the assets owned by it. In CIT vs. Institute of Banking Personnel Selection (supra) Hon. Bombay High Court has held as under :- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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