TMI Blog2011 (12) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case. 2.2 The ld.CIT(A) has decided the issue as under:- I have considered the facts of the case and the submissions made. From the perusal of details on record, it is seen that the The Hon'ble Anddra Pradesh High Court in the case of is a charitable trust registered u/s 12A of the IT Act vide CIT, Bikaner s order dated 17-12-2007. From the plain reading of the provisions of Section 40(a)(ia), it is seen that it would be applicable only when the income is chargeable to tax under the head profits and gains of business of profession. In the instant case, the income of the income of the appellant trust is not chargeable to tax under the head profit and gains of business and profession. Secondly, the provisions of Section 40(a)(ia) would be attracted only if there existed a contractual relationship between the appellant and RSAMB. It is only the RSAMB which is the executing agency for construction/ repair work and not the appellant. The appellant is only providing funds to the RSAMB and not executing construction/ repair work itself. Thirdly, the issue is covered by the decision of Hon'ble ITAT, Jodhpur stated above. The only difference being that in that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty registered u/s 12A of the Act, the profit is to be computed on the basis of the commercial principles. The income is not be computed under different heads. Hence the provisions of Section 40a(ia) are not applicable. It will be useful to reproduce relevant paras from the order of Jaipur bench in the case of ITO vs KUMS, Baran (ITA No. 560 561/JP/2010 dated 06-01- 2011. 6. The Hon ble Gujrat High Court in the case of Zaverchand Laxmi Chand Co. V CIT 55 ITR 486 has considered the difference between assessable profit under I.Tax act and profit based on commercial principles and observed as under :- The company has been allowed depreciation of ₹ 2,32,234 of which the normal depreciation is only ₹ 1,86,143 according to the department representative. The depreciation in excess of the normal depreciation is not strictly depreciation but an inducement to set up new machinery. We consider that normal depreciation is alone allowable in the computation of profits. In our view, the Tribunal was not correct in the way it looked at this question, and the error was in not appreciating the distinction between the depreciation calculated on the basis of the statutory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the financial position and results of operations of an enterprise. Depreciation is charged in each accounting period by reference to the extent of the depreciable amount, irrespective of an increase in the market value of the assets. 8.. The Hon ble Andhra Pradesh High Court in the case of CIT v Trustee of H.E.H. The Nizam Supplemental Religious endorsement trust 127 ITR 378 had an occasion to consider as to how the income of the trust is to be computed. It was stated that the commercial or amounting profits or actual profits earned by the assessee are to be calculated on commercial principles. It is not the total income as would be assessed by the A.O. is not relevant for the purpose of investing the funds of the trust or assessing the income of the trust. It is the accounts of the trust alone will have to be considered. Payment of income Tax and Wealth tax were expenses incidental to the carrying out of charitable purpose of the trust. Under normal provisions of computation of business income, income tax is to be added while computing total income. 9. The Hon ble Madras High Court in the case of CIT v Rao Bahadur Calavala Cunnan Chetly Charities 135 ITR 485 has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee, subject of course to any adjustment for expenses extraneous to the trust. If the expression income is so understood, then we have to take the accounts of the assessee with reference to the receipts and deduct therefrom the expenses necessary for earning or looking after that income. The net amount that remains would be available for distribution or application for charitable purpose. In applying the income for charitable purposes, even capital expenditure may be incurred. Therefore, the nature of the expenditure in the hands of the entity which receives the money is not the criterion. So long as the assessee disburses the amount for charitable purposes, whether the amounts are utilized for capital or revenue purposes by the charity concerned, the assessee would have complied with that part of the requirement of s. 11, namely application of the income for charitable purposes. The authorities will have to find out as to whether they are really charitable purposes or not. Subject to such examination, the application of the income for charitable purposes will have to be excluded and it is only the balance that would require examination for finding out wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hetty Charities [1992] 135 ITR 485, the Madras High Court was required to consider whether, for the purpose of computing accumulation in excess of 25 per cent, as laid down in section 11(i)(a) of the Act, income has to be computed under the various heads enumerated in the Income-tax Act. It held that the income from the properties held under trust would have to be arrived at in the normal commercial manner without classification under the various heads set out in section 14. It held that the expression income has to be understood 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. It observed that the computation under the different categories or heads arises only for the purposes of ascertaining the total income for the purposes of charge. Those provisionsd cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is, for the purpose of the exemptions under Chapter III. We are in respectful agreement with the view taken by the Karnataka, Madhya Prsdesh a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of ITO vs KUMS, Baran (supra). In that case, it has been held that payment of tax is application of income. Hence, we hold that the ld.CIT(A) was justified in deleting the addition. ITA No. 245/JU/2010 KUMS , Anupgarh 4.1 The first ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 1,71,07,719/- made u/s 40(a)(ia) of he Act holding that the provisions of Section u/s 40(a)(ia) are not applicable in the instant case. 4.2 This issue has been decided against the Revenue while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition. 4.3 The second ground of assessee is that the ld. CIT(A) has erred in deleting the addition of ₹ 45,33,798/- made by the AO on ground that the expenditure was not for the objects of the trust. 4.4 This issue has also been decided in favour of the assessee while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition ITA No. 246/JU/2010 K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the ld.CIT(A) was justified in deleting the addition ITA No. 250/JU/2010 KUMS , Suratgarh 8.1 The first ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 1,03,11,194/- made u/s 40(a)(ia) of he Act holding that the provisions of Section u/s 40(a)(ia) are not applicable in the instant case. 8.2 This issue has been decided against the Revenue while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition. 8.3 The second ground of assessee is that the ld. CIT(A) has erred in deleting the addition of ₹ 39,66,760/- made by the AO on ground that the expenditure was not for the objects of the trust. 8.4 This issue has also been decided in favour of the assessee while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition ITA No. 99/JU/2010 KUMS , Padampur 9.1 The first ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 1,30,00,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) has erred in deleting the addition of ₹ 1,64,82,000/- made by the AO on ground that the expenditure was not for the objects of the trust. 11.4 This issue has also been decided in favour of the assessee while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition ITA No. 103/JU/2010 KUMS , Raisinghnagar 12.1 The first ground of Revenue is that the ld. CIT(A) has erred in deleting the addition of ₹ 48,45,000/- made u/s 40(a)(ia) of he Act holding that the provisions of Section u/s 40(a)(ia) are not applicable in the instant case. 12.2 This issue has been decided against the Revenue while disposing off the appeal in the case of Krishi Upaj Mandi Samit, Sri Vijaynagar. Following our findings in that case, we hold that the ld.CIT(A) was justified in deleting the addition. 12.3 The second ground of assessee is that the ld. CIT(A) has erred in deleting the addition of ₹ 44,59,789/- made by the AO on ground that the expenditure was not for the objects of the trust. 12.4 This issue has also been decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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