TMI Blog2016 (5) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Therefore, Section 32 of the Act is not applicable in this case. - Decided against assessee. - ITA No. 1098/Mds/2015 - - - Dated:- 22-4-2016 - Shri N. R. S. Ganesan, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Appellant : Sh. R. Vijayaraghavan, Advocate For the Respondent : Sh. P. Radhakrishnan, JCIT ORDER Per N. R. S. Ganesan, Judicial Member This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) 17, Chennai, dated 13.03.2015 and pertains to assessment year 2010-11. 2. The only issue arises for consideration is with regard to disallowance of depreciation. 3. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee was registered as charitable institution under Section 12AA of the Income-tax Act, 1961 (in short 'the Act'). During the year under consideration, the assessee claimed depreciation of ₹ 63,14,533/- on the capital asset. However, the Assessing Officer disallowed the claim of the assessee on the ground that allowing the claim of depreciation would amount to double deduction which is not permissible under the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. If the assessee claims that it is doing business or profession, then the registration has to be cancelled under Section 12AA(3) of the Act and the assessee will not be eligible for exemption under Section 11 of the Act. The Ld. D.R. has also clarified that the assessee is not doing any business or profession. Therefore, the provisions of Section 32 is not at all applicable to the charitable institution. The Ld. D.R. further pointed out that Section 32 falls in Chapter IV of the Act which provides for computation of business income. The claim of the assessee under Section 11 falls in Chapter III of the Act which says that certain kind of income do not form part of total income. The Ld. D.R. further pointed out that it is not the case of the assessee that any business was held as property under the trust. The matter would stand in a different footing if the assessee claims depreciation on the business which was held as property under trust under Section 11(4) of the Act. In the case before us, according to the Ld. D.R., the assessee is claiming depreciation on the asset which is used for charitable purpose. In fact, the asset was used as a tool for carrying out object of the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i) 6or clause (ii) or clause (iia), as the case may be: Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent. of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset : Provided also that where an asset being commercial vehicle is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. Explanation 1.- Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.- For the purposes of this sub-section written down value of the block of assets shall have the same meaning as in clause (c) of sub-section (6) of section 43; Explanation 3.- For the purposes of this sub-section, 10the expressions assets shall mean-- (a) tangible assets, being buildings, machinery, plant or furniture ; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erwise) in computing the income chargeable under the head Profits and gains of business or profession of any one previous year ; (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. Explanation For the purposes of this clause,-- (1) moneys payable in respect of any building, machinery, plant or furniture includes-- (a) any insurance, salvage or compensation moneys payable in respect thereof ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow depreciation for wear and tear of the building, machinery, plant, etc. Depreciation in certain cases is treated as expenditure laid out over the years during the life time of the machinery. In other words, the value of the asset, machinery, etc. reduced pro tanto. This Tribunal is of the considered opinion that the depreciation is spread over during the effective life time of the machinery or asset, etc. used for business by allowing the same as deduction on notional basis. The amount of depreciation allowed in a particular year is intended to represent the life of the machinery such as expenditure during the above said period. In other words, the value of the machinery was spread over for the effective life time of the asset and a provision was made by way of notional deduction to replace the machinery after expiry of its entire life time. Therefore, the Legislature provided depreciation under Section 32 of the Act as an incentive/allowance to the asset which was used for the business or profession. This can be construed as reduction in value in the balance sheet while computing the income from business or profession. 7. Section 32(1) of the Act clearly says that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profession, the assessee may be eligible for depreciation. The assessee is certainly not entitled for depreciation, when the income was exempted on application or accumulation as provided under the scheme of the Act. The charitable institution under the scheme of Income-tax Act is on a different footing. The entire income of the assessee-trust from the property held under trust do not form part of total income under Section 11 of the Act provided the same is applied for charitable object. Section 11 of the Act also provides for accumulation of 15% of income for future application for the object of the trust. Therefore, the business and charitable institution are two different categories in the scheme of Income-tax Act. This Tribunal is of the considered opinion that the customary way of computing income or the commercial principle of computing income cannot override the specific provision of Income-tax Act. The Income-tax Act does not provide for allowing depreciation other than the asset which was used for business or profession. There is no other provision in the Income-tax Act other than Section 32 of the Act for allowing depreciation. Therefore, the claim of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is claiming depreciation in respect of asset which was used as tool for carrying out charitable object of the institution. When the asset was used as tool for carrying out the object of the charitable institution, such activity cannot be construed as a business or profession of the assessee. Therefore, Section 32 of the Act is not applicable in this case. 13. We have carefully gone through all the judgments and decisions cited by the Ld.counsel for the assessee, which are as under:- 1. DIT v. Vishwa Jagriti Mission (2012) 73 DTR (Del) 195 2. CIT v. Market Committee, Pipli (2011) 330 ITR 16 (P H) 3. CIT v. Society of Sisters of St.Anne (1984) 146 ITR 28 (Kar) 4. CIT v. Bhoruka Public Welfare Trust (1999) 240 ITR 513 (Cal) 5. CIT v. Tiny Tots Education Society (2011) 330 ITR 21 (P H) 6. CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 198 ITR 598 (Guj) 7. CIT v. Raipur Pallottine Society (1989) 180 ITR 579 (MP) 8. CIT v. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bom) 9. DIT(E) v. Framjee Cawasjee Institute (1993) 109 CTR (Bom) 463 10. DDIT v. Lakshmi Saraswathi Educational Trust ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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