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2016 (5) TMI 1131 - ITAT AHMEDABAD

2016 (5) TMI 1131 - ITAT AHMEDABAD - TMI - Charitable trust - whether the assessee is to be assessed as a charitable trust deriving income from property held under trust wholly for charitable purposes and more specifically for the object of general public utility or to be assessed as a trust carrying on business activities? - Held that:- CIT vs. Gujarat Maritime Board, reported in (2007 (12) TMI 7 - SUPREME COURT OF INDIA ), wherein the Hon’ble Apex Court has observed that the appellant is estab .....

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respectfully following the decision of Hon’ble Apex Court and the Co-ordinate Bench, Ahmedabad in assessee’s own case, we are inclined to believe that the assessee is a charitable trust carrying on activity of advancement of public utility without any profit motive and is required to be assessed as per the provisions of Section 11(1) of the Income-tax Act, 1961. - Decided in favour of assessee

Revenue expenditure as application of income by way of payment to the Gujarat Government tow .....

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which in this case is waterfront project. Therefore, the assessee is eligible to claim as application of income against the gross income received and the same should be accounted while calculating 85% of the gross income which needs to be applied for charitable activities by the assessee-trust.

Applacabilty of provision of sec 43B - Held that:- As profit earned by the assessee are not subject to tax being out of the ambit of provisions of Section 11(4) of the Income-tax Act and the in .....

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ble when the ”property held under trust” includes a business undertaking so held and the Assessing Officer have power to determine the income of such business undertaking in accordance with the provisions of the Act and where any such income so determined is in excess of income as shown in the accounts of the undertaking, then such excess income shall be deemed to have been not applied for charitable purposes. However, in the case of the assessee, we have already decided that the assessee is car .....

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hat:- As already held that the assessee is not carrying on any business activity, rather carrying on charitable activities in the form of providing services relating to general public utility which in the case before us relates to maintaining of ports in the State of Gujarat. We further observe that both the lower authorities have not appreciated the fact that the accounts of the assessee were being maintained on cash basis upto Financial Year 2001-02 and certainly in the case of the assessee wh .....

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re, in our view, no addition was called for of ₹ 12,92,00,000/- on account of Revenue recognition of the premium received on allotment of plots by way of spreading the revenue for a period of 10/20-25 years on the basis of AG(Audit) Report.

Granting deduction for accumulation u/s 11(1) of the Act only on net surplus and not on its gross receipts - Held that:- From going through the decision of the Hon’ble Apex Court in the case of CIT vs. Programme for Community Organization (20 .....

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- Held that:- There remains no dispute because the ld. CIT(A), while determining the income u/s 11(1) of the Act, has himself allowed the addition to fixed assets at ₹ 20,68,73,986/- as deduction towards application of income and therefore, this substantive ground needs no further adjudication on this ground relating to allowability of deduction in relation to increase in the fixed assets being application of income amounting to ₹ 20,68,73,968/-, as it has already decided in favour o .....

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s entitled to depreciation in respect of the assets owned by it. In the present case, due to the variation of figures of depreciation as per Income-tax Act in between the assessee as well as Department, it will be appropriate to set aside the matter to the file of the ld. Assessing Officer for the limited purpose of calculating the correct amount of deprecation as per Income-tax Act for the year under appeal. It is needless to mention that proper opportunity of being heard to be given to the ass .....

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This appeal is directed at the instance of the assessee against the order of the ld. Commissioner Income-Tax (Appeals), Gandhinagar vide appeal No.CIT(A)GNR/291/008-09, order dated 18.08.2009 passed for Assessment Year 2003-04. Assessment u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2003-04 was framed on 28.12.2007 by ACIT, Gandhinagar Range, Gandhinagar. 2. This appeal was filed on 28.10.2009 raising five grounds of appeal and thereafter the a .....

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ed in framing the assessment under section 11(1) and also under section 11(4) without appreciating the said income is being assessed twice over. There is no provision under the Income-tax Act, 1961 to have such double assessments of the same income. 2.0 Assessment under section 11(1). 2.1 The ld. CIT(A) has erred in law and on facts in confirming disallowance of ₹ 44,38,23,000/- claimed by the appellant as charges on revenue as application of income by agreeing in principle the same to be .....

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ion of income" and hence section 43B would have no application at all. 2.3 Alternately, even if section 43B is applicable deduction of ₹ 35 crores paid on 22nd July 2003 ought to have been allowed. Further amount of ₹ 1.26 crores was paid on 11th July 2003, the same also ought to have allowed. 2.4 Ld. C'IT(A) has erred in law and on facts in confirming the addition made by AO of ₹ 12,92,00,000 as notional income on account of premium of Alang Plots. Both the lower auth .....

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in not allowing deduction in relation to increase in the fixed assets being application of income amounting to ₹ 20,68,73,986. 2.6 Ld. CIT(A) has erred in law and on facts in not granting deduction for accumulation of income u/s 11(1) of the Act at all. 3.0 Assessment u/s 11(4) 3.1 Ld. CIT(A) has erred in law and on facts in confirming the view taken by AO in holding that the activities carried out by the appellant were in the nature of business and further proceeded to compute the surplus .....

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) is permissible or that it amounts to duplication of the income, the Id. CIT(A) has erred in framing assessment u/s 11(4) inasmuch as he has not granted depreciation amounting to ₹ 36,86,34,716/-. 4. Ld. CIT(A) has erred in law and on facts in confirming the view taken by AO in computing the 15% of income allowed for accumulation u/s. 11(1) on "Net Income" instead of "Gross Receipts" 5. Ld. CIT(A) ought to have worked out the deficiency and permitted the same to be car .....

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arat. In the instant case, the CIT, Gandhinagar vide his order dated 15.06.2005 has granted the registration u/s 12AA to the assessee with retrospective effect from 01.04.2002. 4. The assessee filed its return of income on 29.11.2003 showing the total taxable income at Rs. Nil. The processing u/s 143(1)(a) of the Act was completed on 27.0.2004. Thereafter, the case was selected for scrutiny and assessment order u/s 143(3) was passed on 31.03.2006 at returned income. Subsequently, the assessment .....

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it as carrying on business activity and accordingly did not allow the assessee to consider the payment of ₹ 44,38,23,000/- paid to Government of Gujarat as charges on revenue u/s 12A of Gujarat Maritime Board Act, as the payments towards the charitable purposes of the institution. ii. reduced the claim of depreciation from ₹ 52,67,27,832/- to ₹ 42,28,21,795/-, thereby allowing less claim of ₹ 10,39,06,037/-. iii. addition on account of non-disclosure of premium received o .....

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the assessee from ₹ 38,79,23,874/- to ₹ 64,80,62,360/-. 5. Aggrieved the assessee is now in appeal before the Tribunal. 6. The assessee has raised various grounds of appeal which are interconnected, but in our view following substantive issues have been taken up by the assessee. 1. The ld. CIT(A) has erred in confirming the view taken by the Assessing Officer in holding that the activities carried out by the appellant were in the nature of business and not charitable activity for ad .....

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he provisions of Section 43B of the Income-tax Act on the payment of royalty/waterfront charges paid to Gujarat Government after the due date of filing of return of the Trust. 4. The Ld. CIT(A) has erred in framing assessment at an income of ₹ 64,80,62,360/- by clubbing income under two provisions of Section 22(1) of the Act and also u/s 11(4) of the Act, without appreciating that the said income is being assessee twice. 5. The ld. CIT(A) has erred in confirming the addition made by the As .....

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ting to ₹ 36,86,34,716/-. 7. Now, we take up the first substantive ground, which reads as under:- The ld. CIT(A) has erred in confirming the view taken by the Assessing Officer in holding that the activities carried out by the appellant were in the nature of business and not charitable activity for advancement of the object of general public utility 7.1 The ld. Assessing Officer framed the assessment by taking both the options of calculating the income of the assessee. On one hand, the inc .....

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issue in assessee s own case for Assessment Year 2004-05 came up before the Hon ble Co-ordinate Bench and they have dismissed the appeal of the Revenue and has held that the assessee is a charitable trust u/s 12A of the Act, by following the decision of Hon ble Apex Court in assessee s own case, reported at (2007) 295 ITR 561 (SC). On the other hand, ld. Departmental Representative supported the orders of the lower authorities. 7.4 We have heard the rival contentions and perused the material on .....

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e Income-tax Act with effect from 01.04.2002. We further observe that the Co-ordinate Bench in ITA No.2842/Ahd/2007 in assessee s own case for Assessment Year 2004-05 has dealt with this issue and has observed as under:- 5. We have heard both the parties and gone through the facts of the case . At the outset we find that the issue raised under ground no.3 of the appeal regarding status of the assessee as a trust is settled by the Hon ble Apex Court in their aforesaid decision in the assessee s o .....

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ust. Its property was not held under trust. Therefore, the Board was not entitled to be registered as a charitable registered as a charitable institution. It was the case of the Department that the Board was performing statutory functions. Development of minor ports in the State of Gujarat cannot be termed as the work undertaken for charitable purposes and in the circumstances the Commissioner rejected the Board s application under section 12A of the 1961 Act. In the light of the above case of t .....

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ed under section 2(15) of the 1961 Act. …………………………………………………………………………………… The present case in our view is squarely covered by the judgment of this court in the case of CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC) in which it has been held that s .....

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ntrol of the Board is essentially with the State Government and there is no profit motive, as indicated by the provision of section 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat. In the circumstances, in our view the judgment of this court in Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 squarely applies to the facts of the present case. Before concluding we may mention that under the scheme .....

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alight of aforesaid conclusion of the Hon'ble Apex Court, the assessee Board is a charitable trust and is under legal obligation to apply the income which arises directly and substantially from the business field under trust for the development of minor ports in the State of Gujarat. Therefore, first objection of the Revenue in Ground No.3 regarding the assessee being a charitable trust u/s 12A of the Act, no longer survives for adjudication and is therefore, dismissed. 7.5 From going throug .....

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by the provisions of section 73, 74 and 75 of the 1981 Act. The income earned by the Board is deployed for the development of minor ports in the State of Gujarat and therefore, they are entitled to be registered as charitable trust u/s 12A of the Income-tax Act, 1961. Therefore, respectfully following the decision of Hon ble Apex Court and the Co-ordinate Bench, Ahmedabad (supra) in assessee s own case, we are inclined to believe that the assessee is a charitable trust carrying on activity of ad .....

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3,000/- has been spent towards waterfront charges/royalty paid to Government of Gujarat. 3. Alternatively, ld. CIT(A) has erred in not appreciating the assessment of the appellant, being a charitable institution, and further applying the provisions of Section 43B of the Income-tax Act on the payment of royalty/waterfront charges paid to Gujarat Government after the due date of filing of return of the Trust. 8.1 During the course of assessment proceedings, the ld. Assessing Officer observed that .....

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pital and logistics, qualified to be termed as original founder of the assessee-institution. Further, as per the provisions of Section 22A of the Gujarat Maritime Board Act, 1981, which stipulated that the waterfront royalty has to be calculated on the basis of per ton goods handled at the port and therefore, the payment of ₹ 44,38,23,000/- is not a payment towards the charitable purposes and is not eligible as application of income as mentioned in Section 11(1A) of the Act. When the issue .....

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ime Board Act and Section 74(1)(gg) of the Gujarat Maritime Board Act, 1981 and the amount so quantified will be allowed in the year of payment as per the provisions of Section 43B. The ld. CIT(A) further observed that since in the present situation neither the quantification has taken place nor is there any rationale for even adhoc provision made, the sum of ₹ 44,38,23,000/- is not allowable as a revenue expenditure for the present year. Aggrieved, the assessee is now in appeal before the .....

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ecision of Hon ble Gujarat High Court is applied for the year under appeal, then certainly the assessee will be eligible for claiming application of income of ₹ 44,38,23,000/-, against the gross income earned by the charitable trust. On the other hand, ld. Departmental Representative supported the orders of the lower authorities. 8.3 We have heard the rival contentions and perused the material on record. The issue before us raised by the assessee is that the amount of ₹ 44,38,23,000/ .....

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e trust engaged in the advancement of any other object of general public utility enumerated in section 2(15) of the Income-tax Act and is not a business undertaking. Certainly, once as we have held that the assessee-Board-Trust is not governed by provisions of Section 11(4) of the Act and the income is to be calculated as per the provisions of Section 11(1) of the Income-tax Act, then there remains no requirement to adjudicate as to whether the expenditure is a revenue expenditure or capital exp .....

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No.2842/Ahd/2007 in appellant s own case, wherein the Co-ordinate Bench dismissed the Revenue s ground by observing as under:- Now adverting to ground no.1in the appeal regarding disallowance of ₹ 71,87,33,566/-, being waterfront charges/royalty paid to the State Government, the AO disallowed the claim invoking provisions of sec. 13(1)(c) of the Act. Before the AO, the assessee explained in their letter dated 19/9/06 that the above amount has been paid to Government of Gujarat as Waterfro .....

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g income. As such, since there was no benefit accruing directly or indirectly to the Govt. by the payment of royalty, therefore, the provisions of section 13(1)(c) will not apply,-the Id. CIT(A) concluded. The Id. CIT(A) further observed that the assessee could not have conducted its activities without payment of royalty to the Govt. As such, the expenditure shall be considered as legitimate and incurred for the purposes of earning income. Such payment shall be equated with payments of property .....

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. 22A read with sec 74(gg) of the Gujarat Maritime Board Act, 1981.These provisions were introduced by Gujarat Maritime Board (Amendment & Validation) Act,2005 [Gujarat Act no. 18 of 2005] w.e.f 1.4.1999. In the light of provisions of the said, we are of the opinion that the functioning of the Board for the purposes of the Actg under which it was established depended upon payment of these charges to the Stage Government, as per the provisions of ss. 73, 74, 75 of the Gujarat Maritime Board A .....

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of the current year's income has to be considered as application for charitable purposes. Likewise in CIT v. Jayashree Charity Trust [1986] 159 ITR 280, Morale Calcutta High Court held that the income to be considered will be that which is arrived at in the context of what is available in the hands of the assessee subject to an adjustment of any expenses extraneous to the trust. In our view, income applied to meet expenses, such as normal expenses of management may not, strictly speaking, b .....

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controvert the aforesaid findings of the Id. CIT(A), we have no alternative but to uphold his findings. Thus, Ground No.1 is dismissed. We further find that that for Assessment Year 2004-05 Revenue went in appeal before the Hon ble Gujarat High Court being aggrieved by the decision of Co-ordinate Bench, Ahmedabad. The Hon ble Gujarat High Court, vide order dated 30.08.2011 in Tax Appeal No.673 of 2010, dismissed the Revenue s appeal by observing as under with reference to disallowance of ₹ .....

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the Apex Court which confirmed that the assessee being a charitable Trust under Section 12A, it was under a legal obligation to apply income which arises directly and substantially from the business held under the Trust for the development of minor ports for the State of Gujarat. 5. The Tribunal, with regard to the question under consideration, has noted the findings of CIT(Appeals) that "the assessee came into existence by an Act of the Legislature ". There is no person who can be nam .....

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nsport of goods, storage, shipping, etc. but the main object of the Trust under the Act is the development of minor ports of the State of Gujarat. The income accruing are required to be deployed and credited to separate fund to be utilized for the development of minor ports within the State. Therefore, upholding the findings of CIT(Appeals) the Tribunal noted that since there was no founder and the assessee respondent has been created by the Legislature and being a statutory body, the provisions .....

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vernment towards Water Front Royalty charges was inevitable for functioning of the assessee trust and that such a payment made towards objection of the trust as enshrined in Gujarat Maritime Board Act, 1981 is towards fulfillment of objection. This was rightly found to have been levied by virtue of statutory provisions for allowing the assessee to explore and exploit asset of the State for commercial purpose. And, so direct or indirect benefit also was found to have accrued to the Government due .....

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ble Gujarat High Court dated 30.08.2011 and Special Leave Petition was dismissed by the Hon ble Apex Court vide order dated 27.08.2012. Respectfully following the decision of Hon ble Apex Court, Gujarat High Court and the Co-ordinate Bench in assessee s own case for Assessment Year 2004-05 and applying the ratio of decision, we are of the view that the assessee, being a charitable trust u/s 12A, was certainly under legal obligation to make payment to the State Government towards waterfront/royal .....

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ounted while calculating 85% of the gross income which needs to be applied for charitable activities by the assessee-trust. 8.6 As regard the applicability of provisions of Section 43B, which remains to be academic in the present case as we have held that the assessee is a charitable trust and is eligible for claim of application of income of ₹ 44,38,23,000/-; more so that we observe that this issue came up before the Co-ordinate Bench in the case of Gujarat Industrial Development Corporat .....

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o sale/lease/licence of land and structure be added in the income as business income of the appellant. 6. The learned CIT(A), Gandhinagar has also erred in law as well as on the facts of the case of the appellant by confirming disallowance made by the learned AO of ₹ 5,37,26,241 for unpaid amount as shown in the tax audit report filed by the appellant under protest, on the ground that provisions of s. 43B of the IT Act, 1961 are applicable as income of the appellant is assessable as busine .....

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t of the principle laid down hereinabove that the profits earned by this assessee are not subject to tax being out of the ambit of s. 11(4) of the IT Act because the application of income was not questioned by the AO. The entire income of this organization being held as exempt, therefore, these grounds get automatically allowed. Respectfully applying the ratio of Co-ordinate Bench, we are of the view that, as profit earned by the assessee are not subject to tax being out of the ambit of provisio .....

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/- by clubbing income under two provisions of Section 22(1) of the Act and also u/s 11(4) of the Act, without appreciating that the said income is being assessee twice. 9.1 The ld. CIT(A) while framing the appellate order enhanced the income of the assessee to ₹ 64,80,62,360/- as against ₹ 38,79,23,874/- assessed by the ld. Assessing Officer by calculating the income u/s 11(4) of the Act as well as income u/s 11(1) of the Act at ₹ 30,27,76,028/- and ₹ 34,52,86,332/- respe .....

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twice. On the other hand, ld. Departmental Representative supported the order of the ld. CIT(A). 9.3 We have heard the rival contentions and perused the material on record. The assessee is aggrieved by the order of the ld. CIT(A) who has enhanced the assessed income from ₹ 38,79,23,874/- to ₹ 64,80,62,360/- by merging the income u/s 11(1) of the Act and 11(4) of the Act. Before going further, let us examine the provisions of Section 11(1) and 11(4) of the Act, which reads as under:- .....

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income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per ce .....

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of the Act: (4) For the purposes of this section "property held under trust" includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assessing Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in th .....

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e Act and where any such income so determined is in excess of income as shown in the accounts of the undertaking, then such excess income shall be deemed to have been not applied for charitable purposes. However, in the case of the assessee, we have already decided that the assessee is carrying on charitable activities without profit motive and the income is to be calculated as per the provisions of Section 11(1) of the Act and therefore, ld. CIT(A) has erred in calculating the income u/s 11(1) .....

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of assessment proceedings, the ld. Assessing Officer observed that the assessee received ₹ 131 crores as premium on allotment of plots at Alang and waterfront/jetty which was required to be recognized as Revenue for a period of 10 years for the premium received on plots at Alang and to be recognized as Revenue for a period of 20-25 years for the premium on remaining plots. While going through the Annual Report of the year 2002-03, the ld. Assessing Officer further observed that AG(Audit) h .....

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d on cash basis upto financial year 2001-02 and the impugned premium amount on allotment of plots were received in previous years and no amount has been received in the year under appeal and upto 31.03.2002 the income of the assessee was exempt as local authority u/s 10(20) of the Incometax Act; all the premium received before this date were also exempt from tax and further, premium received is an upfront payment of capital in nature and was accounted for as such in the year of receipt. However, .....

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ng the Financial Year 1994-95 and as on 31.03.2002, the same aggregated to ₹ 131.18 crores and the said comment of AG (Audit), which has been relied on heavily by the ld. Assessing Officer and further ld. CIT(A), has appeared only for the Financial Year 2002-03 even though the amount of premium was received since 1994-95 and they had never raised the issue of spreading over as the account have been maintained on cash basis. Ld. Authorized Representative further submitted that the said prem .....

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ceipt in the previous year. Ld. Departmental Representative, on the other hand, supported the orders of the lower authorities. 10.3 We have heard the rival contentions and perused the material on record. The issue arising in this ground has raised pursuant to report of AG(Audit), Rajkot relating to Premium Grant and Capital Receipt for being not recognized as revenue so far and the suggestion was made to spread the premium for 25 years on account of waterfront/jetty and 10 years in the case of A .....

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rying on charitable activities in the form of providing services relating to general public utility which in the case before us relates to maintaining of ports in the State of Gujarat. We further observe that both the lower authorities have not appreciated the fact that the accounts of the assessee were being maintained on cash basis upto Financial Year 2001-02 and certainly in the case of the assessee who carries on cash basis of accounting of what is received in a year has to be accounted for .....

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recognition of the premium received on allotment of plots by way of spreading the revenue for a period of 10/20-25 years on the basis of AG(Audit) Report. Thus, this ground of assessee s appeal is also allowed. 11. Now we take-up substantive ground No.6, which reads as under:- The ld. CIT(A) has erred in granting deduction for accumulation u/s 11(1) of the Act only on net surplus and not on its gross receipts. 11.1 The issue arising in this ground is that the ld. CIT(A) has restricted the benefi .....

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11(1A) and the amount is to be calculated @ 15% of the gross income of the assessee, i.e., 221.19 crores which comes to ₹ 33.18 crores; whereas both the lower authorities were of the view that 15% is to be calculated on the net surplus for the year which in the case of the assessee was ₹ 64.96 crores and 15% of the same comes to ₹ 9.75 crores. Ld. Authorized Representative referred and relied upon the decision of Hon ble Apex Court in the case of CIT vs. Programme for Communit .....

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peal or the net income, i.e., after deducting the application of income from the gross income received during the year. 11.3 We find that the Hon ble Apex Court has dealt with this issue in the case of CIT vs. Programme for Community Organization (supra) and observed as under:- Having regard to the plan language of the above provisions, it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust. For the pre .....

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crystal clear that calculation of 15% as mentioned in provisions of Section 11(1A) have to be applied on the gross income of the assessee and not the net surplus. Therefore, in our view, in the case of the assessee, 15% has to be calculated on gross income for the year, i.e., ₹ 221.19 crores and not on the net surplus of ₹ 64.96 crores. The issue is, therefore, decided in favour of the assessee. 12. Next, we deal with the substantive ground Nos. 7 & 8, which as under:- 7. The ld .....

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y adding back the depreciation claim in the books of accounts at ₹ 9,83,87,745/- and allowing the application of income towards fixed assets at ₹ 52,67,27,832/- and also again giving credit towards application of income by allowing depreciation as per books at ₹ 9,83,87,745/-; whereas while determining income as per the provisions of Section 11(4) of the Income-tax Act, treating assessee-charitabletrust, as a business undertaking, firstly added the depreciation as per books at .....

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year at ₹ 20,68,73,986/-. Whereas, while determining the income u/s 11(4) of the Act, the ld. CIT(A) firstly added deprecation as per books at ₹ 9,83,87,745/- and gave deduction to the depreciation as per Income-tax Act calculated by the ld. Assessing Officer at ₹ 36,86,34,716/-. 12.2 Now the assessee is in appeal before the Tribunal against the order of the ld. CIT(A) for not granting deduction for depreciation as per Income-tax Act at ₹ 36,86,34,716/- while determining .....

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77; 52,67,27,832/-. We also observe that the ld. Assessing Officer while framing the assessment order u/s 143(3) of the Act has allowed depreciation as per Income-tax Act at ₹ 42,28,21,795/- and has allowed the same while calculating income u/s 11(4) of the Act and thereafter, the ld. Assessing Officer revised the figure of depreciation as per Income-tax Act vide his letter dated 28.12.2007, communicated to ld. CIT(A) and the revised figure of depreciation shown therein was at ₹ 36,8 .....

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ax Act. 12.3 As regards the allowability of addition to fixed assets at ₹ 20,68,73,986/- as application of income, there remains no dispute because the ld. CIT(A), while determining the income u/s 11(1) of the Act, has himself allowed the addition to fixed assets at ₹ 20,68,73,986/- as deduction towards application of income and therefore, this substantive ground needs no further adjudication on this ground relating to allowability of deduction in relation to increase in the fixed as .....

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of Section 11(1) of the Act and further for the sake of ready reference, Section 11(1) is reproduced hereunder:- 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumula .....

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ndia, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952, to th .....

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tent to which the income so accumulated or set apart, provided the same is not in excess of 15% of such income from the property. Besides, in this connection, the provisions of Section 11(2) as well as Section 11 (3) of the Act are also relevant. It is also quite clear that the scheme of taxation of chartable/religious trust is quite different from the taxation of other taxable entities under the Act, because the application of income and/or the accumulation of such income for the purposes of th .....

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in computing the income of the charitable/religious trusts, then there would be no way to preserve the corpus of the trust and therefore, a charitable/religious trust is entitled to depreciation in respect of the assets owned by it. 12.5 This view gets further supported by the decision of Hon ble Madhya Pradesh High Court in the case of CIT vs. Raipur Pallottine Society, reported in [1989] 180 ITR 579 (MP), wherein it has held that the charitable trust is entitled to depreciation in respect of .....

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oportion 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. 12.6 We further observe that the Hon ble Gujarat High Court in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, reported in [1992] 198 ITR 598 (Guj), .....

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