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The Commissioner of Income Tax, Karnal Versus Market Committee, Shahabad

2016 (6) TMI 1044 - PUNJAB AND HARYANA HIGH COURT

Depreciation claim allowablity to assessee trust - Held that:- It is not disputed by the learned counsel for the appellant-revenue that amended questions of law are covered against the revenue by judgment of this Court in Commissioner of Income Tax vs. Market Committee, Pipli, (2010 (7) TMI 374 - Punjab and Haryana High Court ), wherein after considering the relevant case law on the point, it was held that there was no double deduction claimed by the assessee as canvassed by the revenue. As the .....

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PUNJAB AND HARYANA HIGH COURT ] - Accrual of interest on advance made by the assessee to the Haryana State Electricity Board - Held that:- The assessee was following cash system of accounting. Moreover, section 145 of the Act was amended w.e.f 1.4.1997 whereby only one out of the two systems could be followed i.e. either mercantile or cash. The finding recorded by the Assessing Officer and the Tribunal that as the assessee was following cash system of accounting, no income on this account ha .....

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is order shall dispose of ITA Nos.132 and 134 of 2010 as according to the learned counsel for the appellant-revenue, the issues involved in both the appeals are similar. The facts are being extracted from ITA No.134 of 2010. 3. ITA No.134 of 2010 has been preferred by the appellantrevenue under Section 260A of the Income Tax Act, 1961 (in short, the Act ) against the order dated 28.5.2009, Annexure A.3 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A', Chandigarh (in shor .....

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ch further allowing of depreciation on these capital assets will amount to double deduction for the same expenditure? (ii) Whether allowing of depreciation on the capital assets by the Income Tax Appellate Tribunal is justified in the light of the Hon'ble Apex Court decision in the case of Escorts India Limited (199 ITR 43) wherein it has been held that in the absence of clear statutory indication to the contrary, the statute should not be read as to permit an assessee two deductions on the .....

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had failed to prove that the amount was actually spent? (iv) Whether on the facts and in the circumstances of the case, the order of the Income Tax Appellate Tribunal is perverse in as much as it has deleted the addition, made on account of interest accrued on advance made by the assessee to the Haryana State Electricity Board by accepting the contention of the assessee that it was maintaining cash system of accounting and no interest income was received during the year, ignoring the fact that .....

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, but ignoring the remaining part of the communication which says that the matter regarding interest on these deposits will be considered after repayment of principal, which means that right of interest on the advance/deposit made by the assessee with HSEB did not stand waived and as such the same had accrued to the assessee during the year? (vi) Whether on the facts and in the circumstances of the case, the order of the Income Tax Appellate Tribunal is perverse as while deleting the addition, m .....

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mbay High Court in CIT vs. Institute of Banking Personnel Selection, (2003) 264 ITR 110. The Assessing Officer denied the claim in view of the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2005-06. Against the order of the Assessing Officer made under section 143(3) of the Act, the CIT(A) as in the earlier years dismissed the assessee's appeal by holding that income of the assessee had been completely exempt ab initio. The income of the assessee was exemp .....

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he CIT(A), the assessee filed appeal before the Tribunal. The Tribunal following the decision of Bombay High Court in Institute of Banking Personnel Selection's case (supra) allowed the appeal of the assessee holding that normal depreciation could be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(i)(a) of the Act. It was further held that income of a charitable trust derived from building, plant and machinery and fu .....

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n dated 19.9.2008 in the case of Market Committee, Adampur. The Assessing Officer made addition of ₹ 20,10,000/- on account of accrued interest on advance/FD of ₹ 2,01,00,000/- to HSEB and accrued interest of ₹ 3,75,000/- on deposits of ₹ 37,50,000/- to Market Committee, Pundri. The assessee was not showing any interest on accrual basis on such advance. The CIT(A) dismissed the assessee's appeal. The assessee filed appeal before the Tribunal. The Tribunal allowed the .....

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that amended questions of law Nos. (i) and (ii) are covered against the revenue by judgment of this Court in Commissioner of Income Tax vs. Market Committee, Pipli, (2011) 330 ITR 16 (P&H), wherein after considering the relevant case law on the point, it was held that there was no double deduction claimed by the assessee as canvassed by the revenue. As the income of the assessee being exempt, the assessee was claiming that depreciation should be reduced from the income for determining the pe .....

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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 .....

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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 whether the assessee has complied with the rule of accumulation to the extent of ₹ 10,000 or 25 per cent of the income, whichever is higher. xx xx xx xx xx In fact wherever the statute contemplated the income being computed in the manner set out in the provisions of the Act, appropriate words are used. For instance, in s. .....

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, we consider that the computation as envisaged by the other provisions of the Act cannot be imported into section 11(1). The Tribunal has in a way mixed up the notion of total income in understanding the expression income from property held under trust . Section 14 occurs in the chapter Computation of total income . It provides that all income for the purposes of charge of income-tax and computation of total income be classified under certain heads. Therefore, the computation under the differen .....

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Cunnan Chetty Charities (supra) had recorded that if depreciation is not allowed as a necessary deduction for computing the income of a charitable institution then the corpus of the trust for deriving the income cannot be preserved and that the amount of depreciation debited to the account of a charitable institution is to be deducted to arrive at the income available for application to charitable and religious purposes. This decision was followed by Madhya Pradesh High Court in CIT v. Raipur Pa .....

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n Escort Limited's case (supra), on which reliance has been placed by the learned counsel for the Revenue. The Hon'ble Supreme Court in that case was dealing with a case relating to two deductions both under Sections 10(2)(vi) and 10(2)(xiv) of the 1922 Act or both under Sections 32(1)(ii) and 35(1)(iv) of the Act. The assessee therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assessee had .....

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of the same expenditure, one by way of depreciation under section 32 of the Income Tax Act, 1961 and other by way of allowance under section 35 (1) (iv) of a part of the capital expenditure on scientific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions...... It was further recorded that:- There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in .....

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d be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon ble Supreme Court in Escorts Ltd. and another (supra) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of Section 11. The questions proposed have, thus, to be answe .....

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the taxability of income accrued on amount of deposits made by the assessee with Haryana State Electricity Board and also Market Committee, Pundri. The relevant findings recorded by the Tribunal read thus:- 5. We have considered the rival submissions and also perused the orders of the lower authorities. The income tax is charged on the total income of the assessee in terms of sections 4 and 5 of the Act. The income so computable is as per method of accounting provided under section 145 of the A .....

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st on deposit with HSEB on accrual basis. The reason advanced is that the assessee is not following the pure cash system of accounting but is following a mixed system of accounting. In our view, there is no case made out by the Assessing Officer as to how the mixed system of accounting affects the position stated by the assssee. Even if it is accepted that the assessee is following the mixed system of accounting, there is no reason as to why the income from the deposits in question is liable to .....

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