TMI Blog2016 (7) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee as canvassed by the Revenue. 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 answered against the Revenue and in favour of the assessee. It is also to be noticed that while in the year of acquiring the capital asset, what is allowed as exemption is the income out of which such acquisition of asset is made and when depreciation deduction is allowed in the subsequent years, it is for the losses or expenses representing the wear and tear of such capital asset incurred if, not allowed then there is no way to preserve the corpus of the Trust for deriving its income as held in Society of Sisters of St.Anne [1983 (8) TMI 44 - KARNATAKA High Court ]. This judgment of co-ordinate Bench of this Court is binding on us and we have no reasons to disturb the settled position of law at this length of time/depart from the said reasoning. As such, the arguments advanced by the Revenue apprehending double deduction is totally misconceived. Section 11[6] of the Act is prospective in nature denying the depreciation deduction in computing the income of Charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (Appeals), Bangalore. The CIT(A) after calling for the remand report from the Assessing Officer, allowed the appeal on merits and deleted all the additions made by the Assessing Officer. 5. Aggrieved by the same, revenue preferred appeal before the Tribunal. The Tribunal after hearing the parties, dismissed the appeal of the revenue. 6. Being aggrieved by the said order of the Tribunal, the revenue is in appeal. 7. Similarly, in ITA Nos. 233-234/2013, ITA No. 1/2013, ITA No. 433/2013, ITA No. 414/2010, on the assessment orders denying exemption under Section 11, read with Section 10(23c) of the Act and making an addition of income on account of disallowance of depreciation, the assessee preferred appeals which were allowed in favour of the assessee. Revenue challenged the said orders of the CIT(Appeals) before the Tribunal unsuccessfully. The orders passed by the Tribunal are challenged in these appeals. 8. ITA No. 431/2013, ITA Nos. 56/2013 and 108/2014 are filed by the revenue challenging the orders passed by the Tribunal whereby, the orders passed by Revisional Authority under Section 263 of the Act are set aside, restoring the assessment order, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR Vol. 199) 12. On the other hand, learned counsel appearing for the assessee Sri. A. Shankar would contend that Chapter-III of the Act and Chapter-IV of the Act play in different fields. Sections 11 to 13(B) covered under Chapter-III of the Act, governs the manner of computation of total income and exemption by Charitable Trusts. Sections 14 to 59 governed by Chapter-IV of the Act deals with the income under the five heads of income enumerated under Section 14. The exemption entitlement under Section 11 of the Act is based on application of income and 'permissible accumulations' and the 'balance of income', if any, is treated as income which is not applied for objects of the Trust and is brought to tax under Chapter III of the Act. Chapter - IV in no way is applicable to Section 11, the claim of depreciation is not under Section 32 of the Act but under normal commercial principles as laid down by the Courts. It is further contended that allowing exemption on the application of income on the capital asset acquired during the relevant year and further, allowing depreciation in the subsequent years, at any stretch of imagination, could not be construed as double ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems to us that it need not necessarily be so. The expenditure should be understood as necessary outgoings. The depreciation is nothing but decrease in value of property through wear, deterioration or obsolescence and allowance is made for this purpose in book-keeping, accountancy, etc. In Spicer Pegler's Book-keeping and Accounts, 17th Edn., pp. 44, 45 46, it has been noted as follows : Depreciation is the exhaustion of the effective life of a fixed asset owing to 'use' or obsolescence. It may be computed as that part of the cost of the asset which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective lifetime; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period. 16. Similar view is taken by the other High Courts viz., Gujarat, Punjab and Haryana, Delhi, Madras, Calcutta and Madhya Pradesh in the following judgments. [1] COMMISSIONER OF INCOME-TAX, vs FRAMJEE CAWASJEE INSTITUTE, 109 CTR 463 [GUJ]; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of depreciation. It was held that income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforestated Judgment of the Bombay High Court, we answer question No. 1 in the affirmative i.e., in favour of the assessee and against the department. 18. The Judgment in Escorts Ltd. (supra) was rendered by the Apex Court in the context of Section 10(2)(vi) and Section 10(2)(xiv) of the 1922 Act or under Section 32(1)(ii) and Section 35(2)(iv) of the 1965 Act. It was the case of the assessee claiming a specified percentage of the written down value of the asset as depreciation b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to deduction by way of depreciation for all previous years including those for which allowance have been granted under the provision relating to scientific research. The statute does not permit this. The restriction imposed would, therefore, be illogical and unjustified on the basis suggested by the assessees. On the other hand, if we accept the principle we have outlined earlier viz. that, there is a basic legislative scheme, unspoken but clearly underlying the Act, that two allowances cannot be, and are not intended to be, granted in respect of the same asset or expenditure, one will easily see the necessity for the limitation imposed by the quoted words. For, in this view, where the capital asset is one of the nature specified, the assessee can get only one of the two allowances in question but not both. 19. Section 11 of the Act deals with application of income different from revenue expenditure or allowance. Thus, the Judgment of the Apex Court in the case of Escorts Ltd., [supra] is distinguishable and as such is not applicable to the Charitable Trusts where income is to be computed under Chapter III of the Act. Accordingly, the judgment of Lissie Medical Institutions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without, any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in any previous year, and (ii) where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before is amendment by the Finance (No. 2) Act, 1996] and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years . The Memo explaining the provisions in Finance [No. 2] Bill, 2014 reads thus: The second issue which has arisen is that the existing schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by outweighing factors . 25. The Apex Court in the said judgment, while interpreting the proviso, whether to be applied retrospectively or prospectively, has considered the Notes on Clauses appended, the Finance Bill and the understanding of the Central Board of Direct Taxes in this regard. The Apex Court has also taken cognizance of the fact that the legislature is fully aware of 3 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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