TMI Blog2016 (7) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 11 of the Act cannot override section 32 of the Act. If the assessee claimed exemption under section 11 under Chapter III of the Act, it cannot claim depreciation under section 32 of the Act. Therefore, the Assessing Officer has to examine whether the assessee has claimed the cost of acquisition of capital assets as application of income or not in any earlier assessment years and if it is claimed so, the assessee cannot claim depreciation as an application of income while claiming exemption under section 11 of the Act in subsequent assessment years. When the cost of asset become NIL, there is no question of allowing any depreciation. The cost of asset was allowed once again as application of income, it would amounts to double deduction, if depreciation is also allowed as application of income, which cannot be permitted. Accordingly, we direct the Assessing Officer to examine this issue and grant depreciation if the assessee has not claimed the cost of acquisition of asset as application of income while claiming exemption under section 11 of the Act in any assessment year - Decided in favour of assessee for statistical purposes. - I.T.A.No.164/Mds/2015 - - - Dated:- 6-7- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Depreciation was allowed only on the capital assets purchased during the period relevant to the assessment year 2009-10. 3. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and considering the facts of the case, the ld. CIT(A) confirmed the order of the Assessing Officer and gave a finding that in this case, the assessee was in receipt of fees for issuance of certificate of origin for the assessment year under consideration and hence hit by the proviso to section 2(15) of the Act. Since proviso to section 2(15) of the Act is attracted, the provisions of sections 11 and 12 of the Act become inoperative and the surplus of the assessee is subjected to taxation. 4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision of the Kolkata Benches of the Tribunal in the case of Indian Chamber of Commerce v. ITIO, Exemptions in I.T.A. Nos. 1491/Kol/2012 1284/Kol/2012 for the assessment years 2008-09 and 2009-10. The ld. Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to trade, commerce or business were all well covered by the main object being fully connected, incidental and ancillary to the main purpose and were conducted solely for the empowerment, betterment and for creating awareness amongst the industrialists in order to bring about the development of trade and industries in India. Further it is to be noticed that the Memorandum has also specifically authorized the Chamber to do all other things as may be conductive to the development of trade, commerce and industries, or incidental to attainment of the above objectives or any of them. Thus it was only for the purpose of securing its primary aims of proper development of business in India that the assessee was taking the said ancillary steps. The said activities were not carried out independent of the main purpose of the association of the institution being the development and protection of trade. There was no independent profit motive in any of the said activities. The surplus arising out of the same was merely incidental to the main object to charity. The majority of the receipts in the said activities were out of the sponsorships and donations. The expenses incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chievement of the said, being incidental or ancillary to the main object, even if resulting in profit and even if carried out with non members, were all held to be charitable in nature. Hon'ble Apex Court in the earliest case of Andhra Chamber of Commerce (supra) had clearly laid out the principle that if the primary purpose of an Institution was advancement of objects of general public utility, it would remain charitable even if an incidental or ancillary activity or purpose, for achieving the main purpose, was profitable in nature. It was laid out by the Court that, That if the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g. promotion of or opposition to legislation concerning that purpose, was contemplated. It was only for the purpose of securing its primary aims that it was mentioned in the memorandum of association that the Chamber might take steps to urge or oppose legislative or other measures affecting trade, commerce or manufactures. Such an object ought to be regarded as purely ancillary or subsidiary and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject for the welfare and common good of the country s trade, commerce and industry, and its income was, therefore, exempt from tax under s.11 of the IT Act, 1961 Again reiterating the dominant purpose theory, the Hon'ble SC in the case of Sai Publication Fund (supra) laid out as follows: ...If the main activity is not business, then any transaction incidental or ancillary would not normally amount to business unless an independent intention to carry on business in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on business : connected with or incidental or ancillary sales will rest on the Department. Thus, if the main activity of a person is not trade, commerce etc., ordinarily incidental or ancillary activity may not come within the meaning of business . In the recent decision which deals specifically with the newly amended section 2(15) of the Act, in the case of Institute of Chartered Accountants of India v. Director General of Income - tax (Exemptions) [2012] 347 ITR 0099 Del HC, laying down the very same principle it was again laid: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific services must be rendered for its members. The concept behind s.28(iii) is to cut at the mutuality principle being relied on in support of a claim for exemption, when the assessee was actually deriving income or making profits as a result of rendering specific services for its members in a commercial way. The reason for the introduction of Section 28(iii) of Act, to ignore the principle of mutuality and reach the surplus arising to the mutual association and this is clear from the fact that these provisions are confirmed to services performed by the association for its members . Such income would either be charged as business income or under the residual head, depending upon the question whether the activities of the association with the non-members amount to a business or otherwise. Section 28(iii) constitutes certain income of the association to be business income without affecting the scope of the exemption under Section 11. Section 2(15) which incorporates the definition of charitable purposes simply shows that several mutual associations may also fall within the definition. The receipts derived by a chamber of commerce and industry for performing specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. By following the above decision of the Kolkata Benches of the Tribunal, the Coordinate Bench of the Tribunal in the case of The Southern India Chamber of Commerce Industry v. JCIT (supra), decided the issue in favour of the assessee. Respectfully following the above decisions of the Tribunal, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to allow exemption under section 11 of the Act. 8. The next ground raised in the appeal of the assessee is with regard to disallowance of depreciation. The assessee has claimed depreciation of ₹.9,94,918/- as per the accounting method followed by the assessee, which is mercantile system of accounting. However, the Assessing Officer denied the claim of depreciation on the ground that the depreciation is allowed only on the capital assets purchased during the year relevant to the assessment year 2009-10. On appeal, the ld. CIT(A) has held that the assets when purchased are claimed as application of income and claiming depreciation on the same assets would amount to double deduction and thus, confirmed 12 I.T.A. No.164/M/15 the order of the Assessing Officer. On being aggrieved, the assessee is in appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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