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2016 (1) TMI 1118 - ITAT BANGALORE

2016 (1) TMI 1118 - ITAT BANGALORE - TMI - Exemption u/s 11 - disallowance of expenditure as having been incurred in foreign currency and hence, cannot be considered as applied for charitable purposes in India - Held that:- In the present case no evidence whatsoever of either of the educational qualification or the nature of services rendered by Ms.Trishtha to the trust has been established by acceptable evidence, though there was only a oral assertion by the Assessee in this regard. The CIT(A) .....

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urpose of charitable objects. See Commissioner of Income-tax Versus Market Committee, Pipli [2010 (7) TMI 374 - Punjab and Haryana High Court] - Decided in favour of assessee. - ITA No. 686/Bang/2015 - Dated:- 8-1-2016 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri C.Ramesh, CA For The Respondent : Shri G.Ramesha, JCIT ORDER Per N.V. Vasudevan, Judicial Member: This appeal by the assessee is against the order dated 25.3.2015 of CIT(App .....

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s) erred in confirming the disallowance of expenditure of ₹ 5,04,766/- with a finding that, the payment is to relatives as envisaged U/s.13(3) of the act ignoring the fact that, the Assessing Officer has not given any such findings in the assessment and the issue of infringement of provisions of section 13(3) of the act was not before the Honble CIT(A) . 3. The assessee is a charitable trust duly registered u/s.12A(a) of the Income Tax Act, 1961 (Act). The Assessee has established various .....

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epresented amount paid for meeting the education expenses of Ms.Thrista daughter of Ms.Sabitha Ramamurthy, a trustee of the Assessee and was shown as sponsorship fee. According to the AO the sum in question had been spent for charitable purpose outside India and therefore the same cannot be regarded as application of income for charitable purpose in view of the provisions of Sec.11(1)(a) of the Act. Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions .....

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n per cent of the income from such property; 5. According to the AO the Assessee has not established that the payment made for studies abroad resulted in spending income for charitable activities in India. The AO accordingly held that ₹ 5,04,766/- was not applied for charitable purpose and accordingly added the said sum to the total income of the Assessee. 6. Before CIT(A) the Assessee pointed out that the expenditure was in the nature of a sponsorship for Ms.Trishtha to enable her to purs .....

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ring of the expenditure was conditional on Ms.Trishtha giving an undertaking that she will return to India. The CIT(A) noticed no such undertaking had been given by Ms.Trishtha. The Assessee claimed before CIT(A) that Ms.Trishtha returned to India after completing studies on 15.6.2008 and worked for the Assessee trust. The Assessee gave details of services rendered by Ms.Trishtha to the Assessee trust. The same are set out in para 3.2 of CIT(A) s order. 7. The CIT(A) did not agree with the above .....

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contained in section 1197[or section 12 ] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) & (b)….. (c ) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income e .....

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made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees]; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d ) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e ) any concern in which any of .....

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see and therefore the expenditure in question cannot be held to be not application of income for charitable purpose. He brought to our notice the decision of the Hon ble Karnataka High Court in the case of CIT Vs. CMR Janardhana Trust (2015) 55 Taxmann.com 516 (Karn.) wherein it was held that payment for services rendered and where such services have resulted in substantial growth in the activities of the trust are to be allowed and cannot be said to be in contravention of provisions of Sec.13(1 .....

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in which services of Ms.Trishtha were utilized by the Assessee. In the given circumstances, we are of the view that the conclusions drawn by the CIT(A) are correct and calls for no interference. 10. Ground Nos.4 & 5 raised by the Assessee reads as follows: 4.The learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of depreciation of ₹ 515,36,087/- ignoring the position of law for the A Y.2009-10 that, depreciation is an allowance to be considered for appli .....

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ture towards application of funds towards the objects of the trust and allowed as such. According to the AO, allowing such a claim would amount to allowing double deduction. On the facts of the present case, he was of the view that the decision of the Hon ble Supreme Court in the case of Escorts Limited & another Vs. Union of India 199 ITR 43 is squarely applicable, wherein it has been categorically held that when deduction u/s 35(2)(iv) is allowed in respect of capital expenditure on scient .....

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o pointed out that the decision of Escorts Ltd. (supra) will not be applicable as it was rendered on a different set of facts. 13. The AO however, held that allowance of depreciation when the cost has already been recovered by way of exemption as application of income amounts to double deduction and double benefit on the same asset. The AO referred to the decision of the of Hon'ble High Court of Kerala in the case of DDIT(E) v. Lissie Medical Institutions, 348 ITR 344 (Ker) wherein it was he .....

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s of the ld. DR, who relied on the order of CIT(A) and the decision of the Hon ble Delhi High Court in the case of DIT(E) Vs. Charanjiv Charitable Trust (2014) 43 taxmann.com 300 (Delhi). We have considered the order of the CIT(A). Identical issue came up for consideration before ITAT Bangalore Bench in the case of DDIT(E) v. Cutchi Memon Union (2013) 60 SOT 260 Bangalore ITAT, wherein similar issue has been dealt with by this Tribunal. In the aforesaid case, the assessee claimed depreciation an .....

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e considered the rival submissions. If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing su .....

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double benefit. The decision of the Hon ble Supreme Court in the case of Escorts Ltd. 199 ITR 43 (SC) have been referred to and distinguished by the Hon ble Court in the aforesaid decisions. 21. The issue raised by the revenue in the ground of appeal is thus no longer res integra and has been decided by the Hon ble Punjab & Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P&H). The Hon ble Punjab & Haryana High Court after considering several decisions o .....

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n ble Supreme Court was dealing with a case of two deductions under different provisions of the Act, one u/s. 32 for depreciation and the other on account of expenditure of a capital nature incurred on scientific research u/s. 35(1)(iv) of the Act. The Hon ble Court thereafter held that a trust claiming depreciation cannot be equated with a claim for double deduction. The Hon ble Punjab & Haryana High Court has also made a reference to the decision of the Hon'ble Karnataka High Court in .....

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