TMI Blog2016 (9) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 13(1)(c)(ii), the beneficiary of income or property has to be the author trust, any person who has made substantial contribution to the trust in case HUF is the author of the trust, a member of the family or any trustee of the trust or manager, any relative of any such author, founder trustee or manager. Any concern in which any of the persons referred in clause (a) to (d) has a substantial interest. Thus in the case of the assessee, the interest free loan was given to another trust and the common trustee have no substantial interest in any of the trust. Therefore in the absence of any direct or indirect benefit to the trustees or author of assessee trust or to the trustees of the resident trust the provisions of section 13(1)(c) cannot be attracted. Revenue appeal dismissed. - I.T. A. No.1040/Bang/2015 - - - Dated:- 11-8-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Sunil Kumar Agarwal, JCIT (D.R) For The Respondent : Shri H. N. Khincha, C.A. ORDER Per Shri Vijay Pal Rao, J.M. : This appeal by the revenue is directed against the order dt.27.2.2015 of the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) Whether the CIT(A) was correct in deleting the addition w.r.t. disallowance of loan treating the same as donations, when the AO had already allowed the donation claim of ₹ 69 lakhs and only added ₹ 3S,3B,144/- which is the loan paid to Vidyabharati Foundation without charging any interest, which is in violation of Sec. 13(2)(a) of the I T Act. viii) The appellant craves leave to add, alter or amend all or any of the grounds of appeal before or at the time of hearing of the appeal. 3. Ground Nos.1 to 3 are regarding disallowance of depreciation. 4. We have heard the learned Authorised Representative as well as learned Departmental Representative and considered the relevant material on record. The assessee is a charitable trust and running educational institutions. During the assessment proceedings the Assessing Officer noted that the assessee has claimed depreciation of ₹ 45,36,382. The Assessing Officer disallowed the claim of the assessee on the ground that the investment in the asset on which the depreciation has been claimed is allowed as deduction being application of income towards the objectives of the trust. Therefore the claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 such income. It was so held by the Hon ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P H) , following CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P H) : (2011) 238 CTR (P H) 103 that depreciation can be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to 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 consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the same or any other previous year. 17. As already stated, the aforesaid amendment is prospective and will apply only from A.Y. 2015-16. In view of the above legal position, we are of the view that the order of the CIT(A) has to be reversed. Consequently grounds No.4 5 raised by the Assessee are allowed. There is no dispute that the amendment of section 11(6) of the Act by the Finance Act, 2014 is prospective w.e.f. 1.4.2015 and therefore the said amended provision is not applicable for the assessment year under consideration. Following the earlier decisions of this Tribunal, we decide this issue in favour of the assessee and against the revenue. In view of the above decision, we do not find any error or illegality in the order of the CIT (Appeals). 5. Ground Nos.4 to 7 are regarding interest free loans given to the charitable trust. The Assessing Officer has noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee trust. He has further submitted that even otherwise it cannot be regarded as a direct or indirect benefit to the persons as specified under section 13(3) of the Act as there is no benefit to the trustee directly or indirectly because of this amount given to another trust. He has relied upon the decision of the Hon'ble Delhi High Court in the case of DIT Vs. Acme Education Society 326 ITR 146. 8. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the loan was given by the assessee trust to another trust running and engaged in the similar activity of educational institution. It is also not disputed that none of the trustees of these two trusts is getting any benefit from the affairs of the trust. Therefore providing the interest free loan/advance to another trust cannot be regarded as applying the income or asset or property of the trust for direct or indirect benefit of these trustees as alleged by the Assessing Officer. As per the provisions of Section 13(1)(c)(ii) benefit of section 11 is not available in respect of an income or any property of the trust/institution which is used or applied directly or indire ..... X X X X Extracts X X X X X X X X Extracts X X X X
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