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ADIT (E) , TC-II, New Delhi Versus Fortune Society for Development and Promotion of International Business

2017 (9) TMI 1031 - ITAT DELHI

Exemption u/s 11 - denial of claim because the assessee transferred the net profit for non-charitable purpose which is clear violation of section 11(1) and 11(1)(b) - Held that:- We have noted that assessee is just transferred the above money to the infrastructure development fund as well as general reserve fund to be used for the purpose of the object of the trust of the assessee society and not for any other object other than the object of the society. Therefore, the observation of the Ld. ass .....

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ed assets the cost of which has already been allowed to the assessee as application of funds originally - Held that:- Allowance of depreciation on assets on assessee trust allowed. No double deduction. See DDIT versus Indraprastha Cancer Society [2014 (11) TMI 733 - DELHI HIGH COURT ] - Caution money unexplained - Held that:- The brief facts of the case is that assessee has received ₹ 3.27 lakhs. During the year on account of caution money which are held by the Ld. assessing officer as .....

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e - ITA No. 2698/Del/2012 - Dated:- 18-9-2017 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Anshu Prakash, Sr. DR For The Revenue : Shri Satish Khosla, Adv Shri C.N. Malik, CA Shri Manish Malik, CA ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal by the assessee against the order of the ld CIT(A)-XII, new Delhi dated 29.03.2012 for the Assessment Year 2007-08. 2. The Revenue has raised the following grounds of appeal:- 1. On the .....

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he ld CIT(A) has erred in allowing caution money for which assessee could not furnish details. 3. The respondent assessee is a society registered under section 12 A of the income tax act, running educational Institute. In the name of Fortune Institute of International business in Delhi. For the year. It filed its return of income on 31/10/2007 showing nil income and claiming exemption under section 11 and 12 of the income tax act. On scrutiny, the Ld. assessing officer noted that that assessee h .....

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it was not signed by the DCIT (exemption) but ITO (HQ RS) (exemption) and held that he is not the right, authority to issue such certificate. He further held that as assessee has already been granted deduction on account of capital expenditure in earlier years the claim of depreciation of ₹ 37.01 Lacs is also not allowable to the assessee. Consequently he assessed the total income of the assessee at ₹ 1 95.63 lakhs to be charged at maximum marginal rate treating the assessee as an A .....

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haritable objects and assessee is also entitled to the deduction of depreciation allowance. Revenue being aggrieved with the order has preferred appeal before us. 4. The Ld. departmental representative vehemently relied on the order of the Ld. assessing officer. The Ld. authorised representative vehemently relied on the order of Ld. CIT A. 5. The 1st ground of appeal of the revenue is that Ld. CIT A, has erred in allowing the exemption under section 11 of the act, which was denied by the AO beca .....

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ries in books of accounts transferring from the excess of income over expenditure account to these 2 different accounts. Therefore according to us there is no infirmity in the order of the Ld. CIT (A) in holding that assessee has not applied the profit for noncharitable purposes. In the result ground No. 1 of the appeal of the revenue is dismissed. 6. With respect to ground No. 2 of the appeal of the revenue against allowance of the depreciation on fixed assets the cost of which has already been .....

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2. The respondent-assessees are charitable institutions to whom Sections 11 to 13 and other relevant provisions of the Income Tax Act, 1961 (Act, for short) apply. The issue raised in the present appeals is whether a charitable institution, which has purchased capital assets and treated the amount spent Director Of Income Tax... vs M/S Indraprastha Cancer Society on 18 November, 2014 Indian Kanoon - http://indiankanoon.org/doc/138934819/ 1 on purchase of the capital asset as application of inco .....

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3) 199 ITR 43 (SC), was dispelled and distinguished. In Escorts Limited (supra) the claim for depreciation under Section 32 of the Act was denied as the entire expenditure on the capital asset had been allowed under Section 35(2)(iv) of the Act while computing business profit and loss. Secondly, the Supreme Court was not concerned with the case of a charitable trust/institution, and the question as to whether income under the head profits and gains of business should be computed on commercial pr .....

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ala Cunnan Chetty Charities, (1982) 135 ITR 485 (Mad.) were referred to in affirmation of the legal ratio. It was, inter alia, held: 11..........The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilised for the charitable purposes should be allowed. On this issue, there seems to be a consensus of judicial thinking as is seen from the authorities relied upon by the CIT(Appeals) as well as the T .....

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defined in Section 2(45) of the Act and that the word income is a wider term than the expression profits and gains of business or profession . Reference was made to the nature of depreciation and it was pointed out that depreciation was nothing but decrease in the value of property through wear, deterioration or obsolescence. It was observed that depreciation, if not allowed as a necessary deduction for computing the income of charitable institutions, then there is no way to preserve the corpus .....

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tions thereof towards the purpose of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax u/s. 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of the income computed in the aforesaid manner, sho .....

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me Courts that when business is held in trust by charitable institutions income from business has to be computed by granting deductions provided u/s 30 to 43D as provided under S.29 of the Income Tax Act. 6. Senior counsel Sri.A.K.J.Nambiar appearing for the assessee submitted that the assessee has been filing income tax returns for several years including the assessment year 2005-2006, and disallowance is made only for this year. Since business income has to be as stated in S.29 by granting all .....

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le purposes u/s 11(1)(a) of the Act, should not the cost of such assets to be treated as nil for the assessee and in that situation depreciation to be granted turns out to be nil. However, if depreciation provided is claimed on notional cost after the assessee claims 100% of the cost incurred for it as application of income for charitable purposes, the depreciation so claimed has to be written back as income available. In fact, going by the several decisions of the various High Courts, we are su .....

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Central Board of Direct Taxes is of the considered view that where an assessee has acquired an asset through application of income and has also claimed this amount as expenditure in its income expenditure account, depreciation on such asset would not be allowable to the assessee. Such notional statutory deductions like depreciation, if claimed as deduction while computing the income of the 'the property held under trust' under the relevant head of income, is required to be added back whi .....

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ated 2nd Feb, 2012 issued by the Central Board of Direct Taxes, a Division Bench of this Court re-examined the entire issue in ITA No. 7/2013, Director of Income Tax (Exemption) versus Indian Trade Promotion Organisation, and other connected matters, decided on 27th November, 2013. The said order records that the Bench was initially inclined to accept the submission made of the Revenue, but for several reasons mentioned and recorded, declined to interfere and refer the question/ ratio accepted i .....

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n the said financial year. The said assessee spends and acquires a capital asset for ₹ 50,000/-. The purchase price for acquisition of the capital asset i.e. ₹ 50,000/- is treated as application of income for the purpose of clause a to Section 11(1). On the capital asset, the assessee also claims depreciation say @ 20%. Accordingly, the assessee claims that the application of income would include ₹ 10,000/- which is to be allowed as depreciation as to this extent, the asset pur .....

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rson in receipt of the income. The expression total income has been defined under s. 2(45) of the Act to mean the total amount of income referred to in s. 5 computed in the manner laid down in this Act . The word income is defined under s. 2(24) of the Act to include profits and gains, dividends, voluntary payment received by trust, etc. It may be noted that profits and gains are generally used in terms of business or profession as provided u/s. 28. The word income , therefore, is a much wider t .....

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ry of or parting with the money. It 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 .....

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ts effective life, the assets ceases to earn revenue, i.e., the capital value has expired and the asset will have to be replaced or a substitute found provision for depreciation is the setting aside, out of the revenue of an accounting period, the estimated amount by which the capital invested in the asset has expired during that period. It is the provision made for the loss or expense incurred through rising the asset for earning profits, and should, therefore, be charged against those profits .....

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ue and fair view of the state of affairs ; assets should be shown at a figure which represent that part of their value on acquisition, which has not yet expired. In CIT v Indian Jute Mills Association [1982] 134 ITR 68, the Calcutta High Court, while constructing the expression expenditure incurred in s. 44A of the Act, observed : depreciation claimed shall include the expenditure incurred. There are only two recognised methods of accounting : (1) cash basis, and (ii) mercantile basis. Under the .....

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es being made only when money is actually collected or disbursed. That system brings into credit what is due, immediately it becomes legally due and before it, is actually received and it brings into debit expenditure the amount for which a legal liability has been incurred before it is actually disbursed. It is not in dispute that if the mercantile system is followed, the depreciation allowance in respect of the trust property should be allowed. xxxxxxxxxxxxxxxx The depreciation if it is not al .....

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rstood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purpose of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise.It should be noted, in this connection, that the amounts so added back will become chargeable to tax u/s. 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or a .....

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ra), the Board issued a fresh circular or clarification dated 02.02.2012 and has observed: The view of the CBDT to be conveyed to the Court in this regard is as under: The Central Board of Direct Taxes is of the considered view that where an assessee has acquired an asset through application of income and has also claimed this amount as expenditure in its income expenditure account, depreciation on such asset would not be allowable to the assessee. Such notional statutory deductions like depreci .....

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he possibility of revenue leakage which may be a cause for generation of black money. 10. We also note that the Kerala High Court, in fact, has noted the clarifications which were earlier issued by the Board in respect of 1968 circular. It is clear from the reasoning given by the Kerala High Court that they have not gone by the express language of Section 11(a) and have purposively interpreted the provision. 7. Reference was once again made to the decision of the Supreme Court in Escorts Limited .....

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should not be in excess of 15% of the income from such property. Thus, there is an embargo and probation from accumulating or setting apart income derived from property held under trust beyond 15% of income from such property. If there is a violation of the said provision, proportionate income is deemed to be taxable and not exempt under Section 11(1). The language of the Section is peculiar and proceeds on its own wording. This aspect has been highlighted and pointed out in the judgment of Comm .....

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se. Firstly, the Supreme Court was not concerned with the case of a charitable trust/institution involving the question as to whether its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-D of the Act were applicable. In the present case, we are not concerned with the applicability of these p .....

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ific research. The question was whether after claiming deduction in respect of the cost of the asset under Section 35(1), can the assessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double deduction in regard to the same business outgoing is not intended unless clearly expressed. The present case is not one of this type, as rightly distinguished by the CIT(Appeals). 12. We would like to reprod .....

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uous and entirely different and wordings are clear and lucid. The language of Section 11(1), as noticed above, is distinguished and not worded in a similar manner. In Escorts Ltd. (supra), the Supreme Court was considering the said specific provision and the wordings therein. While dealing with the term expenditure and noticing the language it was held that no duplication or double deduction should be allowed towards depreciation in the same or subsequent year. Thus, the issue was decided agains .....

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oncerned with expenditure and since the entire costs of the capital assets had been allowed and had been set off against the business profit in five years or in one previous year, it was unconceivable that the depreciation should be allowed again on the same asset. 8. Decisions of other High Courts in Commissioner of Income Tax versus Tiny Tots Education Society, (2011) 330 ITR 21 (P&H) and Commissioner of Income Tax versus Institute of Banking, (2003) 264 ITR 110 (Bom.) in which the ratio a .....

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tled to write back depreciation and if done, the Assessing Officer would modify the assessment determining the higher income and allow recomputation of depreciation written back for the purpose of application of income for charitable purposes in future or subsequent years. This may lead to its own difficulties and problems as suddenly the entire depreciation written off would have to be added first and then in one year substantial application of income would be required. This may be impractical .....

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earned or available but postulates that the income as computed in accordance with the provisions of the Act to the extent of 86% must be applied. Application of income may include purchase of a capital asset. The said purchase is valid and taken into consideration for the purpose of ensuring compliance, i.e., application of money or funds and is not a factor which determines and decides the quantum of income derived from property held under trust. Computation of income is separate and distinct a .....

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s concerned the decision of the Tribunal cannot be countenanced. The Tribunal has overlooked that the cost of the assets has already been allowed as a deduction as application of income, as held by the CIT (Appeals) as well as the assessing officer. It was their view that allowing depreciation in respect of assets, the cost of which was earlier allowed as deduction as application of income of the trust, would actually amount to double deduction on the basis of the ruling of the Supreme Court in .....

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kept this distinction in view, but has proceeded to rely upon a judgment of this Court in DIT vs. Vishwa Jagrati Mission (supra). In the judgment of this Court the question was whether the income of the assessee, which was a charitable trust, should be computed on commercial principles and if so, whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. This Court noticed that there was a consensus of judicial opinion on this aspect and held, after refer .....

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of the cost of the asset was allowed under Section 35(1) as capital expenditure incurred on scientific research and, therefore, no deduction for depreciation on the very same assets was held allowable under general principles of taxation, as it would amount to double deduction. The judgment of this Court in DIT vs. Vishwa jagrati Mission reinforces the principle that if the cost of the asset has been allowed as deduction by way of application of income then depreciation on the same asset cannot .....

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e case of Vishwa Jagriti Mission (supra) but ratio was distinguished on the ground that in the said case the Court was concerned with computation of income of a charitable trust/institution on commercial principles and if so whether depreciation on fixed assets used for charitable purposes should be allowed as a deduction. The consensus of judicial opinion on the said aspect was referred to. It is noticeable that in Charanjiv Charitable Trust (supra) it stands observed that the Tribunal overlook .....

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e judgment in the case of Indian Trade Promotion Organisation (supra) was not cited and referred to. The judgment in the case of Charanjiv Charitable Trust (supra) is authored by the same Judge, who has also authored the decision in the case of Vishwa Jagriti Mission (supra). It is obvious that in Charanjiv Charitable Trust (supra), the Division Bench could not have taken a different view on the legal ratio as interpreted in Vishwa Jagriti Mission (supra). Further, the decisions in the case of V .....

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deduction or allowance by way of depreciation or otherwise in respect of an asset, the acquisition of which has been claimed as application of income under this Section in the same or any other previous year. The legal position, therefore, would undergo a change in terms of Section 11(6), which has been inserted and applicable with effect from 1st April, 2015 and not to the assessment years in question. The newly enacted sub- section relates to application of income. 12. In these circumstances, .....

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nation of delay shall be treated as dismissed and as a sequitur the appeals will be treated as dismissed. 7. On this issue, Hon madras High court recently in DIT V M/s MEDICAL TRUST OF THE SEVENTH DAY ADVENTISTS [2017-TIOL-1665-HC-MAD-IT] has held as under :- 2. In so far as the issue is common across appeals, we set out below the question of law in T.C.A.No.475 to 478 of 2011 as representative of the issue involved in all appeals:- '(a) Whether on the facts and circumstances of the case, th .....

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me shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such prope .....

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ccounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or ins .....

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imed as an application of income under this section in the same or any other previous year. 4. The various sub-sections of section 11 stipulate the methodology for computing the income applied to charitable and religious purposes and the 15% that may be accumulated or set apart. The section also envisages the inclusion of a business undertaking in the property held under trust and the determination of income therefrom. Sub Section 5 sets out the acceptable forms and modes of investment for the p .....

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regard to assessment years prior to 01.04.2015 is the subject matter of challenge in TCA.No.949 of 2015 to which we shall advert presently. 5. Section 11 was inserted in the Income Tax Act 1961 providing for an exemption in respect of income from property held under trust wholly for charitable and religious purposes. 'Charitable purposes is defined in terms of section 2(15) of the Act to mean relief of the poor, education, medical relief and the advancement of any other object of general pu .....

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ral counsels appearing on behalf of the assesses and set out in brief the submissions advanced. 7. Mr. J.Narayanaswamy would contend that the provisions of section 32 granting depreciation have not been made specifically applicable to section 11. According to him, the provisions of Section 11 extend a benefit to an assessee by way of exemption and granting depreciation in addition would amount to a double benefit that has to be specifically conferred. He would rely on the judgment of the Supreme .....

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f Legislature and the provisions of Section 35(2) (iv) were amended to provide that where a deduction was allowed for any previous year in terms of Section 35(1), no depreciation was liable to be allowed for the same or any other previous year in respect of that asset. 10.The amendment was made to operate retrospectively with effect from 1.4.1962 and the Supreme Court, while upholding the retrospective application of the provision states thus:- 'We think that all misconception will vanish an .....

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(2)(iv) of the 1922 Act - qua the same expenditure. ...... ..... '15.For the reasons discussed above, we are of the view that, even before the 1980-amendment, the Act did not permit a deduction for depreciation in respect of the cost of a capital asset acquired for purposes of scientific research to the extent such cost has been written off under S.10(2) (xiv)/35 (1) & (2). Prior to 1968, such assets qualified for an allowance of one-fifth of the cost of the asset in five previous years .....

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ith a further absurdity that it could be allowed starting with the original cost of the asset despite its user for scientific research and the allowances made under the 'scientific research' clause. In our view, there was no difficulty at all in the interpretation of the provisions. The mere fact that a baseless claim was raised by some over-enthusiastic assessees who sought a double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to attr .....

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conscious departure from the English Amendment with the idea of providing an additional benefit to induce the Indian assessees to invest more in scientific research. I find the argument rather convoluted. If the intention of the Legislature/Parliament was to provide more than 100% deduction, they would have said so, as they have done in cases where they provided for what is called weighted deduction'. (For example, See section 35(B) of 1961 Act). A double deduction cannot be a matter of infe .....

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us situations in the matter of allowance of depreciation. In certain cases where a full deduction has been allowed in relation to a capital asset under other sections (as for example, section 35 which permits a deduction in respect of capital expenditure for scientific research), the tax payers have contended that such deduction is independent of the allowance by way of depreciation. In our view, the intention of the legislature is not to allow a double deduction (of 20%) in respect of the same .....

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ould result in a relief over and above 100 % of the income which was not permissible under statute. 12. Our attention was drawn to the decision of the Kerala High Court in the case of Lissie Medical Institutions Vs. Commissioner of Income Tax, Kochi, (348 ITR 344) = 2012-TIOL-303-HC-KERALA-IT which had concluded the issue in favour of the Revenue. The Kerala High Court had this to say; 'In fact the net effect is that after writing off full value of the capital expenditure on acquisition of a .....

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that requires consideration is when the expenditure incurred for acquisition of depreciable assets itself is treated as application of income for charitable purposes u/s 11(1)(a) of the Act, should not the cost of such assets to be treated as nil for the assessee and in that situation depreciation to be granted turns out to be nil. However, if depreciation provided is claimed on notional cost after the assessee claims 100% of the cost incurred for it as application of income for charitable purpo .....

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: (i) Mr. Sridhar would state that in computing the income of an entity attracting the provisions of section 11, the principles of commercial accounting were liable to be followed. He would rely on the decision of the jurisdictional High Court in Commissioner of Income Tax Vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) (135 ITR 485) = 2003-TIOL-984-HC-MAD-IT and Bombay High Court in Commissioner of Income Tax Vs. Institute of Banking Personnel Selection (2003) (264 ITR 110). A distincti .....

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Tiruvalla V. State of Kerala (209 ITR 596) and Andhra Pradesh High Court in CIT v.Trustee of H.E.H.Nizamm's Supplemental Religious Endowment Trust (127 ITR 378), in support of his submission that commercial principles of accounting are to be applied in computing income for the purposes of section 11. He would refer to the Accounting Standards issued by the Institute of Chartered Accountants of India (in short ICAI) to the effect that depreciation was a mandatory charge in the computation of .....

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ve Petitions filed by the assessee challenging the decision of the Kerala High Court and other cases following the decision of the Kerala High Court in Lissie Medical Institutions (supra) had been admitted by the Supreme Court. Thus according to him, the Supreme Court had clearly recognized the error in the decision of the Kerala High Court. 16. Mr. R. Kumar, appearing for the assessee/respondent in TCA.No.993 of 2015 would point out that the orders of the Income Tax Appellate Tribunal in the sa .....

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ute of Chartered Accountants of India and made mandatory on or after 1.4.1995 in the following terms: 'The reference to commercial, industrial or business enterprises in the aforesaid paragraph is in the context of the nature of activities carried on by the enterprise rather than with reference to its objects. It is quite possible that an enterprise has charitable objects but it carries on, either wholly or in part, activities of a commercial, industrial or business nature in furtherance of .....

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ntity from the applicability of the Accounting Standards would be permissible only if no part of the activity of such entity was commercial, industrial or business in nature. For the removal of doubts, it is clarified that even if a very small proportion of the activities of an entity was considered to be commercial, industrial or business in nature, then it could not claim exemption from the application of Accounting Standards. The Accounting Standards would apply to all its activities includin .....

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. We have heard the arguments in detail and carefully perused the documents relied upon as well as case law cited. 20. Depreciation, as defined in Spicer and Pegler's Book-Keeping and Accounts is the measure of the exhaustion of the effective life of a fixed asset owing to use or obsolescence during a given period. It may be regarded as that part of the cost of the asset which will not be recoverable when the asset is finally put out of use. The object of providing for depreciation is to spr .....

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d amount by which the capital investment has expired during that period. This provision, incurred for the use of that asset for the purpose of earned profit should be charged against those profits as and when earned. Spicer, and Pegler, at page 45, states as follows:- 'If depreciation is not provided for, the books will not contain a true record of revenue or capital. If the asset were hired instead of purchased, the hiring fee would be charged against the profits; having been purchased, the .....

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accounting practice which is required for fair presentation of a company's financials. The computation of income in the case of an entity to which section 11 is applicable would be in two stages. Firstly, the determination of the profit arrived at, which would be the total receipts net of expenditure and depreciation incurred in earning the receipts, and secondly the stage of application to Charitable/Religious objects. The two stages are distinct and are required to be complied with consecu .....

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ome earned from property held for charitable or religious purposes. We see no double benefit that is extended to the assessee in this regard. 24. Truth to tell, this Court in the matter of Calavala Cunnan Charities, has decided the question now under consideration in favour of the assessee and we could well have decided this Batch of appeals simply on the strength of the aforesaid decision. We are however persuaded to proceed further with the discussion since a conflicting view has been expresse .....

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ns on an entirely different position of law and would not impact the issue being discussed in the present case. 26. We are supported in our view by a plethora of decisions of various High Courts - the Bombay High Court in the case of CIT v. Munisuvrat Jain (1994 Tax Law Reporter 1084) and DIT (Exem) Vs. Framjee Cawasjee Institute (109 CTR 463); Karnataka High Court in CIT Vs. Society of the Sisters of St.Anne (146 ITR 28); Madhyapradesh High Court in CIT Vs. Raipur Pallottine Society (180 ITR 57 .....

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in DIT Vs. Vishwa Jagriti Mission 262 CTR 558 = 2012-TIOL-271-HC-DEL-IT and the Karnnataka High Court in DIT (Exem) Vs Al-Ameen Charitable Fund Trust (2016) 67 taxmann.com 160 = 2016-TIOL-463-HC-KAR-IThave accepted the claim of the assessee distinguishing both the judgment of the Supreme Court in Escorts as well as that of the Kerala High Court. 27.In view of the discussion above, the question of law is answered in favour of the assessee and against the revenue. TCA.No.949 of 2015 28. T.C.A.No.9 .....

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be set off against the income of the current year contrary to the judgment of this Honourable Court in the case of Matriseva Trust (2000) 242 ITR 20(Mad)? 29. Learned senior counsel appearing for M/s.St. Thomas Orthodox Syrian Cathedral Parish Trust, the assessee, Mrs. Pushya Sitaraman would contend that the excess application of earlier years was liable to set off against the income of the current year and relied on the decision of the jurisdictional High Court in the case of Commissioner of In .....

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original return was filed on 31.10.2007 and a revised return was filed on 19.2.2008. Notice under Section 148 was issued on 13.9.2010, in response to which, the assessee filed the original return dated 31.10.2007. In the course of re-assessment, the assessing authority rejects the revised return on the ground that it is inadmissible in view of the provisions of section 139(5) requiring the original return to have been filed within time. He thus, does not take cognizance of the revised return an .....

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shall be substituted for the existing subsection( 5) of section 139 by the Finance Act, 2016 w.e.f. 1.4.2017. (5) If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year form the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.' 32. The import of the above amendment is that a return ma .....

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bility of the amendment extracted above. If the amendment is found applicable to the assessee, the rationale of the decision of this Court in Matriseva (supra) shall be applied on merits. 33. Adverting to question No.1, the Tribunal has, in denying the benefit of depreciation to the assessee, applied the provisions of sub section 6 of section 11 reading as follows; '(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purp .....

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earlier years as well. In this regard, M/s.Pushya Sitaraman, learned senior counsel and other learned counsels appearing for the assesses refer to the provisions of Circular 1 of 2015dated 21.1.2015 (371 ITR (St) 0022) containing explanatory notes to the provisions of Finance (No.2) Act, 2014. The relevant portion of the circular reads as follows; '7.3 Several issues had arisen in respect of the application of exemption regime to trusts or institutions in respect of which clarity in law was .....

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or trust has been established. In many cases it had been noted that trusts or institutions which are registered and have been availing benefits of the exemption regime to not apply their income, which is derived from property held under trust, for charitable purposes. In such circumstances, when the income becomes taxable, a claim of exemption under general provisions of section 10 in respect of such income is preferred and tax on such income is avoided. This defeats the very objective and purpo .....

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provisions or specific provisions at will. Allowing such flexibility has undesirable effects on the objects of the regulations and leads to litigation. …. ….. 7.6 Applicability. - These amendments take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-2016 and subsequent assessment years. 35. Para 7.6 of the Circular states that the amendment would apply to assessment year 2015-16 and subsequent assessment years. Reliance was placed o .....

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