TaxTMI 
TaxTMI 
2017 (11) TMI 1421
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....the I.T. Act. (ii) Whether, in the facts and circumstances of the case the Tribunal was justified in law in allowability of depreciation of assets u/s 32 even where the same had already been claimed as application of income in the previous years. (iii) Whether, in the facts and circumstances of the case the Tribunal was justified in law in deleting addition made for foreign travelling expenses u/s 37 of the Act despite of the fact that the assessee failed to prove the justification of these expenses. (iv) Whether, in the facts and circumstances of the case the Tribunal was justified in law and has acted perversely in deleting the addition of disallowance of interest u/s. 36(1)(iii) despite of the fact that assessee failed to discharge its onus of furnishing the evidence of use of the assets." (2) Appeal No. 107/2009 " (i) Whether in the facts and circumstances of the case the Tribunal was justified in law and has acted perversely in allowing the benefit of section 11(1) as charitable trust to the assessee despite of the fact that the huge surpluses earned was withdrawn by way of payments to the persons referred u/s 13(3) of the I.T. Act. (ii) Whether, in the facts and ci....
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....u/s 32 even where the same had already been claimed as application of income in the previous years. (iii) Whether, in the facts and circumstances of the case the Tribunal was justified in law in deleting addition made for foreign travelling expenses u/s 37 of the Act despite of the fact that the assessee failed to prove the justification of these expenses. (iv) Whether, in the facts and circumstances of the case the Tribunal was justified in law and has acted perversely in deleting the addition of disallowance of interest u/s. 36(1)(iii) despite of the fact that assessee failed to discharge its onus of furnishing the evidence of use of the assets." (5) Appeal No. 70/2010 " (i) Whether in the facts and circumstances of the case the Tribunal was justified in law and has acted perversely in allowing the benefit of section 11(1) as charitable trust to the assessee despite of the fact that the huge surpluses earned was withdrawn by way of payments to the persons referred u/s 13(3) of the I.T. Act. (ii) Whether, in the facts and circumstances of the case the Tribunal was justified in law in allowability of depreciation of assets u/s 32 even where the same had already been claime....
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....of the case the Tribunal was justified in law in deleting addition made for foreign travelling expenses u/s 37 of the Act despite of the fact that the assessee failed to prove the justification of these expenses. (iv) Whether, in the facts and circumstances of the case the Tribunal was justified in law and has acted perversely in deleting the addition of disallowance of interest u/s. 36(1)(iii) despite of the fact that assessee failed to discharge its onus of furnishing the evidence of use of the assets." (8) Appeal No. 235/2012 " (i) Whether in the facts and circumstances of the case the ITAT was justified in law and has acted perversely in allowing the benefit of section 11(1) as charitable trust to the assessee despite of the fact that the huge surpluses earned was withdrawn by way of payments to the persons referred u/s 13(3) of the I.T. Act. (ii) Whether, in the facts and circumstances of the case the ITAT was justified in law in allowability of depreciation of assets u/s 32 even where the same had already been claimed as application of income in the previous years. (iii) Whether, in the facts and circumstances of the case the ITAT was justified in law in deleting add....
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....isions of section 13 are attracted? (ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in confirming the decision of Ld. CIT (A) in allowing salary expenses to the member of Bakshi Family which is higher than reasonable? (iii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in allowing contribution made to Jaipur National University during the year under consideration as application of income u/s 11 of the Act despite of the fact that the assistance provided to JNU is the violation of bye laws of society as well as violation of provision of Sec.13(1)(c) and 13(2) of the IT Act? (iv) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in confirming the decision of ld. CIT(A) in allowing foreign traveling expenses inspite of the fact that the assessee society failed to prove that these expenses were incurred for the objects of society? (v) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in holding that the assessee is eligible to claim deduction of depreciation of Rs. 62,73,413/- on the as....
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....same capital asset would amount to double allowance? (vi) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in allowing the depreciation without appreciating the fact that the assessee has not carried out the business activities but the receipts utilized for charity. As there was no business, the claim of depreciation was not allowable, the deprecation is allowable only in the case of business or profession or in case of "income from other sources"? 3. Since, the matters involved common question of law and facts, they are decided by this common judgment. 4. The facts of the case are that the respondent assessee namely Mahima Shiksha Samiti is engaged in imparting education, medical facility and other general public utility and for this purpose the assessee is running two educational institutions i. Seedling Public School, Jawahar Nagar and ii. Seeding Modern High School, Mahaveer Nagar. 4.1 The assessee is a society registered under Rajasthan Society Registration Act, 1958 and is further registered u/s 12AA of the Act w.e.f. 17.12.1990. For the relevant assessment year on 15.10.2010, the assessee filed its return declaring total in....
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....ion 11 Income from property held for charitable or religious purposes . (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) 3 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 twenty- five per cent of the income from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty five per cent of the income from such property;] (c) income 4 derived] from property held under trust-(i) created on or after the 1st day of April, 195....
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....ded further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub- section (3) in so far as such use or application relates to any period before the 1st day of June, 1970 ; (d) 1 in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in subsection (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub- section (5) of section 11 continue to remain so invested or d....
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.... deduction of four types of expenditure on scientific research and what we are concerned with is the deduction provided under Section 35(1) (iv), which is to the following effect: (iv) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of Sub-section (2). Sub-section (2) provides that, for the purposes of Clause (iv) of Sub-section (1), one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal installments in each of the four immediately succeeding previous years. There is an explanation which is not relevant for our present purposes. Reading Section 35(2) further, it provides in Clauses (iv) and (v) as follows: (iv) where a deduction is allowed for anyprevious year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under Clauses (i), (ii) and (iii) of Sub-section (1) of Section 32 for the same previous year in respect of that asset; (v) where the asset mentioned in Clause (....
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....y an asset, no deduction shall be allowed under Clauses (i), (ii) and (iii) of Sub-section (1) of Section 32 for the same or any other previous year in respect of that asset. The Finance Act made this amendment retrospective w.e.f. 1-4-62, that is, the date of the commencement of the 1961 Act. The contention on behalf of the assessees was that the allowances in respect of depreciation on the one hand and in respect of capital expenditure on scientific research on the other are two totally different and independent heads of allowances. One is a notional allowance to provide for the wear and tear of a capital asset employed in the business as the years roll by; the other is an allowance for actual expenditure of a capital nature granted, on the eve of our country's independence, in order to give fillip to new industrial innovations and the development of indigenous know-how and techniques by proper planning on research and development by various business houses. It is therefore suggested that there is nothing absurd in construing the statutes act as providing cumulatively for both types of deductions in respect of the same capital asset. The only limitations on this right are t....
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....an assessee was entitled to claim depreciation allowance in respect of such assets in respect of previous years other than those in which an allowance had been allowed under the other head. We shall revert later to this aspect of the matter. 24. The Revenue says that the deduction provided by Section 35(1)(iv) is in the alternative to the deduction provided by Cls. (i), (ii) and (iii) of Sub-section (1) and Subsection (1A) of Section 32. If one is availed of, the other is not available, not only during the year or years in which the deduction under Section 35(1)(iv) is availed of, but permanently. The reason, according to them, is obvious: if both are allowed to be availed of, it amounts to grant of 200% deduction .viz., 100% under Section 35(1)(iv) and another 100% under Sub-sections (1) and (1A) of Section 32. This is totally outside the contemplation of the Act, they say. On the other hand, the case of the assessees is that the bar created by Clause (iv) of Sub-section (2) applies only to that previous year or those previous years during which the said expenditure is allowed as a deduction. That is the express language of the clause. The bar does not extend beyond the year or y....
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....D as provided under section 29 of the Income-tax Act. 5. 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 2005-06, and disallowance is made only for this year. Since business income has to be as stated in section 29 by granting all deductions provided under sections 30 to 43D which includes depreciation under section 32, the assessee is entitled is the case pressed before us by the senior counsel appearing for the assessee. We have no doubt in our mind that business income of charitable trust also has to be computed in the same manner as provided under section 29 of the Income-tax Act. However, the issue that requires consideration is when the expenditure incurred for acquisition of depreciable assets itself is treated as application of income for charitable purposes under section 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 per cent of the cost incu....
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....f the expenses which are for charitable purpose, therefore, depreciation claimed is not business expenses and Section 32 will not be admissible to a charitable purpose in view of the fact that it is not for business purpose nor profession. 8. In that view of the matter, while relying upon the decision in Escorts and Kerala High Court (supra) he contended that in view of the two decisions, double benefit cannot be granted and the tribunal has committed serious error. 9. On Foreign Trip, it has been contended that the tribunal has not appreciated the fact that it was a personal trip under the guise of student exchange programme and the tribunal has wrongly granted the benefit to the trust. 10. On the other issue of transfer of money of excess profit systematic service which has been created by primary school where transfer by sponsoring a University is contrary to very object of Sec.11 and in that view of the matter, it is clear that Sec.13 (1) C and 13 (2) will not apply. 11. He also contended that the money which is transferred to the private university is also controlled by the same family members who are same trustees in the university and they are controlling the affairs and....
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....ion/falling into any disqualification criteria under section 13 but he cannot be allowed to go into the existence of the trust for "charitable purpose". This is for the reason that else it would imply that the subordinate authority has "set at naught" the judgment of a superior authority. This is against the principles of Administrative law as well as jurisprudence. The "charitable Purpose" can be questioned only by the Commissioner and he has been granted the statutory powers even to cancel the registration if a doubt arises about the "charitable purpose" subsequent to granting of registration. 19. Without prejudice to above, reliance is placed on the decision of Hon'ble Rajasthan High Court in case of Deputy Commissioner Income-Tax v. Cosmopolitan Education Society 244 ITR 494 where the appeal of the department was rejected by affirming the finding of ld. Income Tax Appellate Tribunal and ld. Commissioner of Income-Tax Appeals that in case there was any misutilisation of the funds of the society or mismanagement of the activities of the society, the action could be taken against the members of the society as per the provisions of various statues governing the society. However, ....
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....ng to the relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. The balance income of Rs. 1,64,210.03 constitutes less than 25% of the income for Assessment Year 1970-71. Therefore, the Assessee is entitled to accumulate this income and claim exemption from income tax Under Section 11(1)(a). We set aside the judgment of the Uttarakhand High Court dated 24th September, 2007. The reasoning of the ITAT (set aside by the High Court) is more in consonance with the law laid down by this Court, and we approve its decision. (ii) In Chief Commissioner of Income Tax, Chandigarh vs. St. Peter's Education Society (2016) 385 ITR 66 (SC), the Supreme Court observed as under:- We may record at this stage that there was a difference of opinion among various High Courts on the aforesaid issue. While summarizing the law, this Court approved the judgments of Punjab and Haryana High Court, Delhi and Bombay High Courts and reversed the view taken by the Uttarakhand High Court. In so far as the judgment of the Punjab and Haryana High Court is concerned, it was given in the case of Pin....
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....hall apply in these cases. One appeal is from the Gujarat High Court which has also followed the view taken by the Punjab and Haryana High Court in Pinegrove International Charitable Trust, which also stands dismissed. We also make it clear that the observations made in para. 25 in Queen's Educational Society v. CIT MANU/SC/0287/2015 : [2015] 8 SCC 47 : [2015] 372 ITR 699, 729 (SC) shall be followed. 6.2 He strongly relied on decision of this Court in the case of Jhunjhunu Academy Sammittee Vs. Income Tax Officer Jhunjhunu, D.B. Income Tax Appeal No. 123/2006, decided on 8th February, 2017, this Court while considering the identical question observed as under: "15. Before coming to the basic contentions, it is not in dispute that the appellant is as by name itself suggests that it is an academic Samiti carrying on activities of educational purpose for establishing any educational institution. There is need of infrastructure and expansion of every activity whether it is a residential accommodation or physical or competitive requirement or other requirement and also the maintenance of the institution is a mandatory for which one has to collect the funds. 16. From the record....
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.... purposes is required to be determined by taking into consideration provisions of Section 11 of the Act of 1961 after extending normal depreciation and deductions from its gross income. In computing the income of a charitable institution/trust depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available. 5. In view of the discussions made above, we find ourselves in agreement with the view taken by Bombay High Court in Director of Income Tax v. Framjee Cawasjee Institute (supra) and in CIT v. Institute of Banking Personnel (supra). The substantial question framed in the instant matter, thus, is answered in the terms that the Income Tax Appellate Tribunal rightly allowed depreciation claimed by the assessee on capital assets for which capital expenditure was already given in the year under consideration." 14.1 Decision of Punjab and Haryana High Court in Commisioner of Income Tax vs. Market Committee, Pipli (2011) 330 ITR 16 wherein it has been held as under:- 7. The Karnataka High Court in Commissionerof Income Tax, Karnataka v. Society of the Sisters of ....
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....ific research, even though the two heads of deduction do not completely overlap and there is some difference in the rationale of the two deductions....It was further recorded that: There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions.... 9. In the present case, the assessee is notclaiming double deduction on account of depreciation as has been suggested by learned Counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon'ble Supreme Court in Escorts Ltd. and Anr. (supra) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation....
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....nce 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. 14.3 Decision of Punjab & Haryana High Court in Commissioner of Income Tax vs. Tiny Tots Education Society (2011) 330 ITR 21 wherein it has been held as under:- 6. The matter was discussed in our recent judgment dated July 5, 2010 in I. T. A. No. 535 of 2009 CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P and H). After referring to the judgments in CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust [1992]198 ITR 598 (Guj) and CIT v. Institute of Banking Personnel Selection (IBPS) [2003] 264 ITR 110 (Bom) : [2003] 131 Taxman 386 (Bom), CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982]135 ITR 485 (Mad), CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Kar)and CIT v. Raipur Pallottine Society [1989]180 ITR 57....
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....rely a finding of fact and no question of law much less substantial question of law can be said to emerge out of the said order of the Tribunal so as to call for any interference of this Court. In our view, no substantial question of law arises out of the order passed by the Tribunal. Consequently, the appeal, being devoid of merit, is hereby dismissed in limine. No order as to costs. 18. He contended that the view taken by the tribunal is on consideration of facts and it is not a question of law. 19. He has relied upon the judgment of this court in Murari Lal Khandelwal vs. CIT (2003) 263 ITR 642 wherein it has been held as under:- 4. Learned counsel for the assessee Mr.Jhanwar submits that the amount of salary claimed on account of payment to the sons i.e., Anoop and Alock was reasonable, as both are looking after the business and assessee has got paralytic attack in the year 1983, therefore, the payment of salary to these persons at the rate of Rs. 6,000 and Rs. 5,000 per month, respectively, was justified. 5. The facts on record reveal that both are graduates and Anoop, to whom assessee has paid Rs. 6,000 p.m. in the year under consideration was getting only Rs. 1,000 p.m....