TMI Blog2018 (2) TMI 1593X X X X Extracts X X X X X X X X Extracts X X X X ..... on the written submissions filed by the assessee. As regards the adverse comments by the Assessing Officer regarding depreciation claimed by the assessee, we find that in the case of CIT vs. Krishi Utpadan Mandi Samiti [2013 (11) TMI 1062 - ALLAHABAD HIGH COURT], under similar facts and circumstances, has held that depreciation was allowable even if the entire capital expenditure was allowed as deduction. With effect from 01/04/2015 section 11(6) has been inserted by which it has been laid down that income of trust/society registered u/s 12A 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 u/s 11 in the same or any other previous year. This amendment is prospective and is applicable from 01/04/2015 and before this many courts, as noted by learned CIT(A) in his order, have held that depreciation claim is allowable. The case of assessee relates to assessment year 2011-12 and therefore, this amendment will not be applicable in the case of the assessee. - Decided against revenue - ITA No. 193/Lkw/2016 - - - Dated:- 23-2-2018 - Shri T. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.01.2016 which is on record. The observations of the Assessing Officer in the remand report are as under:- During the assessment proceedings, the AO had made addition of ₹ 2,71,20,688/- towards Administrative Expenses @ 30% of total expenses claimed at ₹ 9,04,02,294/- as the assessee trust failed to produce books of accounts, bills/vouchers etc. in respect of claim of application of income towards charitable purpose. During the remand proceedings, the assessee trust has submitted copies of ledger account of expenses exceeding ₹ 2 Lakhs and submitted photocopy of some bills and vouchers. 6.5 A copy of remand report was provided to the appellant for comments. The appellant has filed the written submissions claiming that With respect to aforesaid expense we would like to state that during the remand proceeding we had submitted copies of ledger accounts of expenses of 2,00,000/- and above claimed under the head Administrative Expenses in Income Expenditure account of relevant assessment year alongwith copies of .some bills and vouchers. We would further like to state that all bills and vouchers of administrative expenses amounting to ₹ 9,04,02, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/c 30000 Total 6345086 A copy of remand report was provided to the appellant for comments. The appellant has filed the written submission claiming that- With respect to aforesaid expense we would like to state that we had submitted copies of all ledger accounts pertaining to fee concession along with copies of some letter/notices issue by the management of the appellant trust for fee concession along with incentive policy for admission of meritorious students and copies of some applications for fee concession of financially deprived students along with the hand written ledger during the remand proceeding. Further, the appellant Trust had produced all its books of accounts along with bills and vouchers before the Ld. Assessing Officer for verification with reply dated 06.01.2016 during remand proceeding. The activity of giving fee concessions to deserving students is not new for this year and is a regular practice of the appellant trust. The activities of appellant are exactly similar to the activities undertaken by appellant in the earlier A.Y.'s In the earlier A.Y.'s t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same or any other previous year w.e.f. 01.04.2015 as section 11(6) of Income-tax Act has been inserted by the Finance (No. 2) Act, 2014. Thus, depreciation claim was not disallowable as per Income-tax Act, 1961, in the relevant assessment year. Further, by catena of judgments of Hon'ble ITAT and Hon'ble High Court it is well settled that charitable institutions can claim depreciation on assets acquired out of application of trust income, irrespective of the facts that cost of purchase is out of application of income exempt u/s 11 and 12 of the Act. In this regard, our reliance is placed on judgment of Hon'ble ITAT, Jaipur in the case of M/s Santokbha Durlabhji cuke trust, Jaipur v. Income tax Officer in ITA NO. 241 242/JP/2014 for A.Ys. 2004-05 and 2009-10 dated 13.03.2015. Relevant portion is reproduced below: 2.5 Besides by a catena of judgments of ITAT and Hon'ble High Court it is by now well settled that charitable institutions can claim depreciation on assets acquired out of application of trust income, irrespective of the facts that cost of purchase is out of application of income exempt u/s 11 and 12 of the Act Following are the case laws relied: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was allowed in addition to capital expenditure. f. In Pooran Mal Phoola Devi Memorial Trust vs. ITO (JP ITAT) it was held that depreciation is allowable as application of income. g. Latest judgment in GKR Charities vs. Dy. DIT (Exemptions) [2011] 46 SOT 23 is also of the view that benefit of depreciation is different from claim of capital expenditure and both are allowable distinctively. h. P H High Court again has reiterated the similar stand in its latest judgment in CIT Vs. Market Committee [2011] 330 ITR 16. M/s Santokbha Durlabhji Trust vs. ITO Ward-Kl). Jaipur. It is further pleaded that the legal position in behalf of such depreciation has been amended w.e.f. 01.04.2015 by insertion of Section 11(6) of I.T. Act, 1961 by Finance (No.2) Act, 2014 as under- (6) In this section where any income is required to 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. The memorand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated as per the existing scheme of section 11 and section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently when computing the income, notional deduction by way of depreciation etc. is claimed and such amount of notional deduction remains to be applied for charitable purpose. This means that double benefit is claimed by Trust and institutions. To ensure that double benefit is not claimed there was amendment in the Act and income for purpose of application shall be determined without any allowance of depreciation. This amendment took effect from 01.04.2015 i.e. A.Y. 2015-16 and subsequent years. The issue in appeal is for A.Y. 2011-12 and the pre amended section will apply in the case of appellant. In view of these facts the provisions of Section 11(6) of the Act shall be applicable only after 01.04.2015. In view of existing scheme of section 11 section 10(23C) for A.Y. 2011-12 and the judgments in case of M/s Santokbha Durlabhji Trust of Hon'ble ITAT Jaipur the claim of depreciation is allowed to the appellant. The addition made by AO is deleted. Addition on account of capital expenditure 9.3 The submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 during remand proceeding. The activities of the appellant are similar to the activities undertaken in the earlier AY's . Appellant has always been granted exemption u/s 11 in earlier AY's as it was registered u/s 12A. During the remand proceedings the ledger accounts and details of addition to fixed assets were produced before AO along with supporting documentary evidence. The same were examined by AO and no adverse inference has been drawn in the remand report after verification of the books of accounts and bill/vouchers. The ledger accounts of addition of fixed assets along with copies of bills/vouchers were produced before the undersigned also and were examined head wise. The activities of the charitable trust for the year under consideration are similar to activities of earlier A.Y.'s wherein exemption u/s 11 was granted as it was held that these capital assets were used for charitable purpose. No fact has been brought out to hold that these assets were not utilized for charitable purpose during the year under consideration. In view of these facts the amount spent on capital assets is allowed to be treated as application of income while computing income u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions filed by the assessee. As regards the adverse comments by the Assessing Officer regarding depreciation claimed by the assessee, we find that Hon'ble Allahabad High Court in the case of CIT vs. Krishi Utpadan Mandi Samiti, under similar facts and circumstances, has held that depreciation was allowable even if the entire capital expenditure was allowed as deduction. The relevant findings of Hon'ble court as reproduced below: On perusal of the impugned judgment and order passed by the Tribunal, it reflects that after taking into consideration the undisputed facts that the issue of depreciation on the assets of the assesses was examined by the Tribunal in the assessee's own case for the earlier assessment year 2007-2008 rendered in the case of Income Tax Officer Vs. Krishi Utpadan Mandi Samiti Jalaun and others in I.T.R. Nos. 305 to 309/Lkw/ll of this Bench, directing the Assessing Officer to allow the claim of the assessee, the Appellate Tribunal, vide impugned judgment and order dated 20.6.2012, decided the issue in favour of the assessee and against the department. The findings of facts so recorded by the Appellate Tribunal are on the basis of cogent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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