TMI Blog2018 (8) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... 09/2013 declaring NIL income after claiming exemption u/s 11 of the Income-tax Act, 1961 (in short the Act ). Assessment u/s 143(3) was completed on 14/03/2016 by denying exemption u/s 11 and making the following additions: 1. Excess of income over expenditure ₹ 6,43,34,410/- 2. Prior Period expenses ₹ 99,52,992/- 3. Income tax Rs.3,21,04,919/- 4. Provision of deferred tax ₹ 11,14,774/- 5. Depreciation Rs.3,54,91,335/- 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), it was submitted that the issue of denial of exemption u/s 11 is squarely covered in favour of the assessee by the orders of ITAT in ITA No. 1712/Hyd/2014 dated 30/06/2015 for AY 2011-12, which was confirmed by the AP High Court in ITA No. 168 of 2015 dated 04/11/2015 and also the order of CIT(A) 9 for AY 2012-13. 5. After considering the submissions of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival submissions and perused the material on record. Similar issues came up for consideration before the coordinate bench of this Tribunal in assessee s own case for AY 2011-12 wherein the Bench has held as under: 20. Therefore, viewed from any angle, we hold that the Appellant society is entitled from exemption of income under the provision of Section 11 of the Act and the proviso to Section 2(15) of the Act cannot be applied to the appellant society as it is not engaged in any activity which are in the nature of trade, commerce and business. Accordingly, we direct the Assessing Officer to allow the exemption under the provisions of Sec. 11 of the Act. 21. The next ground of appeal relates to the disallowance of prior period expenses of ₹ 1,26,807/- and deferred tax liability of ₹ 5,01,728/- and provision for income-tax of ₹ 4,63,00,000/-. It appears the A.O. has disallowed these expenses on the ground that appellant society was not entitled to exemption under the provisions of Sec. 11 of the Act. In the preceding para, we already held that the appellant society is entitled for exemption under the provisions of Section 11 of the Act. Once it is hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me available for application for charitable purposes, it is only the actual receipts and payments which are all alone to be considered. Therefore, we direct the Assessing Officer to allow the provision for taxation only in the year in which actual payment is made. 23. The next ground of appeal relates to the allowability of depreciation. The issue is no more res integra and it is covered by the decision of Co-ordinate Bench, Hyderabad in the case of A.P. Olympic Association, held vide para 8 to 16 as follows: 8. .... We have considered the rival submissions and examined the issue. There is no dispute with regard to the fact that the assessee is registered under section 12AA of the Income-tax Act. There is also no dispute that the assessee has shown all the receipts in income-expenditure account and claimed various expenses in its computation of income, while declaring excess of income over expenditure. It is also not in dispute that the income of the assessee-trust has to be computed with reference to the provisions of sections 11 and 13. Therefore, the principles governing the computation of income under the head Business may not apply to the computation of income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f opinion on the above issue at that point of time. 11. The hon'ble Punjab and Haryana High Court in the case of Manav Mangal Society (supra) has considered and allowed the claim of depreciation (page 423) : The amount spent on construction of school building at Panchkula is a capital expenditure but for the purpose of section 11 it is an outgoing expenditure which is application of income of the appellant-trust for charitable purpose. The appellant shall also be entitled to claim depreciation on the school building . 12. This decision was followed in the case of CIT v. Tiny Tots Education Society [2011] 330 ITR 21/11 taxmann.com 242 by the hon'ble Punjab and Haryana High Court. 13. This issue has elaborately been discussed by the hon'ble Delhi High Court in the case of Vishwa Jagriti Mission (supra) and took a over view of the existing decisions on the issue while holding as under : 11. The Revenue is in appeal against the aforesaid order of the Tribunal. We are not inclined to admit the appeal and frame any substantial question of law since none arises from the order of the Tribunal. There is no dispute that the assessee has been grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oings 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, should be not less than 75 per cent. Of the latter, if the trust is to get the full benefit of the exemption under section 11(1).' 12. A similar view was earlier expressed by the Andhra Pradesh High Court in CIT v. Trustee of H.E. H. The Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378 (AP) and by the Madras High Court in CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad). The Madhya Pradesh High Court in CIT v. Raipur Pallottine Society [1989] 180 ITR 579 (MP) has held, following the judgment of the Karnataka High court cited above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a necessary deduction on commercial principles. The Gujarat High Court, after referring to the judgments of the Karnataka, Maharashtra and Madhya Pradesh High Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Appellate Tribunal, Bangalore in the case of Asstt. CIT v. Shri Adichunchanagiri Shikshana Trust [2013] 141 ITD 575/31 taxmann.com 157 wherein it was held that charitable or religious trust registered under section 12Acan claim benefit under section 11 in the form of application of funds as well as depreciation under section 32 in respect of property held under the trust. The same opinion was followed by the Income-tax Appellate Tribunal, Bangalore Tribunal in the case of Dy. DIT (Exemption) v. Cutchi Memon Union [2013] 60 SOT 260/38 taxmann.com 276 wherein also similar opinion was expressed. 15. Thus, on this issue, there are decisions of the hon'ble Gujarat High Court, the Madhya Pradesh High Court, the Kerala High Court, the Bombay High Court, the Punjab and Haryana High Court and the Delhi High Court in favour of the assessee, whereas, there is only a lone judgment of the hon'ble Kerala High Court against the above opinion confirming the Revenue's contention. In view of the majority opinion of various High Courts, we are of the opinion that amount of depreciation debited to the account of charitable institution has to be allowed in order to arr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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