TMI Blog2019 (8) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... y show that the Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The proviso to Sec.2(15) is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11. The AO has not disputed the conditions necessary for allowing exemption u/s.11 of the Act, except the applicability of proviso to Sec.2(15). The said proviso is not applicable to the case of the Assessee, we hold that the Assessee's income is entitled to the benefits of Sec.11. In view of the above conclusion on the preliminary issue, the other grounds of appeal become academic and require no consideration. Allowance of depreciation when the cost has already been recovered by way of exemption as application of income - HELD THAT:- As decided in M/S. CUTCHI MEMON UNION [ 2013 (9) TMI 404 - ITAT BANGALORE] u/s. 11(1), income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. The Hon ble Supreme Court in the case of CIT Vs. Rajasthan Gujarati Charitable Foundation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Government. The assessee was granted the benefit of registration u/s 12A of the Act on 22/12/2000. The Assessee claimed the benefits of exemption under Sec.11 of the Act on the ground that it was existing for charitable purpose as defined in Sec.2(15) of the Act. Section 2(15) of the Act has been amended by Finance Act, 2010 w.e.f. 01.04.2009 (i.e., w.e.f. Assessment Year 2009-10). It is not in dispute that the objects of the Assessee would fall within the ambit of advancement of any object of general public utility which is one of the purposes mentioned in the definition of Charitable purpose u/s.2(15) of the Act. As stated earlier, the definition of Charitable Purpose as given in Sec.2(15) of the Act was amended by the Finance Act, 2010, w.e.f. 1.4.2009. By the aforesaid Amendment, a proviso has been inserted to the definition of Charitable Purpose in Sec.2(15) of the Act, which reads as follows:- 2(15) Charitable purpose includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldings have been constructed above bus terminus and let out on commercial basis to shops, restaurants, etc. These are the primary reasons assigned by the AO for coming to the conclusion that the assessee was not existing for charitable purpose and therefore was not entitled to the benefit of deduction u/s 11 of the Act. The CIT(A) concurred with the view of the AO. Hence, the appeals by the assessee before the Tribunal. The facts in assessment year 2010-11 are also identical to the facts as they prevailed in 2009-10. 5. Before us, learned counsel for the assessee placed reliance on several decisions of the Tribunal wherein on identical facts, the Tribunal came to the conclusion that similar activities will not render the assessee as not existing for charitable purposes. The main decisions cited were the following: (i) Karnataka Industrial Area Devt.Board Vs. DIT ITA No.661/Bang/2014 order dated 20.4.2016. (ii) Bangalore Development Authority Vs. Addl.CIT ITA No.1104/Bang/2017 order dated 22.3.2019. (iii) Hon ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(Exemption) (371 ITR 333)(Del). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench of Tribunal in the case of Bangalore Industrial Area Devl.Corpn.(supra), has taken the view that the predominant object of charitable organization has to be examined before coming to a conclusion regarding application of the proviso to section 2(15) of the Act. This aspect has been highlighted by the Hon ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(Exemption) (371 ITR 333)(Del). The facts of the case before the Hon ble Delhi High Court in the case of India Trade Promotion Organization (supra) were that the Assessee in that case enjoyed the benefit of exemption u/s.10(23C)(iv) of the Act. Sec.10(23C)(iv) provides any income received by any person on behalf of any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States, shall not form part of the total income under the Act. The prescribed authority withdrew the approval granted to the Assessee consequent to the insertion of the proviso to Sec.2(15) of the Act, on the ground that the Assessee was deriving rental inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context of income , because, it is only when there is income the question of not including that income in the total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption would have to be determined having regard to the objects of the institution and its importance throughout India or throughout any State or States. (iv) Merely, because an institution derives income out of activities which may be commercial, that does, in any way, affect the nature of the Institution as a charitable institution if it otherwise qualifies for such a character. (v) Merely because a fee or some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose. If the dominant activity of the institution was not business, trade or commerce, then any such incidental or ancillary activity would also not fall within the categories of trade, commerce or business. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. (emphasis supplied). 8. Keeping in mind the principles laid down as above, let us examine the case of the Assessee. The Assessee is a statutory corporation established under the RTC Act, 1950. It is not driven b profit motive but is for providing transportation facilities to members of the public. The State Government fixes fares for travel by public. Buses ply in areas even where it is not economically viable. Sec.18 of the RTC Act, 1950 lays down duties of the corporation which is to provide, secure and promote efficient, adequate, economical and properly coordinated system of road transport services in the State of Karnataka. Sec.22 of the RTC Act, 1950 lays down that the corporation should act on business principles in the sense it has to recover the cost of services rendered to the public which means that it cannot provide service free of cost. Sec.30 of the RTC Act, 1950 provides how profits of the corporation shall be disposed and it lays down that the same shall be used only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of depreciation claimed, that depreciation was claimed on assets, the cost of acquisition of the said assets had been claimed by the assessee as capital expenditure towards application of funds towards the objects of the trust and allowed as such. According to the AO, allowing such a claim would amount to allowing double deduction. On the facts of the present case, he was of the view that the decision of the Hon ble Supreme Court in the case of Escorts Limited another Vs. Union of India 199 ITR 43 is squarely applicable, wherein it has been categorically held that when deduction u/s 35(2)(iv) is allowed in respect of capital expenditure on scientific research, no depreciation is allowable u/s 32 on the same asset. The assessee pointed out that Hon'ble High Court of Karnataka in the case of All Saints Church, 148 ITR 786 (Kar) and Society of Sisters of St. Ann, 146 ITR 28 (Kar) has taken the view that where capital expenditure on acquisition of depreciable asset is considered as application of income for charitable purpose, allowing depreciation on the very same capital asset would not amount to double allowance. The assessee also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust for deriving the income as it is nothing but a decrease 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, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance 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 confirmed and the appeal of the revenue dismissed. There is no merit in this appeal of the revenue. 18. As far as ITA No.1536/Bang/2016 is concerned, learned counsel for the assessee did not press for adjudication of this appeal. Accordingly, the same is dismissed as not pressed. 19. In view of the conclusion on the preliminary issue in the assessee s appeals for AY 2009-10 2010-11, other issues raised by the assessee in this appeal does not require any consideration. AO is directed to allow the benefit of sec.11 of the Act to the assessee and re-compute the total income in accordance with law after affording an opportunity of hearing to the assessee. 20. In the result, ITA Nos.532/Bang/2014 and 779/Bang/2013 are pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
