9911796707
TMI Blog2018 (9) TMI 1891X X X X Extracts X X X X X X X X Extracts X X X X ..... laring a surplus income ; and for the assessment year 2009-10 declaring the taxable income as nil after accumulating income under section 11(2) of the Act. The return was processed under section 143(1) and later on, the case was selected for scrutiny under section 143(2) of the Act, for both the assessment years 2008-09 and 2009-10. The respondent-assessee made available necessary information before the Assessing Officer. The Assessing Officer, based on the material on record, disallowed the claim of depreciation, as per the provisions of section 11 of the Act. Further, he held that claim of depreciation amounted to double deduction, as the respondent-trust had availed of 100 per cent. exemption of capital expenditure in the previous year as application of income. Further, more specifically for the assessment year 2009-10, the Assessing Officer also held that the respondent-trust is not entitled for the benefit of accumulation of income under section 11(2) of the Act and the same was brought to tax, even though the respondent-trust had filed Form No. 10 towards the utilization of surplus funds towards achieving the primary object of the respondent-trust. The Assessing Officer passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed depreciation as revenue expenditure and also as application of income in the year of investment itself and, therefore, allowing depreciation on the same assets would amount to double deduction. 7. The Revenue is also before this court in the connected appeal, i.e., I. T. A. No. 107 of 2016 against the order passed in I. T. A. No. 72/Bang/2015 dated May 29, 2015 in so far as allowing depreciation, being similar to the issue in the first appeal, but for the assessment year 2009-10 ; and for the accumulation of income under section 11(2) of the Act contending that the Tribunal without considering the fact that in the original Form No. 10, the assessee had failed to indicate the specific purposes for which income was accumulated ; though it is mandatory to file Form No. 10 before completing scrutiny assessment by the assessing authority for claiming accumulation of income under section 11(2) of the Act. Further it is contended that the assessing authority had rightly disallowed the accumulation of income claimed by the respondent-trust as the respondent-assessee had filed revised Form No.10 subsequently, which do not satisfy the requirements of law. 8. The present appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts have accepted the decision of the Income-tax Appellate Tribunal thereby dismissing the appeals of the Income-tax Department. From the judgments of the High Courts, it can be discerned that the High Courts have primarily followed the judgment of the Bombay High Court in CIT v. Institute of Banking [2003] 131 Taxman 386 (Bom) ; [2003] 264 ITR 110 (Bom). In the said judgment, the contention of the Department predicated on double benefit was turned down in the following manner (page 113 of 264 ITR) : 'As stated above, the first question which requires consideration by this court is : whether depreciation was allowable on the assets, the cost of which has been fully allowed as application of income under section 11 in the past years ? In the case of CIT v. Munisuvrat Jain [1994] Tax LR 1084 (Bom) the facts were as follows : The assessee was a charitable trust. It was registered as a public charitable trust. It was also registered with the Commissioner of Income-tax, Pune. The assessee derived income from temple property which was a trust property. During the course of assessment proceedings for assess ment years 1977-78, 1978-79 and 1979-80, the assessee claimed depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the aforestated judgment of the Bombay High Curt, we answer question No. 1 in the affirmative, i.e., in favour of the assessee and against the Department. Question No. 2 herein is identical to the question which was raised before the Bombay High Court in the case of DIT (Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR (Bom) 463. In that case, the facts were as follows : The assessee was a trust. It derived its income from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the trust. The Income-tax Officer held that depreciation could not be taken into account because, full capital expenditure had been allowed in the year of acquisition of the assets. The assessee went in appeal before the Assistant Appellate Commissioner. The appeal was rejected. The Tri bunal, however, took the view that when the Income-tax Officer stated that full expenditure had been allowed in the year of acquisi tion of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the trust in the year in which the income was spent in acquiring those assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... san. Explanation to section 11(1)(a) on the contrary takes note of the income not received in a particular year. It lends support to the contention of the assessee that accounting need not be on cash basis only. Section 11(4) is not intended to explain how the accounts of the business undertaking should be maintained. It is intended only to bring to tax the excess income computed under the provisions of the Act in respect of busi ness undertaking. The depreciation if it is not allowed as a necessary deduction for computing the income from the charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income. The Board also appears to have understood the "income" under sec tion 11(1) in its commercial sense. The relevant portion of the Circular No. 5-P(LXX-6) of 1968, dated July 19, 1968 reads : "Where the trust derives income from house property, interest on securities, capital gains, or other sources, the word "income" should be understood 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and the assets in respect whereof depreciation is claimed may not be busi ness assets. In all such cases, section 32 of the Act providing for depreciation, for computation of income derived from business or profession is not applicable. However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from the gross income of the trust. Income derived from the trust property has also got to be com puted on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for chari table and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious pur poses in the subsequent year in which adjustment had been made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a).' In view of the controversy covered by the above decisions of this court, we are of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
