TMI Blog2019 (12) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the assessee by following the decision of Hon ble Supreme court in the case of Rajasthan Gujarati Charitable Foundation [ 2017 (12) TMI 1067 - SUPREME COURT] and note that the ratio decidendi of the Tribunal (Madras) is not a good law in the light of the Hon ble Supreme Court in Rajasthan Gujarati Charitable Foundation(supra) and the reliance made by the Ld. CIT(A) is thus erroneous and has to be set aside and we direct that depreciation claimed to be allowed. Before parting, we would like to observe that though the Ld. CIT(A) was aware that the Hon ble jurisdictional High Court , Calcutta has passed an order in a similar case CIT Vs. Siliguri Regulated Market Committee [ 2014 (8) TMI 686 - CALCUTTA HIGH COURT] by allowing the claim of depreciation [refer page 9 of the impugned order of CIT(A)] and though the ratio of the case is binding on the Ld. CIT(A) he has preferred to apply the ratio of the Tribunal, ie, Chennai which is situated outside the jurisdiction of State of West Bengal, which is not in consonance with the judicial discipline and cannot be accepted and we expect the lower authorities to be clear in mind that the law laid by the Hon ble jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration u/s. 80G(5) was also cancelled by the Ld. CIT(E) vide his order dated 14/03/2016 with retrospective effect from 01/04/2006. The ITO, thereafter, issued notice u/s. 148 dated 28/03/2016 received on 30/03/2016. The petitioner filed letter dated 18/04/2016 asking for furnishing recorded reason for issue of notice u/s. 148. Recorded reason was supplied vide letter dated 07/06/2016 received on 09/06/2016. In view of the cancellation order of registration u/s. 12A, the A.O. denied the benefit of Sections 11 12 of the 1. T. Act, 1961 and completed the assessment in the status of AOP. Further, depreciation was allowed to the extent of ₹ 4,65,859/- instead of ₹ 19,69,869/- as claimed. Moreover, donation of ₹ 20,00,000/- given to 3 (three) parties towards furtherance of charitable object was disallowed and added in the total income but deduction u/s. 80G was not allowed. The claim for credit of TDS of ₹ 71,349/- made in the I.T. return was not allowed nor discussed in the assessment order. 4. Being aggrieved by the assessment order, the assessee has preferred an appeal before the Ld. CIT(A) who took note of the fact that the AO has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own as application of income in earlier assessment still, it is an allowable deduction on the following grounds: That for the purpose of determining the income of charitable trust eligible for exemption U/s 11, income should be construed strictly in commercial sense i.e. (normal accounting principal) without reference to the heads of income specified in Section 14. The income to be considered is the book income and the total income is defined in Section 2(45). The computation of commercial income necessarily envisages deduction of depreciation on the assets of the trusts and this position is confirmed by the CBDT vide its Circular No. 5.P(LXX - 6) dated 19. 06. 1968. Moreover, normal accounting principal provides for taking depreciation to arrive at income. The income so arrived at after deduction of depreciation is to be computed for application towards charitable purpose. Capital expenditure incurred s an application of income so determined. It was also pointed out that by amendment in section 11 of the Act with effect from 01.04.2015, depreciation is to be disallowed from assessment year 2015-16 in determining income of the charitable trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill the Hon'ble Madras High Court allowed the claim of depreciation of the assessee. In this connection it may be further considered that the judgment of the Jurisdictional High Court at Calcutta has been passed after the said judgment of the Lissie Medical Institution and therefore, it is respectfully submitted that the Calcutta High Court Judgment should be followed. 6. However, it is noted that the Ld. CIT(A) has referred to an order of the coordinate bench of Tribunal, Chennai Bench in the case of The Music Academy Madras, Chennai Vs. Assessing Officer on 22.04.2016 and disallowed the claim of depreciation. However, we do not countenance the action of Ld. CIT(A) on the simple ground that the claim made by the assessee for depreciation for the year under consideration is no longer res integra since the Hon ble Supreme Court in the decision in CIT Vs. Rajasthan Gujarati Charitable Foundation (2018) 402 ITR 441 (SC) has held at para 4(infra) that the amendment in section 11(6) of the Act vide Finance Act No. 2/2014 would be effective from AY 2015-16 and has approved the Hon ble Delhi High court s declaration that the said amendment is prospective in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed depreciation on the value of the building @2 % and they also claimed depreciation on furniture @ 5%. The question which arose before the Court for determination was : whether depreciation could be denied to the assessee, as expenditure on acquisition of the assets had been treated as application of income in the year of acquisition? It was held by the Bombay High Court that section 11 of the Income Tax Act makes provision in respect of computation of income of the Trust from the property held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, section 28 of the Income Tax Act deals with chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business ahll be computed in accordance with section 30 to section 43C. That, section 32(1) of the Act provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgment. Hence, Question No. 2 is covered by the decision of the Bombay High Court in the above Judgment. Consequently, Question No. 2 is answered in the Affirmative i.e., in favour of the assessee and against the Department. 2. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and there is no need to interfere with the same. 3. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in Lissie Medical Institutions v. Commissioner of Income Tax . 4. It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which beca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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