TMI Blog2018 (8) TMI 1968X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 Tribunal, however, took the view that when the Income-tax Officer stated that full expenditure had been allowed in the year of acquisition 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. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. Carrying forward of the losses for being set off against the income of the charitable trust for the present assessment year - HELD THAT:- Allowing any expenditure of the earlier year which has been brought forward and set off in the year under consideration, is a justified finding of fact based on the correct interpretation of law and the judgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call for interference. A similar view was also taken in CIT v. Institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case, the Tribunal was correct in holding that depreciation is allowable in cases of trust on normal commercial principles, where the assessment of trusts are covered under sections 11, 12 and 13 of the Income-tax Act, 1961 and the provisions of sections 28 to 44 of the Act are not applicable to charitable trust as only application of income during the year is allowable under section 11 of the Act and depreciation being a notional expenditure is not allowable ? 5. Whether, on the facts and in circumstances of the case, the Tribunal was correct in following the decision in the case of CIT v. Cutchi Memon Union [1985] 155 ITR 51 (Karn) wherein it is stated the distinction between the application of income and the deduction of depreciation as expenditure stating that the allowance of depreciation has nothing to do with the application of income is not appropriate and acceptable as the investment in the capital assets as well as depreciation are both claimed as application of income in determining surplus/deficit during the year ? 6. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a provision in respect of computation of income of the trust from properly 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 shall 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 depreciation can be allowed as deduction only under section 32 of the Income-tax Act and not under general principles. The court rejected this argument. It was held that normal depreciation can be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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. 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.' Since the issue regarding claim of depreciation in the hands of the charitable trust is no longer res integra, we are of the opinion that no substantial question of law now arises in the present appeals filed by the Revenue. 4. With regard to carrying forward of the losses for being set off against the income of the charitable trust for the present assessment year, the controversy is covered by the judgment in CIT (Exemptions) v. Ohio University Christ College [2018] 408 ITR 352 (Karn) rendered on July 17, 2018 in ITA. No. 312 of 2016 and ITA No. 313 of 2016, in which this court held as under (page 364 of 408 ITR) : In so far as the second question proposed by the Revenue, quoted above is concerned also, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of income in sub sequent years, including the assessment years 2008-09 and 2009-10 which are under consideration. We find that the issue before us is directly related to the issue decided by the hon'ble Karnataka High Court in the case of Society of the Sisters of St. Anne (supra) cited by the assessee. In the said case, the hon'ble Karnataka High Court at paras 8 to 10 thereof has held as under : . . . Further, the CBDT Circular No. 5-P (LXX) 6 of 1968 cited by the assessee makes it clear that income should be understood in its commercial sense ; in the case of trusts also and therefore the commercial principle enunciated by the hon'ble Karnataka High Court in the above referred case of Society of the Sisters of St. Anne (supra) applies to trusts as well. In view of the factual and legal matrix of this issue in the case on hand as discussed above, we concur with the decision of the learned Commissioner of Income-tax (Appeals) in cancelling the disallowance made by the Assessing Officer and in allowing the amortization of expenses. Consequently, Ground No. B (1 to 6) of the Revenue's appeal for the assessment year 2008-09 and Ground No. C for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be noted, in this connection, that the amounts so added back will become chargeable to tax under section 11(3) to the extent that they represent outgoings 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). In CIT v. Trustee of H. E. H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378 (AP), the Andhra Pradesh High Court has accepted the accounts maintained in respect of the trust in conformity with the principles of accountancy for the purposes of determining the income derived from the property held in trust.' In view of the aforesaid findings of the learned Tribunal, allowing any expenditure of the earlier year which has been brought forward and set off in the year under consideration, is a justified finding of fact based on the correct interpretation of law and the judgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call for interference. A similar view was also taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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