TMI Blog2013 (11) TMI 1778X X X X Extracts X X X X X X X X Extracts X X X X ..... on the asset which was already claimed as application of income towards the object of the trust. 3. The assessee is an educational trust, registered under section 12A of the Act, filed its return of income for the assessment year 2009-10 on 22nd September, 09. During the course of assessment proceedings, ld.AO observed that the assessee claimed depreciation of ₹ .1,50,26,836/- on the assets, which was already claimed as application of income. Ld. Assessing Officer opined that In the assessment of charitable organizations the assessee s eligibility for the exemption of its income under sections 11 to 13 is to be considered first. If the assessee is found to be eligible for exemption of its income under section 11, then the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of trust. Similarly, the ITAT C bench, Chennai in the case of GKR charities Vs. DDIT (Exemptions)-1,Chennai in appeal No.1812/Mds./2011 in the judgement dated April 30,2012 has allowed the claim of depreciation for the assessee trust. The Tribunal followed the judgement of the Chennai Tribunal in the case of Rengalatchumi Educational Trust Vs ITO in its Appeal No.681 of 2010 dated 25.03.2011. The Tribunal held that while calculating application of 85% of Trust income for purpose of Section-11, assessee s trust claim for depreciation is to be allowed. Further, the jurisdictional Tribunal in the case of Coimbatore Stock Exchange for the assessment years 2005-06 and 2006-07 has decided the issue in favour of the appellant. In view of the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, for a reason that by making such an allowance, a charitable institution got a permission to generate income outside the books. As against this, Hon ble P H High Court in the decisions of Market Committee, Pipli(supra) and of M/s.Tiny Tots Education Society (supra) had held clearly in favour of the assessee that depreciation was allowable as utilization for the purpose of computing exempt income under sections 11 12 of the Act. Decisions relied on by the Assessing Officer for disallowing the claim of the assessee were all considered by Hon ble P H High Court in the above case. In fact, this issue had come up before the Tribunal in the case of G.K.R. Charities Vs.DDIT(E) (supra) where it was held as under:- 7. After considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that the concept of commercial income necessarily envisages deduction of depreciation on assets of the Trust. Even reasonable depreciation on assets and interest on Sinking Fund or Repairs Reserve are to be deducted as held by the Mumbai Bench of this Tribunal in Balkan-Ji-Bari (1979) 2 Taxman 377(Bom.). Hon'ble Bombay High Court had rejected a reference application of the Revenue in the case of CIT v. Framjee Cawasjee Institute (1993) 109 CTR 463, holding that the answer to the question whether depreciation was allowable to a charitable Trust was self-evident, even if the capital value of the assets on which depreciation was claimed had been allowed as a deduction under Section 11, as an application of income for religious or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable purpose. Capital expense is application of the income so determined. So there is no double deduction or double claim of the same amount as application. Thus depreciation is to be 8 deducted to arrive at income and it is not application of income. No doubt, Department has relied on the decision of the Supreme Court in the case of Escorts Ltd. (supra). However, in this case the issue before Hon'ble Supreme Court was that whether both depreciation under Section 32 and capital expenditure on scientific research under Section 35(1)(iv) can be claimed as deduction. Reference to this decision cannot be drawn as in the case of Escorts (supra) both were deductions under the head business income whereas in case of a charitable Trust de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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