TMI Blog2021 (4) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... be funds applied from the income of the Trust. Further, the Tribunal held that there cannot be a case where the Trust can apply its income more than the income received by it for the purpose of section 11(1)(a) and (b) of the Act. In the Judgment reported in MATRISEVA TRUST [ 1999 (3) TMI 34 - MADRAS HIGH COURT] the Hon'ble Division Bench of this court, while deciding the substantial questions of law as to the set off of the deficiency of funds of this year against the earlier year surplus is concerned, categorically decided the same in favour of the assessee and against the Revenue. Though the appellant-assessee relied upon the said Judgment before the Income Tax Appellate Tribunal, the Tribunal did not consider the same. The Commissioner of Income Tax (Appeals), went beyond its jurisdiction and commented on the Judgments of the High Courts. Commissioner of Income Tax (Appeals) is bound by the Judgments/Orders of the High Courts. The Commissioner of Income Tax (Appeals) was not sitting over appeal on the Judgments of the Hon'ble High Courts. If the Judgments/Orders of the High Courts are applicable to the facts and circumstances of the case pending before the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts and not with reference to the minimum application of 85%; and disallowed the claim of depreciation on fixed assets to the extent of ₹ 13,71,516/- as the cost of capital assets were already claimed as application of income. The taxable income was computed as ₹ 13,03,861/-. (iii) Aggrieved over the Assessment Order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who by order dated 18.07.2014, while upholding the order of assessment, disallowed depreciation, enhancing the assessment by directing the Assessing Officer to completely disallow the set off of excess application of income for the Assessment Year 2008-2009. While arriving at the said conclusion, the Commissioner of Income Tax (Appeals) held that there was no concept of carry forward provided in Chapter III of the Act. (iv) According to the appellant, the Commissioner of Income Tax (Appeals) failed to follow the ratio laid down by the Hon'ble Division Bench of this Court reported in (2000) 242 ITR 20 [Commissioner of Income Tax v. Matriseva Trust] . Further, the appellant submitted that the observations made by the Commissioner of Income Tax (Appeals) about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Question of Law no.2 is covered by the decision of this Bench dated 19.01.2021 made in T.C.A.Nos.1470 to 1472 of 2010 [Commissioner of Income Tax, Chennai Vs. M/s.S.R.A. Systems Ltd., No.100, Valluvar Kottam High Road, Nungambakkam, Chennai] and the Question of law no.3 is covered by the decision of the Division Bench of this Court dated 18.03.2020 made in T.C.A.No.228 of 2011 [M/s.Comstar Automative Technologies Private Ltd., (formerly known as Visteon Powertrain Control Systems India Private Limited, Keelakaranai Village, Malrosapuram Post, Maraimalai Nagar, Chengalpattu District- 603 204 Vs. The Deputy Commissioner of Income Tax, Company Circle I (3), 121, Nungambakkam High Road, Chennai 600 034]. 5.It would be appropriate to extract the relevant portions of the judgments relied upon by the learned counsel for the respondent. (i)[2018] 93 taxmann.com 33 (SC) [Commissioner of Income-tax, Central III Vs. HCL Technologies Ltd.] ... 19.In the instant case, if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software under Section 10A of the IT Act are allowed only in Export Turnove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire claim of deduction under Section 10B. Further, the expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by the Assessing Officer on the ground that such expenses were in the nature of capital expenditure. The Assessing Officer in his re-assessment order noted that in terms of Section 10B(ii) an undertaking in order to be eligible for deduction under Section 10B must not be formed by splitting up or reconstruction of a business already in existence. Further, the Assessing Officer held that deduction under Section 10B was not available to the assessee Company in view of the provisions of Section 10B(iii) which stipulate that eligible business is not formed by transfer to a new business of plant and machinery previously used for any purpose. The Assessing Officer found that the assessee had not complied with both these conditions, hence, it was not entitled to any deduction under Section 10B. 6.For the Assessment Year 2002-03, in the case of the assessee Company itself, the Income Tax Appellate Tribunal C Bench, Chennai had dealt with the applicability of Clauses (ii) and (iii) of Section 10A(2) in its order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Apex Court, where in clear terms, it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. 28.Here is the case in hand, the total income was first arrived at by the Revenue through the Assessing Officer in the Assessment order by computing the total income by way of brought forward or carry forward the depreciation allowance of the earlier Assessment years and set off the unabsorbed depreciation first and making the return Nil, thereby leaving the Assessee in a position where it could not claim an deduction under Section 10B as there was no income after set off of carry forward depreciation and unabsorbed depreciation from earlier years. 29.This method of computing the income in the present case made by the Revenue is totally against the said law as has been declared by te Hon'ble Apex Court in the aforesaid decision in Commissioner of Income-tax v. Yokogawa India Ltd., (cited supra). 30.Therefore we have no hesitation to hold that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. Though it appears that in most of these cases, the CIT (Appeals) had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT 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 Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS) [(2003) 131 Taxman 386 (Bombay)]. In the said judgment, the contention of the Department predicated on double benefit was turned down in the following manner: 3. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness assets. In all such cases, section 32 of the Income Tax 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 gross income of the Trust. In view of the aforesatated 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. 4. Question No. 2 herein is identical to the question which was raised before the Bombay High Court in the case of Director of Incometax (Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR 463. In that case, the facts were as follows: The assessee was the 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 ITO 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 Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of funds in the earlier years, contrary to judgments of several High Courts? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the excess application of the earlier year could not be set off against the income of the current year contrary to the judgment of this Honourable Court in the case of Matriseva Trust (2000) 242 ITR 20(Mad)? 29. Learned senior counsel appearing for M/s.St. Thomas Orthodox Syrian Cathedral Parish Trust, the assessee, Mrs. Pushya Sitaraman would contend that the excess application of earlier years was liable to set off against the income of the current year and relied on the decision of the jurisdictional High Court in the case of Commissioner of Income Tax Vs. Matriseva Trust [(2000) 242 ITR 20]. While Sri. J.Narayanaswamy, learned counsel appearing for the Department does not seriously object to the argument advanced on merits, he would raise a technical objection to the effect that in the present case, the claim was made under a revised return. The original return of income was filed only on 31.10.2007 beyond 31.10.2006 when it was due and as such would debar the consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals) had allowed the claim of the assessee. The Tribunal had confirmed the order of the Commissioner (Appeals). 3. With regard to the first question, this court in the decision reported in CIT v. Thanthi Trust [1982] 137 ITR 735, had held that the trust which has applied the money for charitable purposes was entitled to exemption without having to show how the money had been dealt with by the transferee institution. This court has answered the question referred there in favour of the assessee and against the Revenue. 4. Following the aforesaid decision of this court and for the reasons stated therein, we answer the first question referred to us in favour of the assessee and against the Revenue. 5. With regard to the second question, the Tribunal has held that the trust is entitled to set off the amount of excess application of the last year against the deficiency of ₹ 82,516 of the present assessment year. 6. When similar questions came up before the Rajasthan High Court and the Gujarat High Court in the case of CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439 and CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [19951 211 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10.2. Section 11(1)(a) of the Act provides that income derived from property held under Trust wholly for charitable or religious purpose shall not be included in the total income to the extent such income is applied for charitable or religious purpose in India. The Act also provides that upto 15% of such income is accumulated or set apart, then, that shall also not be included in the total income. 10.3. Section 11(1)(d) of the Act provides that income in the form of voluntary contribution made with specific direction that they shall form part of the corpus of the Trust or Institution will also not be included in the total income. 10.4 Section 2(24) of the Act defines income , which includes any voluntary contribution received by the Trust created wholly or partly of charitable or religious purposes . Further, explanation to section 11(1)(a)(b) read with section 12(1) of the Act provides that any voluntary contribution received other than with specific direction that they shall form part of the corpus of the Trust or Institution created wholly for charitable or religious purpose shall be deemed to be the income derived from property held under Trust . 11. On a co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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