TMI Blog2016 (2) TMI 1307X X X X Extracts X X X X X X X X Extracts X X X X ..... of the asset by applying the rate of depreciation specified in the Income Tax Rules and that is allowed as deduction while arriving at the business or profession income of the assessee. A provision with fiction cannot be superimposed on another provision with fiction for arriving at the income of the assessee. For the aforesaid reasons, we are of the considered view that the assessee will not be entitled to claim depreciation under section 32 of the Act for arriving at the income of the assessee under section 11. Accordingly, we hereby confirm the order passed by the learned Assessing Officer and set aside the order passed by the learned Commissioner of Income Tax (Appeals). - ITA Nos.1652 & 1653/Mds/2015 & C.O.Nos.106 & 107/Mds/2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition of the asset had been claimed as application of income in the earlier year when the asset was purchased by the assessee trust. Both the cross objections filed by the assessee are only in support of the order passed by the learned Commissioner of Income Tax (Appeals). 4. Brief facts of the case are that the assessee is an AOP trust engaged in providing higher education in the field of engineering. The assessee trust has filed its returns of income on 30.10.2008 29.09.2009 for the assessment years 2008-09 and 2009-10 respectively declaring Nil income after claiming exemption under section 11 of the Act. Thereafter scrutiny assessments under section 143(3) read with section 147 of the Act were completed by the learned Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tressed that income of the trust has to be arrived on commercial principles. 6. We have heard the rival contentions and carefully perused the materials on record. At the outset, we are reminded of the recent decision of the Chennai Bench of the Tribunal in the case The Anjuman-E-Himayath-E-Islam Vs. ADIT in ITA No.2271/Mds/2014 dated 02.06.2015, wherein the bench following the decision of the Hon ble Kerala High Court in the case Lissie Medical Institution Vs. CIT reported in [2012] 348 ITR 344(Ker.) and the decision of Hon ble Calcutta High Court in the case DCIT VS. Girdharilal Shewnarain Tantia Trust reported in [1993] 199 ITR 15(Cal.) held the issue against the assessee. The gist of the decision is reproduced hereunder for refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 11(1) of the Income- tax Act, 1961, must spend at least 75 per cent of its total income, for religious or charitable purposes. In other words, it was not permitted to accumulate more than 25 per cent of its total income. The question has been reconsidered by the Board and the correct legal position is explained below. 2. Section 11(1) provides that subject to the provisions of sections 60 to 63 the following income shall not be included in the total income of the previous year . . . . The reference in sub-section (a) is invariably to income and not to total income . The expression total income has been specifically defined in section 2(45) of the Act as the total amount of income . . . computed in the manner laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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). 5. To sum up, the business income of the trust as disclosed by the accounts plus its other income computed above, will be the income of the trust for purposes of section 11(1). Further, the trust must spend at least 75 per cent of this income and not accumulate more than 25 per cent thereof. The excess accumulation, if any, will become taxable under section 11(1). After considering the Circular, the Hon ble Kerala High Court held as follows:- Held, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we are constrained to hold that the assessee would not be entitled to claim the benefit of depreciation for the purpose of section 11 of the Act. Further, it is pertinent to mention that section 11 is a section with a legal fiction, wherein, when registration is granted to a charitable institution under section 12A of the Act, income from the trust is not brought into the ambit of tax on fulfilling certain conditions. Similarly, section 32 of the Act is also a provision with a legal fiction wherein notional amount is determined on the cost/WDV of the asset by applying the rate of depreciation specified in the Income Tax Rules and that is allowed as deduction while arriving at the business or profession income of the assessee. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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