TMI Blog2021 (10) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... we direct the A.O. to grant depreciation on the assets irrespective of the fact that the cost of assets is claimed as application of income. It is ordered accordingly. - ITA No.718/Bang/2013 - - - Dated:- 14-10-2021 - Shri George George K, JM And Shri B.R.Baskaran, AM For the Appellant : Sri.Annamalai S., Advocate For the Respondent : Sri.Muzaffar Hussain, CIT-DR ORDER PER GEORGE GEORGE K, JM This appeal at the instance of the assessee is directed against CIT(A) s order dated 18.03.2013. The relevant assessment year is 2009-2010. 2. The assessee has raised several grounds and an additional ground. However, during the course of hearing, the learned AR limited his submission only to the following two issues, namely (i) whether the CIT(A) is justified in law in holding that the assessee is hit by proviso to section 2(15) of the I.T.Act and consequently confirming the excess of income over expenditure of ₹ 57,70,52,000, as taxable income of the assessee. (ii) whether the CIT(A) is justified in confirming the addition made by the Assessing Officer in respect of disallowance of depreciation amounting to ₹ 113,36,48,093 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for charitable purpose is on the basis of source of revenue derived from renting of space and advertisements and giving on hire buses for excursion etc. besides existence of non-operational revenue. It is not the case of the revenue that there has been any private profit earned from the activities carried out by the assessee. The Bengaluru Bench of Tribunal in the case of Bangalore Industrial Area Devl.Corpn.(supra), has taken the view that the predominant object of charitable organization has to be examined before coming to a conclusion regarding application of the proviso to section 2(15) of the Act. This aspect has been highlighted by the Hon ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(Exemption) (371 ITR 333)(Del). The facts of the case before the Hon ble Delhi High Court in the case of India Trade Promotion Organization (supra) were that the Assessee in that case enjoyed the benefit of exemption u/s.10(23C)(iv) of the Act. Sec.10(23C)(iv) provides any income received by any person on behalf of any other fund or institution established for charitable purposes which may be approved by the prescribed authority, having regard to the objects of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profit making or not. Similarly, while considering whether any activity is one of rendering any service in relation to any trade, commerce or business, the element of profit making is also very important. (iii) The meaning of the expression charitable purposes has to be examined in the context of income , because, it is only when there is income the question of not including that income in the total income would arise. Therefore, merely because an institution, which otherwise is established for a charitable purpose, receives income would not make it any less a charitable institution. Whether that institution, which is established for charitable purposes, will get the exemption would have to be determined having regard to the objects of the institution and its importance throughout India or throughout any State or States. (iv) Merely, because an institution derives income out of activities which may be commercial, that does, in any way, affect the nature of the Institution as a charitable institution if it otherwise qualifies for such a character. (v) Merely because a fee or some other consideration is collected or received by an institution, it would not lose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a 'charitable purpose'. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. (emphasis supplied). 12. Keeping in mind the principles laid down as above, let us examine the case of the Assessee. The Assessee is a statutory corporation established under the RTC Act, 1950. It is not driven b profit motive but is for providing transportation facilities to members of the public. The State Government fixes fares for travel by public. Buses ply in areas even where it is not economically viable. Sec.18 of the RTC Act, 1950 lays down duties of the corporation which is to provide, secure and promote efficient, adequate, economical and properly coordinated system of road transport services in the State of Karnataka. Sec.22 of the RTC Act, 1950 lays down that the corporation should act on business principles in the sense it has to recover the cost of services rendered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Tribunal in assessee s own case, we hold that the assessee is not hit by proviso to section 2(15) of the I.T.Act. Accordingly, the A.O. is directed to grant benefit of exemption u/s 11 of the I.T.Act for the relevant assessment year. 6. As regards the issue of disallowance of depreciation, an identical issue was decided in favour of the assessee by the order of the Tribunal in the case of Bangalore Metropolitan Transport Corporation (supra). The relevant finding of the Tribunal reads as follow:- 15. We have heard the submissions of the ld. DR, who relied on the order of AO. The learned counsel for the Assessee relied on the order of the CIT(A). We have considered the order of the AO. Identical issue came up for consideration before ITAT Bangalore Bench in the case of DDIT(E) v. Cutchi Memon Union (2013) 60 SOT 260 Bangalore ITAT, wherein similar issue has been dealt with by this Tribunal. In the aforesaid case, the assessee claimed depreciation and the AO denied depreciation on the ground that at the time of acquiring the relevant capital asset, cost of acquisition was considered as application of income in the year of its acquisition. The AO took the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the other on account of expenditure of a capital nature incurred on scientific research u/s. 35(1)(iv) of the Act. The Hon ble Court thereafter held that a trust claiming depreciation cannot be equated with a claim for double deduction. The Hon ble Punjab Haryana High Court has also made a reference to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Society of Sisters of Anne, 146 ITR 28 (Kar), wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciation debited in the books is deductible while computing such income. In view of the aforesaid decision on the issue, we are of the view that the order of the CIT(A) on the above issue does not call for any interference. 22. Consequently, ground No.5 raised by the revenue is dismissed. 16. The Hon ble Supreme Court in the case of CIT Vs. Rajasthan Gujarati Charitable Foundation Poona, (2018) 89 taxmann.com 127(SC) has since confirmed the view that depreciation has to be allowed as a deduction even when the cost of acquisition of the depreciable asset has been treated as application of income in the year of its acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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