TMI Blog2013 (6) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... D SHRI CHALLA NAGENDRA PRASAD, JJ. For the Appellant : Smt. Ruby George, CIT-DR For the Respondent : Shri A.S. Sriraman, Advocate ORDER PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : In this appeal filed by the Revenue, its grievance is that CIT(Appeals) held assessee to be eligible to claim depreciation as an application of income for the purpose of claiming exemption under Section 11 of Income-tax Act, 1961 (in short 'the Act'). 2. Facts apropos are that assessee, while computing its exemption of income under Section 11 of the Act, had considered depreciation on assets also as an application of income. Assessing Officer had not allowed such claim, relying on the decision of Hon'ble Apex Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lissie Medical Institutions v .CIT(supra), after considering the decision of Hon ble P H High Court in the case of M/s.Tiny Tots Education Society (supra), which had in turn followed its own decision in the case of Market Committee, Pipli (supra), has held that notional claim of depreciation on an asset, the value of which was claimed as an application of income could not be allowed while computing the income of a charitable institution. Their Lordships held so, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st (1981) 127 ITR 378 (A.P.), CIT v. Rao Bahadur Calawala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad.) and CIT v. Estate of V.L. Ethiraj (1982)136 ITR 12 (Mad.). This position is also confirmed by the CBDT vide its Circular No.5- P (LXX-6) dated 19th June, 1968. The concept of commercial income necessarily envisages deduction of depreciation on assets of the Trust. Depreciation on assets of a Trust is to be deducted for the purpose of calculating income of a Trust. This is because of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand that provision of computation of income under Section 11 does not contain any provision which may entitle an assessee to claim weighted deduction for any expenses incurred is not acceptable as Section 11 provides that the income of the Trust is to be computed on commercial basis i.e. as per normal accounting principles. Normal Accounting Principles clearly provide for deducting depreciation to arrive at income. Income so arrived at (after deducting depreciation) is to be applied for charitable 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 deducted to arrive at income and it is not application of income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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