TMI Blog2023 (7) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... me of exempt person has to be calculated on the basis of normal commercial principles and by Rule of accountancy. We hold that the assessee is entitled to claim the depreciation as plant and machinery as the assessee in promoting public objects which are activities in the nature of trade, commerce or business but without commercial motive. Ground raised by the Assessee allowed. Accumulation of income - whether application of income shall precede accumulation by directing A.O. to allow accumulation u/s. 11(1)(a) from income remaining after deducting amount applied for the objects of the assessee trust - HELD THAT:- As relying on Gnyan Dham Vapi Charitable Trust [ 2020 (10) TMI 238 - ITAT AHMEDABAD] and Maharshi Karve Stree Shikshan Samstha Karvenagar [ 2019 (1) TMI 1260 - ITAT PUNE] we hereby set aside the order passed by the Ld. CIT(A) and held that when application of income is more than receipts of year, excess application of income i.e., expenditure in the hands of the assessee can be carried forward to succeeding Year. Ground raised by the Assessee allowed. - ITA No. 370/Ahd/2019 And ITA No. 221/Ahd/2019 - - - Dated:- 23-6-2023 - Shri Waseem Ahmed, Accountant Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2017 in assessee s own case reported in 449 ITR 1 (SC) which has settled the issue by dismissing the Revenue s appeal vide Para 254(ii) of the judgment as follows: .254. In accordance with the foregoing discussion, and summary of conclusions the numerous appeals are disposed of as follows: (i) The revenue's appeals against the Improvement Trust, Moga, the Hoshiarpur Improvement Trust, Bathinda Improvement Trust, Fazilka Improvement Trust Sangrur Improvement Trust Patiala Improvement Trust Jalandhar Improvement Trust Kapurthala Improvement Trust, Pathankot Improvement Trust Improvement Trust, Hansi, and the Special Leave Petitions filed against the Gujarat Maritime Board and Karnataka Water Supply and Drainage Board are rejected. (ii) The revenue's appeals against Ahmedabad Urban Development Authority, the Gujarat Housing Board, the Gandhinagar Urban Development Authority, Rajkot Urban Development Authority, Surat Urban Development Development Authority, Jamnagar Area Development Authority, and the Gujarat Industrial Development Corporation are rejected. Likewise, the revenue's appeals against Agra Development Trust, UP Awas Evam Vikas Parishad, Raeba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the revenue, they are to be treated as final. However, the reference to future application has to be understood in this context, which is that for the assessment years which this court was not called upon to decide, the concerned authorities will apply the law declared in the judgment, having regard to the facts of each such assessment year. In view of this discussion, no further clarification is necessary or called for. 5. Thus it is seen from the above judgment of the Hon ble Supreme Court in Miscellaneous Application, wherever the Revenue s appeals are dismissed, they are to be treated as Final. Respectfully following the same, we hereby dismiss the appeal filed by the Revenue. 6. In the result, the appeal filed by the Revenue in ITA No. 370/Ahd/2019 is hereby dismissed. ITA No. 221/Ahd/2019 for Assessee s appeal for A.Y. 2015-16 7. Now we take assessee appeal, the Grounds of Appeal filed by the Assessee in ITA No. 221/Ahd/2019 reads as under: 1. Ld. CIT (A) erred in law and on facts directing AO to verify compute the income of appellant as per guidelines narrated by him though holding the activities of assessee authority not covered by proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act is not justified. 8. At the outset the Ld. Senior Counsel Shri S.N. Soparkar appearing for the assessee submits that ground no. 1 is covered in favour of the assessee by the Hon ble Supreme Court judgment in assessee s own case reported in 449 ITR 1 (SC). Regarding Ground Nos. 2 to 6, the same are consequential and covered in favour of the assessee pursuant to the Supreme Court Judgment in assessee s own case (cited supra), hence the same are not pressed. Ld. D.R. could not dispute the above submission thus the Ground No. 1 is allowed in favour of the assessee and Ground Nos. 2 to 6 are dismissed as not pressed. 9. Regarding Ground No. 8, Ld. CIT(A) directed A.O. to verify and apply rate of depreciation on the basis of normal commercial principles and not as per section 32 of the I.T. Act. In this connection, Ld. Senior Counsel drawn our attention to the decision of the Cuttack Bench in the case of Paradip Port Trust Vs. Additional Commissioner of Income-tax reported in 20 taxmann.com 311 (Cuttack) wherein the Co-ordinate Bench of this Tribunal held that permanent way, wharves, roads and boundaries which were serving some special purpose of working of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peculiar situation has arisen in the present case towards the manner of computation of quantum of deficit eligible to be carried forward for set off in subsequent assessment years having regard to statutory permission towards 15% accumulation under s.11(1)(a)/11(1)(b) of the Act without any time limit. 8.2 To delineate on the issue, it may be pertinent to note that in order to be eligible for claiming exemption, it is essential that the income of the trust is applied for charitable objects. A charitable trust or institution is required to apply at least 85% of income derived from trust property towards charitable purposes. If the income spent on charitable or religious purposes during the previous year falls short of 85% of the income derived during the year, such shortfall may be subjected to tax in certain circumstances. Hence, a statutory obligation has been cast on beneficiary trusts to utilize at least 85% of the income derived from the trust property unless accumulated or set apart for application in subsequent years subject to certain stipulated conditions. Section 11(1)(a) (b) r.w.s. 11(2) of the Act however grants an entitlement to a charitable trust to retain or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars in accordance with law. 12. 2. Ld. Senior Counsel further relied upon Pune Bench decision in the case of Maharshi Karve Stree Shikshan Samstha Karvenagar Vs. ITO wherein it has been held as follows: IT: Exemption under section 11(1)(a) i.e... 15 per cent of income, is absolute exemption and application of section 11(2) does not extend to nullify said absolute exemption IT: Where in relevant assessment year application of income, is more than receipts of year, excess application of income i.e., expenditure in hands of assessee, can be carried forward to succeeding year 13. Respectfully following the above ratio of the decisions of the Coordinate Benches of the Tribunals, we hereby set aside the order passed by the Ld. CIT(A) and held that when application of income is more than receipts of year, excess application of income i.e., expenditure in the hands of the assessee can be carried forward to succeeding Year. Thus the ground no. 9 raised by the assessee is hereby allowed. 14. Regarding ground nos. 10 11 namely levy of interest u/s. 234B 234C and initiation of penalty proceedings which are consequential in nature and the same does not require any adj ..... X X X X Extracts X X X X X X X X Extracts X X X X
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