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TMI Blog2015 (6) TMI 1272X X X X Extracts X X X X X X X X Extracts X X X X ..... not entitled to the benefit of Section-11 of the Act and the rental income from the community hall is assessable under the head 'income from business' amounting to Rs. 1,18,09,107/-. Grounds raised in Revenue's Appeal 2.2. The Revenue has raised six elaborate grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had erred in allowing the claim of depreciation as deduction because the cost of the asset was earlier allowed as application of income for the purpose of Section-11 of the Act and therefore, once again allowing the claim of depreciation would amount to double deduction. 3. The brief facts of the case are that the assessee is a charitable trust registered u/s. 12A of the Act, filed its return of income for the assessment year 2010-11 on 28.09.2010 declaring taxable income as NIL. The case was taken up for scrutiny and assessment was completed U/s. 143(3) of the Act on 15.03.2013 wherein the Ld. Assessing Officer disallowed the claim of depreciation amounting to Rs. 10,16,21,019/- because the cost of asset was already allowed as application of income and the claim of depreciation would amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unning community hall is also hit by S.11 (4A) of the Act. (e) The aggregate receipts exceed Rs. 10 lakhs for the year under consideration thereby attracting the proviso to S-2(15) of the Act." 4.2. On appeal, the Ld. CIT(A) upheld the order of the Ld. Assessing Officer by observing as under:-- "11. I have gone the submissions made by the appellant and also the order of the A.O. The assessee's principal activity is providing education through their various Educational Institutions and medical relief through their Hospitals. As per the submissions made by the Authorized representative, the Community Hall was to provide Public Amenity for the general public and promote Indian Custom, Culture, Heritage, Traditions without intentions of earning profits as per the objects of the Trust. The A.R denied that there is any commercial activity carried on continuously and systematically in using the community Hall by a person by application of material, labour or skill with a view to earn profits to fall within the meaning of 'Business'. The character of the rental receipts are only to be considered under 'income from house property'. 12. As seen from the Income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 245 ITR 242(Mad.) wherein it was held that as the objects of the assessee were education and other objects of general utility, the letting out of the Kalayana Mandapam was not one of the objects of the assessee, but an activity carried on to fulfill the objects of the trust. The income derived from the Sabha was not its business income, but its property income. Hence, the provisions of section 13(1)(bb) of the income-tax Act, 1961, were not applicable to the facts of the assessee. The assessee was entitled to exemption U/s. 11 of the Act. Ld. D.R argued in support of the order of the Revenue. 4.4. We have heard both the parties and carefully perused the materials available on record. From the facts of the case it is apparent that the assessee trust's multiple activities are to provide relief to the poor, medical relief, providing education and for advancement of any other object of general public utility. Section 2(15) of the Act has undergone drastic change by the Finance Act 2008 with effect from 1/4/2009. Prior to that Section 2(15) of the Act stood as follows. "Section-2(15): Charitable purpose includes relief of the poor, education, medical relief and the adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2010 relevant to the assessment year 2010-11, we find that the assessee has receipts from the following activities:-- Sl.no name of the unit activity gross receipts(Rs.) 1 Sri Ramakrishna hospital medical services Medical service 481538825.44 2 Community hall trust A/c Business 53297183.43 3 Sri Ramakrishna Children's school cbe Education 13625956.68 4 Sri Ramakrishna Children's school V.M. Palayam Education 8233061.00 5 Sri Ramakrishna Engineering collage Education 181057247.84 6 Sri Ramakrishna Arts & Science Collage for Women Education 36543017.36 7 S.N.R.Son's collage Education 70485488.68 8 Sri Ramakrishna Institute of Paramedical Science Medical service 62896870.80 9 Sri Ramakrishna Dental collage and hospital Medical service 67729113.94 10 Sri Ramakrishna Polytechnic Education 43711158.49 11 Sri Ramakrishna Institute technology Education 110273682.00 12 Sri Ramakrishna Pharmacy Medical science 192177279.89 13 Sri Ramakrishna advance traning institute - 905561.00 1322523946.55 The Ld. Assessing Officer has categorized the receipt from community hall as business activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his order:-- "Section. 11(4) For the purposes of this section "property held under trust" includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the [Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of the Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes." In the case Gujarat Industrial Corporation v. ACIT in 129 ITD 73 (2010) Ahmedabad it has held that the word "includes" occurring at section 11(4) means that there is a reference of property or business of a trust which is a business undertaking in addition to the other properties of the trust. In this given case before us, the community hall or marriage hall whatever may be called is the asset of the separate business of the assessee which falls apart from the other charitable activities conducted by the assessee. Therefore considering the facts and circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 down in this Act". It would accordingly be incorrect to assign to the word "income" used in section 11(1)(a), the same meaning as has been specifically assigned to the expression "total income" vide section 2(45). 3. In the case of a business undertaking held under trust, its "income" will be the income as shown in the accounts of the undertaking. Under section 11(4), any income of the business undertaking determined by the Income-tax Officer in accordance with the provisions of the Act, which is in excess of the income as shown in its accounts, is to be deemed to have been applied to purposes other than charitable or religious, and hence it will be charged to tax under sub-section (3). As only the income disclosed by the account will be eligible for exemption under section 11(1), the permitted accumulation of 25 per cent will also be calculated with reference to this income. 4. Where the trust derives inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the real income and not the income as assessed or assessable. Respectfully following the decision of the Hon'ble Kerala High Court and taking cue from the decision of the Hon'ble Calcutta High Court, we do not find any hesitation to confirm the order of the Ld. CIT(A) and also the views expressed by him in his order. Accordingly this appeal is held in favour of the Revenue."
5.2. Since we held the issue in favour of the Revenue on the earlier occasion, we hereby hold that the cost of the asset which was already allowed as application of income for the purpose of Section-11(1)(a) of the Act, the benefit of depreciation on the same asset cannot be claimed while computing the exempt income of the trust U/s. 11 of the Act. However, we make it clear that in the case where the benefit of Section-11 is withdrawn, the assessee would be entitled to claim depreciation while computing the income under the head 'income from business' as per Chapter IV-D of the Act. It is ordered accordingly.
6. In the result, the appeal of the assessee is dismissed and the appeal of the Revenue is allowed.
Order pronounced on 12th June, 2015 at Chennai. X X X X Extracts X X X X X X X X Extracts X X X X
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