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TMI Blog2025 (3) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in law and facts in deleting the depreciation of Rs. 1,69,33,620/- made by the AO while capital expenditure on fixed assets have been allowed in respective years. 3. The brief facts of the case are that the assessee is an authority, notified under by the Government of Uttar Pradesh u/s. 4 of Uttar Pradesh Urban Planning (Development and Registration) Act 1973 meant to promote and secure the development of the development area according to plan and for that purpose the Authority shall have the power to acquire, hold manage and dispose of land and other property, to carry out building, engineering mining and other operation, to execute works in connection with supply of water and electricity, to dispose of sewage and to provide and maintain other services and amenities and generally to do anything necessary or expedient for purpose of such development and for purpose incidental thereto. The assessee enjoyed exemption u/s. 10 (20A) of the Act, upto the Assessment year 2002-03, since w.e.f. 01.04.2023, the aforesaid provision got omitted from the statute resulting in the taxability of its income from thereon. 4. The assessee has filed return of income on 30-09-2013 declaring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation Poona Civil Appeal No. 7186/2014 dated the Hon'ble High Court held that the amendment of section 11(6) of the Act is prospective and therefore applicable from A.Y. 2015-16. Ld counsel for assessee prayed that the appeal be dismissed. Reliance have placed on the following decisions: (i) ACIT, Circle -2(2) (1) vs M/s Firozabad Shikohabad Development Authority ITA no. 270/Agra/2016 dated 25-01-2018 (ii) ITO vs. Saharanpur Development Authority ITA No. 4113/Del/2017 dated 24-03-2021 (iii) Commissioner of Income Tax -1 Lucknow v. Lucknow Development Authority, Gomti Nagar [2013] 38 taxmann.com 246 (Allahabad) (iv) Ld CIT(A) has observed in his order as under: "After considering the matter from all angles, it is clear that the Hon'ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers Association (supra) held that what is important is whether the predominant object of the activity involved in carrying out the object of general public utility or is to subserve the charitable purpose or to earn profit. It is not required that the activity must be carried on in such a manner that it does not result in any profit. If the profits are earned then they must nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es as under: "If in the opinion of State Government, any land is required for the purpose of development or for any other purposes under this Act, the State Government may acquire such land under the provisions of Land Acquisition Act, 1894." It is clear that as per clause 4 of Land Acquisition Act, the land could be acquired only for public purposes. Section 57 of the said Act also provides that Authorities could make its bye-laws with the approval of the State Government. Section 58 provides that in case of dissolution of the Authority, all the properties, funds and dues which are vested in or realizable by the Authority, shall vest in or to be realizable by the State Government. Various sections of the said Act make it abundantly clear that the activities of the Authorities were aimed at public purposes and not personal one. I, therefore, have no hesitation in holding that the activities of the assessee are charitable in nature and are for advancement of general public utility. It is therefore clear that KDA fully qualifies the test laid down by the apex court and the jurisdictional high court in as much as there is obligation that the properties of the authority will be utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded in the assessment order has been wrongly drafted without application of mind. The correct position behind the logic taken by the assessing officer should have been as follows as is demonstrated in the redrafted chart: Head of Receipts Gross amount under each head or total receipts Credited directly to Balance sheet as infrastructure fund in accordance with GO Credited to income and expenditure account in accordance with GO Conversion of land use 1,17,44,258.00 1,05,69,832.20 11,74,425.80 Betterment and registration 1,63,06,390.00 1,46,75,751.00 16,30,639.00 Compounding Fee 5,25,66,441.00 2,62,83,220.50 2,62,83,220.50 Income from Stamp duty 21,59,42,368.00 19,43,48,131.20 2,15,94,236.80 Developed Fee 49,24,40,032.00 44,31,96,028.75 4,92,44.003.025 Total 81,06,86,749.00 70,85,91,497.59.00 10,20,95,251.49 On comparison of both the charts it will be noted that besides the components of Infrastructure fund having been wrongly identified in the assessment order even the TOTALS of the columns were wrong. Only on this basis of this patent mistake the impugned assessment order needs to be set aside and the addition deleted. Regarding this addition on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions made in paras herein fore; and b) irrespective of firstly, the receipts in question never belonged to the appellant as the same stood diverted at source thereof, therefore decision of Delhi Bench of Hon'ble ITAT in case of Saharanpur Development as has been discussed in para herein forth is squarely applicable. Decision: I have perused the facts of the case, contention of AO and submissions made by the appellant. AO has made the addition by a very cryptic and non-speaking order without mentioning anything about the issue involved, facts of the matter or any legal and accounting provision under which the same has been added. Appellant has tried to bring to my knowledge the inference drawn from the assessment order, pointing the para that might be relevant for the basis of this addition. A perusal of the para shows that AO has in fact calculated sum in every column, incorrectly. In fact if it is presumed that the table made by AO is correct then appellant has in fact credited more in P&L Account and not less. Secondly even if it is to be held that the accretion to his fund namely Infrastructure fund received can be added to the income of the assessee then also the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n added at the time of framing the assessment order so that the disputed high pitched demand would have been reduced. Decision: The A.O has denied the claim of depreciation holding that assessee is enjoying exemption u/s 11 since inception and the assets was created out of exempt Income and thus claiming depreciation on such assets which was acquired from exempted income is amount to double deduction. Claim made for depreciation is for use of the assets while claim of capital outgo as an application is on a different footing, just because capital expenditure was considered as application of income, it could not be said that the assessee would not be entitle to claim of depreciation thereon. The Hon'ble High Court Calcutta Bench in the case of CIT vs. Siliguri Regulated Market Committee has also held that prior to 1-4-2015 depreciation was to be allowed on assets acquired by the trust even though cost of same has already been treated as application of income for charitable purpose. The Hon'ble ITAT, Lucknow Bench in the case of Assistant Commissioner of Income-tax v. Saraswati Gyan Mandir Shiksha Sansthan reported in [2014] 50 taxmann.com 203 (Lucknow -Trib.) held that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in the case of Commissioner of Income-tax v. Institute of Banking Personnel Selection (IBPS) reported in [2003] 131 ΤΑΧΜΑΝ 386 (BOM.) has held that in the case of a Charitable Trust, there Income and thus claiming depreciation on such assets which was acquired from exempted income is amount to double deduction. Claim made for depreciation is for use of the assets while claim of capital outgo as an application is on a different footing, just because capital expenditure was considered as application of income, it could not be said that the assessee would not be entitle to claim of depreciation thereon. The Hon'ble High Court Calcutta Bench In the case of CIT vs. Siliguri Regulated Market Committee has also held that prior to 1-4-2015 depreciation was to be allowed on assets acquired by the trust even though cost of same has already been treated as application of income for charitable purpose. The Hon'ble ITAT, Lucknow Bench in the case of Assistant Commissioner of Income-tax v. Saraswati Gyan Mandir Shiksha Sansthan reported in [2014] 50 taxmann.com 203 (Lucknow Trib.) held that allowing exemption under s. 11 is not equal to allowing ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Banking Personnel Selection (IBPS) reported in [2003] 131 ΤΑΧΜΑΝ 386 (BOM.) has held that in the case of a Charitable Trust, there was no provision for carry forward of the excess of expenditure of earlier years to be adjusted against income of subsequent years. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the Trust for charitable and religious purposes in the earlier years against the Income earned by the Trust in the subsequent year will have to be regarded as application of income of the Trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in section 11 of the Act and that such adjustment will have to be excluded from the income of the Trust under section 11(1)(a) of the Act. The amended provision of section 11(6) of the I.T Act, which has been inserted w.e.f 1-4-2015 which is explanatory and clarificatory in nature. The provision is applicable from A.Y 2015-16 onwards. Respectfully fallowing the above decisions, I am of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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