2015 (5) TMI 220 - HC - Income Tax

Court upholds exemption for trust's charges under Income Tax Act, dismisses revenue's appeal

The revenue's appeal challenging the Tribunal's order was dismissed by the Court. The Court held that the exemption claimed for 'Management Development ... Income under the head 'Management Development Programme and consultancy charges - whether exemption was not admissible because the requirement which is set out in sub-section (4A) of section 11 has not been satisfied? - ITAT allowed claim - Held that:- Letting out of halls for marriages, sale and advertisement rights has not been found to be a regular activity undertaken as a part of business. The educational institutions require funds. The income is generated from giving various halls and properties of the institution on rentals only on Saturdays and Sundays and on public holidays when they are not required for educational activities, then, this cannot be said to be a business which is not incidental to attain the objects of the trust. This being merely an incidental activity and the income derived from it is used for the educational institute and not for any particular person, separate books of account are also maintained, then, this income cannot be brought to tax. This conclusion is also not perverse and given the facts and circumstances which are undisputed. - Decided against revenue. Admissibility of depreciation - asset purchased by trust - itat allowed claim - Held that:- There is nothing like double deduction. When the assessee has acquired an asset from the income of the trust and thereafter the amount that is claimed is the depreciation on the use of the assets, such depreciation claim does not mean double deduction. The deduction earlier claimed is towards towards application of funds of the trust for acquiring assets. The latter is depreciation and it is permissible deduction considering the use of the assets. This has been clarified repeatedly by this Court. If any reference is required then the case of Commissioner of Income Tax V/s. Institution of Banking reported in (2003 (7) TMI 52 - BOMBAY High Court ) is enough. - Decided against revenue. Issues:1. Challenge to Tribunal's order by revenue.2. Admissibility of exemption claimed under 'Management Development Programme and consultancy charges.'3. Income from hiring premises and advertisement rights.4. Clarification on double deduction for depreciation on trust's assets.Analysis:1. The appeal filed by the revenue challenges the Tribunal's order dated October 5, 2012. The revenue argues that the questions formulated are substantial questions of law.2. Regarding the first issue, the revenue contends that the exemption claimed for 'Management Development Programme and consultancy charges' was not admissible as per section 11(4A) of the Income Tax Act, 1961. The revenue asserts that the trust failed to satisfy the requirements of this provision.3. However, the Tribunal found that the mentioned charges were part of an educational institute set up by the trust. The Tribunal concluded that the income generated was applied towards the institute's objectives, making the condition of section 11(4A) satisfied. Similarly, income from hiring premises and advertisement rights was deemed incidental to the trust's objectives, not constituting a separate business activity.4. Addressing the issue of double deduction for depreciation on trust assets, the Court clarified that depreciation does not amount to double deduction. The deduction for asset acquisition is distinct from depreciation claimed for asset use, as established in previous judgments. The Court held that even this issue does not raise a substantial question of law, dismissing the appeal for lacking merit.