2016 (5) TMI 1567 - AT - Income Tax

Trust's Tax Exemption & Depreciation Claim Upheld by ITAT

ITO (Exemptions), New Delhi Versus Indian Youth Centre Trust

ITO (Exemptions), New Delhi Versus Indian Youth Centre Trust - TMI Issues Involved:1. Exemption under Sections 11 & 12 of the Income Tax Act, 1961.2. Nature of activities of the trust under Section 2(15) of the Income Tax Act, 1961.3. Claim of depreciation on fixed assets previously claimed as application of income.4. Applicability of recent judicial precedents regarding depreciation claims.Issue-wise Detailed Analysis:1. Exemption under Sections 11 & 12 of the Income Tax Act, 1961:The Revenue challenged the CIT(A)’s decision to allow the benefit of exemption under Sections 11 & 12, contending that the activities of the trust did not fall within the purview of Section 2(15) of the Income Tax Act, 1961. The ITAT noted that the CIT(A) followed the ITAT's order from the previous assessment year, which was not disputed by the Revenue. The trust, registered under Section 12A since 1973, continued to pursue its main objective of establishing and maintaining youth centers, sponsoring youth programs, and facilitating interactions among youth leaders. The AO's disallowance based on the trust's activities being of 'general utility' was reversed by the CIT(A), which the ITAT upheld, finding no change in facts or circumstances from previous years.2. Nature of Activities of the Trust under Section 2(15) of the Income Tax Act, 1961:The AO argued that the trust's activities, including running a hostel, canteen, and renting out auditoriums, were commercial in nature. The AO's conclusion was based on an Inspector's report indicating that the trust's facilities were open to the general public without membership restrictions. The CIT(A) and ITAT found that the trust's activities were consistent with its charitable objectives, and any incidental commercial activities were within permissible limits. The ITAT emphasized that the trust's primary purpose was charitable, focusing on youth welfare and leadership development, and upheld the CIT(A)'s decision to allow the exemption under Sections 11 & 12.3. Claim of Depreciation on Fixed Assets Previously Claimed as Application of Income:The Revenue contended that the CIT(A) erred in allowing the claim of depreciation on fixed assets that had been claimed as application of income in earlier years. The ITAT referred to the CIT(A)'s reliance on judicial precedents, including the Delhi High Court's decision in DIT vs. Vishwa Jagriti Mission, which held that depreciation on assets used for charitable purposes should be allowed as a deduction. The ITAT found no distinction in facts or contrary decisions presented by the Revenue and upheld the CIT(A)'s decision to allow the depreciation claim.4. Applicability of Recent Judicial Precedents Regarding Depreciation Claims:The Revenue cited the Delhi High Court's judgment in Charanjiv Charitable Trust vs. DIT(E) to argue against the depreciation claim. However, the ITAT noted that this judgment had been overruled by the Delhi High Court in DIT(E) vs. Indraprastha Cancer Society, which reaffirmed the allowance of depreciation on assets used for charitable purposes. The ITAT concluded that the CIT(A) correctly applied the prevailing judicial precedents and dismissed the Revenue's grounds related to the depreciation claim.Conclusion:The ITAT upheld the CIT(A)'s order, allowing the trust's exemption under Sections 11 & 12 and the claim for depreciation on fixed assets. The ITAT found that the trust's activities were charitable and aligned with its objectives, and any incidental commercial activities did not negate its charitable status. The ITAT dismissed the Revenue's appeal, affirming the CIT(A)'s reliance on established judicial precedents.