Company Granted Tax Exemption & Depreciation Claim Allowed on Appeal

The Tribunal granted exemption under section 11 of the Income Tax Act to the assessee, a company registered under section 25 of the Companies Act, allowing the appeal. The Tribunal also allowed the depreciation claim that had been disallowed by the lower authorities, setting aside their orders.

---

---

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Denial of exemption under section 11 of the Income Tax Act.
3. Disallowance of depreciation claim.

Condonation of Delay:
The appeal was filed with a delay of 212 days. The petitioner explained that the delay was due to changes in the office of the General Secretary and the auditor, as well as the board members' limited exposure to income tax procedures. The Departmental Representative did not object, and the delay was condoned, allowing the appeal to be admitted.

Denial of Exemption Under Section 11:
The assessee, a company registered under section 25 of the Companies Act, 1956, claimed exemption under section 11 of the Income Tax Act based on its registration under section 12A(a). The Assessing Officer denied the exemption, concluding that the majority of the assessee's activities were of general public utility, specifically publishing and selling literature, including religious and non-religious books. The Assessing Officer also noted that the assessee had amended its object clause without prior approval, which was against the law as per various judicial precedents. Additionally, the audited accounts did not incorporate the results of the Cochin and Trivandrum branches, leading to incomplete disclosure of assets and liabilities.

The Commissioner of Income Tax (Appeals) upheld the denial, stating that selling Christian literature was not a charitable or religious activity and was covered under the residual clause of "advancement of any other object of general public utility" as per section 2(15) of the Act. The Commissioner also upheld the non-incorporation of branch accounts and the amendments to the object clause without prior approval.

Upon appeal, it was argued that the assessee's main activity was religious, focusing on publishing and distributing Christian literature. The Tribunal found that the sale of non-religious books was incidental to the primary religious activity. Citing the Andhra Pradesh High Court judgment in Arsha Vijinanna Trust, the Tribunal held that publishing and distributing religious books is a religious activity. Therefore, the assessee's activities were religious, and section 2(15) did not apply. The Tribunal also noted that as a company under section 25 of the Companies Act, the assessee was not a trust and could amend its objects as per the Companies Act. The Tribunal concluded that the non-incorporation of branch accounts was not willful and had been accepted in earlier years.

Disallowance of Depreciation Claim:
The Assessing Officer disallowed the depreciation claim on assets whose cost was already allowed as application of income, relying on the Supreme Court judgment in Escorts Ltd. The Commissioner of Income Tax (Appeals) upheld this disallowance, citing the Delhi High Court judgment in Charanjiv Charitable Trust.

The Tribunal, however, noted conflicting judgments from various High Courts on this issue. It decided in favor of the assessee, allowing the depreciation claim, as there was no jurisdictional High Court ruling directly on this aspect.

Conclusion:
The Tribunal set aside the orders of the lower authorities, granted the exemption under section 11, and allowed the depreciation claim, thereby allowing the appeal of the assessee.

---