2018 (3) TMI 1520 - AT - Income Tax

Tribunal Allows Appeal on Income Accumulation & Depreciation, Emphasizes Precedents

M/s. Rams Education Foundation Versus The Income Tax Officer (Exemptions), Ward 2, Bangalore And Vice-Versa

M/s. Rams Education Foundation Versus The Income Tax Officer (Exemptions), Ward 2, Bangalore And Vice-Versa - TMI Issues Involved:1. Computation of accumulation of income under Section 11(1)(a) of the Income-tax Act.2. Allowance of depreciation on assets for which the cost has already been allowed as application of income in earlier years.Issue-wise Detailed Analysis:1. Computation of Accumulation of Income under Section 11(1)(a):The primary issue raised by the assessee was whether the accumulation of income of 15% under Section 11(1)(a) of the Income-tax Act should be computed on the gross receipts or the net receipts after deducting the expenditure incurred for charitable purposes. The Tribunal noted that this issue was already covered by the order in the case of Jyothi Charitable Trust v. DCIT, where it was held that the net receipts should be considered for computing the accumulation of income. The Tribunal referenced the Special Bench decision in Bai Sonabai Hirji Agiary Trust Vs. ITO, which supported the view that the accumulation should be based on the gross receipts. The Tribunal concluded that the CIT(A) did not provide specific reasons for not following the established precedent and directed the AO to consider the net receipt for the purpose of computation.2. Allowance of Depreciation on Assets:The revenue's appeal challenged the CIT(A)'s decision to allow depreciation on assets, arguing that it amounted to double deduction since the cost of the assets had already been allowed as application of income in earlier years. The Tribunal examined the orders and judgments, including the Hon'ble Kerala High Court's decision in Lissie Medical Institutions Vs. CIT and the Hon'ble Supreme Court's decision in Escorts Ltd. & another Vs. Union of India. The Tribunal noted that the issue was covered by the jurisdictional High Court's judgment in the case of Society of Sisters of St. Anne, which allowed depreciation to preserve the corpus of the trust. The Tribunal also considered the financial statements of the assessee, which showed no corpus donation during the year, thus justifying the allowance of the entire depreciation claim. Consequently, the Tribunal found no infirmity in the CIT(A)'s order and confirmed it.Conclusion:The Tribunal allowed the assessee's appeal regarding the computation of accumulation of income under Section 11(1)(a) and dismissed the revenue's appeal concerning the allowance of depreciation on assets. The judgment reinforced the principle that established precedents and jurisdictional High Court decisions should be followed unless specific reasons are provided for deviation.