TaxTMI 
TaxTMI 
2012 (4) TMI 115
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.... Act for short), and is running a hospital. In the course of running the hospital, the appellant acquires medical equipments such as x-ray units, scanning machines etc., which were purchased with the surplus funds available. The entire expenditure incurred for acquisition of capital assets is treated as application of income for charitable purposes under Section 11(1)(a) of the Act. When capital expenditure is treated as application of income for charitable purposes, the appellant virtually enjoys a 100% write off of the cost of assets. However, since medical service is a business activity held in Trust, the appellant claimed all the benefits under the Act including depreciation in the computation of net income. In the course of assessment ....
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....he assessee claims depreciation on the value of such assets, then in order to reflect the true income to be available for application for charitable purposes, the assessee should write back in the accounts the depreciation amount to form part of the income to be accounted for application for charitable purposes. This is obviously not done by the assessee and so much so, the income which should be available for application for charitable purposes gets reduced by the depreciation amount, which is not permissible under Section 11(1)(a) of the Act. In fact the net effect is that after writing off full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claims the....
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....red by the Supreme Court on merits on this issue, even though one of the SLPs filed by the Department against one of the above decisions was dismissed by the Supreme Court. No amendment is seen made to the statute requiring the Trust claiming depreciation to write back the depreciation as income of previous year, if payment for acquisition of assets is treated as application of income for charitable purposes. 5. It is settled position through several decisions of High Courts and Supreme Courts that when business is held in trust by charitable institutions income from business has to be computed by granting deductions provided u/s 30 to 43D as provided under S.29 of the Income Tax Act. 6. Senior counsel Sri.A.K.J.Nambiar ....
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....any of these decisions. We, therefore, sought the views from the Central Board of Direct Taxes. Senior Standing counsel Sri.P.K.R.Menon, appearing for the Revenue produced clarification obtained from the Central Board wherein they have stated as follows: "The Central Board of Direct Taxes is of the considered view that where an assessee has acquired an asset through application of income and has also claimed this amount as expenditure in its income expenditure account, depreciation on such asset would not be allowable to the assessee. Such notional statutory deductions like depreciation, if claimed as deduction while computing the income of the 'the property held under trust' under the relevant head of income, is required to be added bac....