TaxTMI 
TaxTMI 
2014 (2) TMI 988
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....o charitable purpose of Rs.2,55,04,326/- as expenditure. Assessee claimed depreciation of Rs.7,29,036/- inter alia, in the computation of income-expenditure statement. 3. Before the CIT(A), the assessee contended that assessee has not made any double claim and relied on the decision of the ITAT in assessee's own case for the assessment years 2003-04 and 2007-08 wherein the depreciation was allowed. However, the learned CIT(A) noticed that the Hon'ble ITAT in a later case of ACIT vs. Sri Venkata Sai Educational Society and others vide ITA.No.1440/Hyd/2011 dated 09.04.2012) held that where the entire cost of the asset stands allowed by way of application of income under section 11(1), depreciation claimed by the assessee under section 32(1) is not allowable. Relying on the above decision, the learned CIT(A) dismissed the assessee's appeal. Assessee is aggrieved by the order of the CIT(A) and filed appeal raising following grounds : "1. The order of the learned CIT(A)-IV, Hyderabad dated 22.08.2013 is against law and facts of the case. 2. The learned CIT(A) ought to have appreciated that there were no reasons to believe that income got escaped the assessment and consequently,....
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....nt of the Hon'ble Kerala High Court in the case of Lissie Medical Institutions vs. CIT (2012) 348 ITR 344 (Kerala). It was the submission that having claimed the entire cost of the asset as an application of income, question of allowing depreciation on the same asset does not apply, in view of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. vs. Union of India (1993) 199 ITR 43 (SC). 7. We have considered the rival submissions and examined the issue. There is no dispute with regard to the fact that the assessee is registered under section 12AA of the I.T. Act. There is also no dispute that assessee has shown all the receipts in income-expenditure account and claimed various expenses in its computation of income, while declaring excess of income over expenditure. It is also not in dispute that income of the assessee trust has to be computed with reference to the provisions of section 11 and 13. Therefore, the principles governing computation of income under the head 'Business' may not apply to the computation of income under the above provisions, since the income of a charitable institution has to be computed under ordinary principles of commercial accounting....
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.... the purpose of section 11 it is an outgoing expenditure which is application of income of the appellant trust for charitable purpose. The appellant shall also be entitled to claim depreciation on the school building". 11. This decision was followed in the case of CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 by the Hon'ble Punjab & Haryana High Court. 12. This issue has elaborately been discussed by the Hon'ble Delhi High Court in the case of DIT vs. Vishwa Jagriti Mission in ITA.No. 140/2012 dated 29.03.2012 and took a over view of the existing decisions on the issue while holding as under : "11. The revenue is in appeal against the aforesaid order of the Tribunal. We are not inclined to admit the appeal and frame any substantial question of law since none arises from the order of the Tribunal. There is no dispute that the assessee has been granted registration under Section 12AA vide order dated 11th September, 2009 and, therefore, it was entitled to exemption of its income under Section 11. The only question is whether the income of the assessee should be computed on commercial principles and in doing so whether depreciation on fixed assets utilised for the cha....
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....sioner of Income-tax. v. Nizam's Suppl. Religious Endowment Trust (1981) 127 ITR 378 and by the Madras High Court in Commissioner Of Income-Tax vs Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485. The Madhya Pradesh High Court in CIT vs. Raipur Pallottine Society (supra) has held, following the judgment of the Karnataka High court cited above, that in computing the income of a charitable institution/trust, depreciation of assets owned by the trust/institution is a necessary deduction on commercial principles. The Gujarat High Court, after referring to the judgments of the Karnataka, Maharashtra and Madhya Pradesh High Courts cited above, also came to the same conclusion and held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. 13. The judgment of the Supreme Court in Escorts Limited Vs. Union of India (supra) has been rightly held to be inapplicable to the present case. There are two reasons as to why the judgment cannot be applied to the present case. Firstly, the Supreme Court was not concerned with the case of a charita....
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....alore vs. Cutchi Memon Union (2013) 38 Taxman.com 276 (Bangalore- Trib.) wherein also similar opinion was expressed. 14. Thus, on this issue, there are decisions of Hon'ble Gujarat High Court, Madhya Pradesh High Court, Kerala High Court, Bombay High Court, Punjab and Haryana High Court and Delhi High Court in favour of the assessee, whereas, there is only a lone judgment of Hon'ble Kerala High Court against the above opinion confirming the Revenue's contention. In view of the majority opinion of various High Courts, we are of the opinion that amount of depreciation debited to the account of charitable institution has to be allowed in order to arrive at the income available for application to the charitable purpose. 15. Since the Hon'ble Delhi High Court in the case of DIT vs. Vishwa Jagruti Mission (supra) has distinguished various judgments on the issue, we do not intend to discuss the same again. However, we respectfully agree with the principles laid down by the Hon'ble Delhi High Court, which were in favour of the assessee allowing the claim of depreciation. 16. This issue can also be looked into in an other manner. Not only the Board Circular 5-P (LXX-6) of 1968 date....