TaxTMI 
TaxTMI 
2013 (6) TMI 733
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....hat assessee, while computing its exemption of income under Section 11 of the Act, had considered depreciation on assets also as an application of income. Assessing Officer had not allowed such claim, relying on the decision of Hon'ble Apex Court in the case of Escorts Ltd. v. Union of India (199 ITR 43). 3. Assessee's appeal before CIT(Appeals) was successful. According to him, Tribunal, in the case of Coimbatore Stock Exchange Ltd., for assessment years 2005-06 and 2006-07 in I.T.A. Nos. 1086 & 1087/Mds/2010, had held that such a claim could be allowed. 4. Now before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that the decision of co-ordinate Bench of this Tribunal for the earlier years, had not bee....
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....so, for a reason that by making such an allowance, a charitable institution got a permission to generate income outside the books. As against this, Hon'ble P&H High Court in the decisions of Market Committee, Pipli(supra) and of M/s.Tiny Tots Education Society (supra) had held clearly in favour of the assessee that depreciation was allowable as utilization for the purpose of computing exempt income under sections 11 & 12 of the Act. Decisions relied on by the Assessing Officer for disallowing the claim of the assessee were all considered by Hon'ble P&H High Court in the above case. In fact, this issue had come up before the Tribunal in the case of G.K.R. Charities Vs.DDIT(E) (supra) where it was held as under:- "7. After considering the ....
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.... of the fact that the concept of commercial income necessarily envisages deduction of depreciation on assets of the Trust. Even reasonable depreciation on assets and interest on Sinking Fund or Repairs Reserve are to be deducted as held by the Mumbai Bench of this Tribunal in Balkan-Ji-Bari (1979) 2 Taxman 377(Bom.). Hon'ble Bombay High Court had rejected a reference application of the Revenue in the case of CIT v. Framjee Cawasjee Institute (1993) 109 CTR 463, holding that the answer to the question whether depreciation was allowable to a charitable Trust was self-evident, even if the capital value of the assets on which depreciation was claimed had been allowed as a deduction under Section 11, as an application of income for religious....
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....or charitable purpose. Capital expense is application of the income so determined. So there is no double deduction or double claim of the same amount as application. Thus depreciation is to be deducted to arrive at income and it is not application of income. No doubt, Department has relied on the decision of the Supreme Court in the case of Escorts Ltd. (supra). However, in this case the issue before Hon'ble Supreme Court was that whether both depreciation under Section 32 and capital expenditure on scientific research under Section 35(1)(iv) can be claimed as deduction. Reference to this decision cannot be drawn as in the case of Escorts (supra) both were deductions under the head 'business income' whereas in case of a charitable Trust....