TaxTMI 
TaxTMI 
2016 (3) TMI 462
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....) of the Act. The question herein revolves around Section 11 of the Act. For the purpose of narrating the facts, we are considering ITA No.62/2010. The assessments for the assessment year 2005-06 were concluded under Section 144 of the Act denying exemption under Section 10(23) of the Act. The addition of income was made on account of disallowance of depreciation by the Assessing Officer. 4. Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), Bangalore. The CIT(A) after calling for the remand report from the Assessing Officer, allowed the appeal on merits and deleted all the additions made by the Assessing Officer. 5. Aggrieved by the same, revenue preferred appeal before the Tribunal. The Tribunal after hearing the parties, dismissed the appeal of the revenue. 6. Being aggrieved by the said order of the Tribunal, the revenue is in appeal. 7. Similarly, in ITA Nos. 233-234/2013, ITA No. 1/2013, ITA No. 433/2013, ITA No. 414/2010, on the assessment orders denying exemption under Section 11 read with Section 10(23c) of the Act and making an addition of income on account of disallowance of depreciation, the assessee preferred ....
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....rted by the Finance Act No.2, Act 14 with effect from 01.04.2015 to contend that the said amendment applies retrospectively being clarificatory in nature. Learned counsel for the revenue placed reliance on the following Judgments: (1) [A] COMMISSIONER OF INCOME TAX vs. SOCIETY OF THE SISTERS OF ST. ANNE ((1984) CTR 9) (2) LISSIE MEDICAL INSTITUTIONS vs. COMMISSIONER OF INCOME TAX ((2012) 348 ITR 0344) (3) ESCORTS LTD. vs. UNION OF INDIA ((1993 SC ITR Vol. 199) 12. On the other hand, learned counsel appearing for the assessee Sri. A. Shankar would contend that Chapter - III of the Act and Chapter - IV of the Act play in different fields. Sections 11 to 13(B) covered under Chapter - III of the Act, governs the manner of computation of total income and exemption by Charitable Trusts. Sections 14 to 59 governed by Chapter - IV of the Act deals with the income under the five heads of income enumerated under Section 14. The exemption entitlement under Section 11 of the Act is based on application of income and 'permissible accumulations' and the 'balance of income', if any, is treated as income which is not applied for objects of the Trust an....
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....siness or profession". Net receipt after deducting all the necessary expenditure of the trust (sic). 10. There is a broad agreement on this proposition. But still the contention for the Revenue is that the depreciation allowance being a notional income (expenditure ?) cannot be allowed to be debited to the expenditure account of the trust. This contention appears to proceed on the assumption that the expenditure should necessarily involve actual delivery of or parting with the money. It seems to us that it need not necessarily be so. The expenditure should be understood as necessary outgoings. The depreciation is nothing but decrease in value of property through wear, deterioration or obsolescence and allowance is made for this purpose in book keeping, accountancy, etc. In Spicer & Pegler's Book-keeping and Accounts, 17th Edn., pp. 44, 45 & 46, it has been noted as follows : "Depreciation is the exhaustion of the effective life of a fixed asset owing to 'use' or obsolescence. It may be computed as that part of the cost of the asset which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to sprea....
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.... on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income Tax Act. The court rejected the argument on behalf of the revenue that section 32 of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof ....
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....an emphatic 'no' and that the purpose of the words above referred to is totally different. If, as contended for by the assessees, there can be no objection in principle to allowances being made under both the provisions as their nature and purpose are different, then the interdict disallowing a double deduction will be meaningless even in respect of the previous years for which deduction is allowed under S.10(2) (xiv) /S.35 in respect of the same asset. If that were the correct principle, The assessee should logically be entitled to deduction by way of depreciation for all previous years including those for which allowance have been granted under the provision relating to scientific research. The statute does not permit this. The restriction imposed would, therefore, be illogical and unjustified on the basis suggested by the assessees. On the other hand, if we accept the principle we have outlined earlier viz. that, there is a basic legislative scheme, unspoken but clearly underlying the Act, that two allowances cannot be, and are not intended to be, granted in respect of the same asset or expenditure, one will easily see the necessity for the limitation imposed by the quot....
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.... to amend section 11 of the Income-tax Act relating Income from property held for charitable or religious purposes. The existing provisions of the aforesaid section contain a primary condition that for grant of exemption in respect of income derived from property held under trust, such income should be applied for the charitable purposes in India, and where such income cannot be so applied during the previous year, it has to be accumulated in the prescribed modes. It is proposed to insert sub-sections (6) and (7) in the said section so as to provide that- (i) where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without, any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in any previous year, and (ii) where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before is amendment by the Finance (No.2) Act, 1996] and the said registra....
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....Association, the doctrine of fairness was held to be relevant factor to construe a statute conferring a benefit, in the context of it to be given a retrospective operation. The same doctrine of fairness, to hold that a statute was retrospective in nature, was applied in the case of Vijay v. State of Maharashtra. It was held that where a law is enacted for the benefit of community as a whole, even in the absence of a provision the statute may be held to be retrospective in nature. However, we are confronted with any such situation here. 34. In such cases, retrospectively is attached to benefit the persons in contradistinction to the provision imposing some burden or liability where the presumption attaches towards prospectivity. In the instant case, the proviso added to Section 113 of the Act is not beneficial to the assessee. On the contrary, it is a provision which is onerous to the assessee. Therefore, in a case like this, we have to proceed with the normal rule of presumption against retrospective operation. Thus, the rule against retrospective operation is a fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a const....