TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 165
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.... amount to double deduction which is not permissible under the provisions of Income-tax Act. According to the Ld. counsel, depreciation is allowable while computing income under the head "business or profession". Referring to Section 11 of the Act, the Ld.counsel submitted that Section 11 provides for exemption of income of the trust on application. However, the income of the trust has to be computed on commercial principles. The Ld.counsel placed his reliance on various case laws to support the claim of depreciation, including some of the orders of this Tribunal. Placing reliance on the decision co-ordinate Bench of this Tribunal in ITO v. Sakthi Foundation in I.T.A. No.2219/Mds/2014 dated 12.12.2014, the Ld.counsel submitted that on identical set of facts, this Tribunal by following its own earlier order in CMS Educational & Charitable Trust in I.T.A. No.2261/Mds/2012 dated 17.04.2013, directed the Assessing Officer to allow depreciation. The Ld.counsel has also filed a list of various judgments and submitted that in all these cases, the claim of depreciation was allowed even though the income of the trust was allowed as exempted on its application. Therefore, at no stretch of im....
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....ct, the asset was used as a tool for carrying out object of the trust. Therefore, Section 32 of the Act is not applicable at all. Hence, the assessee is not eligible for depreciation under Section 32 of the Act. The Ld. D.R. placed his reliance on the decision of this Bench of the Tribunal in The Anjuman-E-Himayath-E-Islam v. ADIT(Exemption) in I.T.A. No. 2271/Mds/2014 dated 02.06.2015 and also the judgment of Kerala High Court in Lissie Medical Institution v. CIT (2012) 348 ITR 344. 6. We have considered the rival submissions on either side and perused the relevant material available on record. The issue arises for consideration is whether a charitable institution is eligible for depreciation in respect of its asset, which was used as a tool for carrying out its object. Depreciation is provided under Section 32 of the Act, which reads as follows:- "DEPRECIATION 32 (1) In respect of depreciation of-- (i) buildings, machinery, plant or furniture being tangible assets ; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, ....
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.... asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998, but before the 1st day of April, 1999, and is put to use before the 1st day of April, 1999, for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed. Explanation For the purposes of this proviso,-- (a) the expression "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi cab", "motor-cab", "tractor" and "road-roller" ; (b) the expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "roadroller" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988). Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this....
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....es or any other business or commercial rights of similar nature. Explanation 4.- For the purposes of this sub-section, the expression "know-how" means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oilwell or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto) ; Explanation 5.- For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income ; (iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : Provided thatwhere an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April....
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....tor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso (2) "sold" includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is 8an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act, of any asset by the banking company to the banking institution. (2) Where, in the assessment of the assessee, f....
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...."used for the purpose of business or profession". In view of the language employed by the Parliament, the asset used for the purpose of business or profession alone eligible for depreciation. The Income-tax Act does not provide for depreciation in respect of the asset other than the one which is used for business or profession. Therefore, it is for the assessee to establish that the assessee is carrying on any business or profession. In the case before us, the admitted case of the assessee is that the assessee is not carrying on any business or profession. Therefore, whatever be the nature of the asset, which was used as a tool for carrying out the object of the charitable institution, cannot be construed as an asset which is used for the business or profession of the assessee. Therefore, the assessee is not eligible for depreciation under Section 32 of the Income-tax Act. 8. The Ld.counsel for the assessee has also clarified that the assessee is not claiming depreciation under Section 32 of the Act. According to the Ld. counsel, the assessee is claiming depreciation on the commercial principle. On a query from the Bench what is meant by "commercial principle"?, he clarified that ....
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....nciple or customary principle of computation of income is contrary to the specific provision, namely, Section 32 of the Act. 10. The next question arises for consideration is when there is a conflict between customary practice, commercial principle and provisions of Section 32, which one will prevail? The obvious answer to this question is the statutory provision, namely, Section 32 of the Act will prevail over the customary practice and commercial principle. Therefore, even on customary practice or commercial principle whereby the assessee claims depreciation while computing the income, Section 32 of the Act is a specific provision under Income-tax Act, which is contrary to commercial principle or customary practice. Therefore, this Tribunal is of the considered opinion that Section 32 will prevail over the customary practice or commercial principle. Hence, the assessee is not eligible for depreciation in respect of building, plant, machinery, etc. which are not used for the purpose of business or profession. 11. Even assuming for argument sake that the assessee was doing business, then the assessee is not eligible for exemption under Section 11 of the Act and as rightly submitt....