TaxTMI 
TaxTMI 
2016 (6) TMI 1181
X X X X Extracts X X X X
X X X X Extracts X X X X
....decision of the Hon'ble Bombay High Court in the case of Institute of Banking, decision of the Co-ordinate Bench of the Tribunal in the assessee's own case in ITA No.486 to 491 (BANG)/2009 dated: 16.02.2010 for the A.Ys. 2001-02 to 2006-07, decision of the Hon'ble Madhya Pradesh High Court in the case of CIT V/s. Devisakuntala Tharal Charitabale Foundation 358 ITR 452 and the decision of the Hon'ble Delhi High Court in the case of DIT Vs/. Vishwa Jagiriti Mission (2013) 262 ITR 558 ?" (3) "Whether, in the given facts and circumstances, the Tribunal is correct in law in dismissing the appeal filed by the Revenue on the issue of disallowance of depreciation placing reliance on their own decision without appreciating the fact that the Hon'ble Kerala High Court in the case of Lissie Medical Institutions vs. CIT (348 ITR 344) has held that depreciation cannot be allowed on assets, where cost of such assets has already been allowed as application of income in the year of acquisition / purchase of asset ?" (4) Whether, in the given facts and circumstances, the Tribunal is correct in law in dismissing the appeal filed by the Revenue on the issue of disallowance of dep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p; 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 appeals which were allowed in favour of the assessee. Revenue challenged the said orders of the CIT(Appeals) before the Tribunal unsuccessfully. The orders passed by the Tribunal are challenged in these appeals. 8. ITA No.431/2013, ITA Nos.56/2013 and 108/2014 are filed by the revenue challenging the orders passed by the Tribunal whereby, the orders passed by Revisional Authority under Section 263 of the Act are set- aside, restoring the assessment order, thus, allowing the depreciation under Section 11 of the Act as claimed by the assessee. 9. In all these appeals, the common substantial question of law that arises for our consideration is as under: "Whether the Tribunal is correct in holding that depreciation is allowable under Section 11 of the Act, and there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 and is brought to tax under Chapter III of the Act. Chapter - IV in no way is applicable to Section 11, the claim of depreciation is not under Section 32 of the Act but under normal commercial principles as laid down by the Courts. It is further contended that allowing exemption on the application of income on the capital asset acquired during the relevant year and further, allowing depreciation in the subsequent years, at any stretch of imagination, could not be construed as double deduction. 13. Mr. Parthasarthy, learned counsel appearing for the assessee in some of the appeals adopts the arguments advanced by Mr. A.Shankar. 14. Learned counsel appearing for the assessee has placed reliance on the following Judgments: [1] COMMISSIONER OF INCOME-TAX vs. VATIKA TOWNSHIP P.LTD., [(2014) 367 ITR 466 (SC)] [2] COMMISSIONER OF INCOME-TAX vs.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 spread the expenditure, incurred in acquiring the asset, over its effective lifetime; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period." 16. Similar view is taken by the other High Courts viz., Gujarat, Punjab and Haryana, Delhi, Madras, Calcutta and Madhya Pradesh in the following judgments. [1] COMMISSIONER OF INCOME-TAX, vs FRAMJEE CAWASJEE INSTITUTE, 109 CTR 463 [GUJ]; [2] COMMISSIONER OF INCOME-TAX, vs RAIPUR PALLOTTINE SOCIETY,. 180 ITR 571 [MP] [3] COMMISSIONER OF INCOME-TAX, vs SETH MANILAL RANCHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 [GUJ]; [4] COMMISSIONER OF INCOME-TAX, vs BHORUKA PUBLIC WELFARE TRUST [1999] 240 ITR 513 [CAL]; [5] COMMISSIONER OF INCOME-TAX, vs RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD)] [6] COMMISSIONER OF INCOME-TAX vs. MARKET COMMITTEE PIPLI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pplicable. 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 from gross income of the Trust. In view of the aforestated Judgment of the Bombay High Court, we answer question No. 1 in the affirmative i.e., in favour of the assessee and against the department." 18. The Judgment in Escorts Limited (supra) was rendered by the Apex Court in the context of Section 10(2)(vi) and Section 10(2)(xiv) of the 1922 Act or under Section 32(1)(ii) and Section 35(2)(iv) of the 1965 Act. It was the case of the assessee claiming a specified percentage of the written down value of the asset as depreciation besides claiming deduction in 5 consecutive years of the expenditure incurred on the acquisition of the capital asset used for scientific research. In such circumstances, the Apex Court held thus: "There is an apparent plausibility about these arguments, particularly in the context of the alleged departure in the language used by S.10(2)(xiv) from that employed in S.20 of the U.K. Finance Act, 1944. We may, however, point out that the last few underlined words of the Eng....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is 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 quoted words. For, in this view, where the capital asset is one of the nature specified, the assessee can get only one of the two allowances in question but not both." 19. Section 11 of the Act deals with application of income different from revenue expenditure or allowance. Thus, the Judgment of the Apex Court in the case of Escorts Ltd., [supra] is distinguishable and as such is not applicable to the Charitable Trusts where income is to be computed under Chapter III of the Act. Accordingly, the judgment of Lissie Medical Institutions [supra] based on Escorts Ltd., [supra], is not applicable to the facts of the present case. 20. It is also to be noticed that while in the year of acquiring the capital asset, what is allowed as exemption is the income out of which such acquisition of asset is made and when depreciati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der 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 registration is in force for any previous year, then, nothing contained in section 10 [other than clause(1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year. This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to the assessment year 2015-16 and subsequent years". The Memo explaining the provisions in Finance [No.2] Bill, 2014 reads thus: "The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc. is claimed and such amount of notional deduction remains to be ap....