TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1415
X X X X Extracts X X X X
X X X X Extracts X X X X
....rala High Court in the case of Lissie Medical Institutions vs. Commissioner of Income Tax, Kochi, 348 ITR 344 and decision of Delhi High Court in the case of DIT(E) vs. Charanjiv Charitable Trust in (2014) 43 taxmann.com 300 (Delhi). (II) Whether, on the facts and in the circumstances of the case, deduction of depreciation u/s.32 which falls under the head "Profit and Gains from business and profession' of the Income Tax Act, 1961, would be available to a charitable trust whose income is otherwise not assessable under the above head. 2) On the facts and circumstances of the case, the ld. Commissioner of income tax (Appeals) ought to have upheld the order of the Assessing Officer. 3) It is, therefore, prayed that the order of the Ld. Commissioner of Income Tax (Appeals) may be set aside and that of the Assessing officer be restored." 3. None appeared for the assessee but we have heard the learned Departmental Representative, perused the material on record and duly considered facts of the case in the light of applicable legal position. 4. We find that the issue is squarely covered by a decision of the co-ordinate bench in the case of ACIT vs. Vishwachetan Foundation IBMR [(2....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Bookkeeping 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 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, Punj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 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 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 Ltd.'s (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 cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. 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 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 C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oposed to insert subsections (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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication. Dogmatically framed, the rule is no more than a presumption, and thus could be displaced by out weighing factors". 25. The Apex Court in the said judgment, while interpreting the proviso, whether to be applied retrospectively or prospectively, has considered the Notes on Clauses appended, the Finance Bill and the understanding of the Central Board of Direct Taxes in this regard. The Apex Court has also taken cogniza....