TaxTMI 
TaxTMI 
2017 (12) TMI 802
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....by the assessee. He assessed the total income of the assessee at Rs. 60,95,011/-. 3. When the assessee carried the matter in appeal before the CIT(A), the CIT(A) upheld the action of the AO with regard to denial of exemption u/s 11 on the ground that it has given advance to M/s Shalivahana Associates of Rs. 32,07,995/- and disallowance of depreciation. CIT(A) allowed the claim of exemption u/s 11 with regard to contributions to the building fund of Rs. 3,20,000/-. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal: "1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous to the extent it is prejudicial to the appellant herein. 2. The learned Commissioner of Income-Tax (Appeals) erred in holding that there was any violations to the provisions of Sec.13(l)(c) of the I.T. Act and that the appellant is not eligible for exemption u/s 11 of the I.T. Act. 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in disallowing depreciation in respect of the fixed assets and on the expenditure incurred for acquisition of ....
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....ed on few case law before the CIT(A), which were mentioned at page 4 of CIT(A)'s order. 8. After considering the submissions of the assessee, the CIT(A) observed that the AR of the assessee has not specified the nature of transactions which the assessee had undertaken with Shalivahana Associates which resulted in maintaining the running account. He further observed that without any such financial transactions in the course of which money was paid or received from Shalivahana Associates, the transaction with this party necessarily takes the character of a loan account and has to be examined in the light of the relevant provisions of section 13. As regards the claim of the assessee that there was no benefit to Shalivahana Associates since money was payable by the assessee and not vice versa, the CIT(A) observed that the claim of the AR is without any merit as section 13(2)(a) applies to a situation where any party of the income or property of the trust is lent to a specified person 'for any period' during the previous year. In view of the above observations the CIT(A) further analyzed the issue with case law and held that the loan to Shalivahana Associates was in violation of sect....
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....unds remitted to the concern in which the trustee is holding substantial interest. Whether income is so used or applied is a question to be decided on the facts and circumstances of each case. The legislature, however, also creates a fiction and enumerates in clause (a) to (h) of sub-section (2), a list of circumstances in which the income shall be deemed to have been used or applied for the benefit of specified persons. The clause (a) deals with "any part of income or property is lent or continues to be, to any person referred in sub-section (3) of section 13 for any period during PY without adequate security or interest or both. In the given case, the assessee has lent the funds without any security or interest. It is worth to note the meaning of 'lend' explained by Hon'ble AP High Court in the case of CIT/CWT Vs. Polisetty Somasundaram Charities [1990] 183 ITR 377 (AP). The Hon'ble High Court discussed the distinction between 'lend' and 'invest' and pointed out that in commercial parlance "lending" is associated with advancing money for an assured return at an agreed rate of interest returnable on demand or within specified period with minimal risk, while, the expression 'invest....
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....4. Considered the rival submissions and perused the material facts on record. We have considered the Escorts Ltd. (supra), on which reliance placed by the ld. DR, wherein the Hon'ble Supreme Court has adjudicated that the assessee cannot claim double benefit claiming deduction u/s 32 and u/s 35 at the same time. The intention of legislature is not to extend double benefit by observing that the deduction of the allowance on scientific research assets and that of depreciation are basically of the same nature intended to enable the assessee write off certain items of capital expenditure against his business priority. This decision cannot be applied in the present case because the assessee is not into business and its profits are exempt. The assets acquired are out of application of capital funds and the depreciation is calculated to determine the actual income over expenditure. The allowability of deduction of depreciation in the case of a charitable / religious trust is supported by a number of other legal precedents by Hon'ble Courts are as follows : "1. CIT Vs Market Committee, Pipli [2011] 330 ITR 16 (P&H) In this case, the assessee was registered under section 12AA of th....
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....imed may not be business assets. In all such cases, section 32 of the 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 11on commercial principles after providing for allowance for normal depreciation and deduction thereof from the gross income of the trust. Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment had been made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a). 3. DIT (E) Vs Framjee Cawasjee Institute [1993] 109 CTR 463 (Bom) It was held in this case that depreciation on depreciable assets had to be taken i....