2018 (6) TMI 1393

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....ltural Produce Market Committee, Shimoga, a Charitable Trust, duly registered under Section 12A of the Act.  2. In the first round appeal before the learned Tribunal, vide Order Annexure-C dated 8.3.2011, the learned Tribunal held that the Revisional Order passed by the Commissioner of Income Tax under Section 263 of the Act was not sustainable on both grounds on which it was passed, namely, [i] to disallow the claim of Depreciation under Section 32 of the Act in the hands of the Assessee, being a Charitable Trust and [ii] requirement to comply with the procedure under Section 11[2] of the Act, if the accumulated income not spent for charitable purpose exceeded 15% of the income during the year. 3. The learned Tribunal found that....

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....The said circular has accepted the principles that even the whole of capital expenditure may be treated as application towards charitable activities for the purposes of section 11 depending upon the purposes for which the funds were applied. Therefore, as rightly argued by the assessee when the entire capital expenditure is permissible to be allowed as a deduction treated it as application of funds for charitable or religious purposes, how there could be a fetter in claiming  the  depreciation  allowance which is only a percentage of the total capital expenditure incurred by the assessee ? When the entire capital expenditure itself is deductible as applied for charitable or religious purposes, the refusal to allow depreciatio....

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....s for computation of income from other sources in Part 'F' under Chapter IV of the IT Act, 1961 running from sections 56 to 59. Section 57 provides for deduction allowable in computing income under other sources. Clause (ii) of section 57 provides for depreciation u/s 32(2). It shows that even in computing the income from other sources, the assessee is entitled to claim depreciation u/s 32(2). This crucial aspect also was not examined by the Commissioner of Income-tax in the right perspective. Therefore, we find that the Assessing Officer has rightly allowed the deduction of Rs. 2,26,57,709/- as depreciation allowance in computing the income of assessee trust. 14. xxxx xxxx xxxx 15. xxxx xxxx xxxx 16. In result, w....

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....contention of the Department predicated on double benefit was  turned down in the following manner: 3. As stated above, the first question which requires consideration by this court is : whether depreciation was allowable on the assets, the cost of which has been fully allowed as application of income under section 11 in the past years? In the case of CIT v. Munisuvrat Jain 1994 Tax Law Reporter, 1084 the facts were as follows. The assessee was a Charitable Trust. It was registered as a Public Charitable Trust. It was also registered with the Commissioner, Pune. The assessee derived income from the temple property which was a Trust property. During the course of assessment proceedings for assessment years 1977-78, 1978-79 and ....

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....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. Howev....

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....bsequent years, depreciation in respect of those assets cannot be taken into account. This view of the Tribunal has been confirmed by, the Bombay High Court in the above judgment. Hence, Question No. 2 is covered by the decision of the Bombay High Court in the above judgment. Consequently, Question No. 2 is answered in the affirmative i.e., in favour of the assessee and against, the department. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and there is no need to interfere with the same." 6. Since the issue regarding claim of Depreciation in the hands of the Charitable Trust is no longer res integra, We are of the opinion ....