TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 329
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....he income from another source, set-off of loss from one head against income from another head and carry forward and set-off of loss against the income of subsequent years as envisaged under sections 70 to 79 are also not applicable to the charitable trusts/institutions ? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal is right in setting aside disallowance of accumula tion/set apart of income under section 11(1)(a) without appreciating the fact that the issue of application of income more than the income computed does not arise, except in a case where the assessee has incurred huge amount of capital expenditure sourced out of borrowed or corpus donations or 15 per cent. of income set apart over a period of time and even otherwise expenditure incurred out of the above sources cannot be termed as application of funds out of the income earned in a particular assessment year inasmuch as loan borrowed does not fall under the category of income earned by the assessee ? 3. Whether on the facts and in the circumstances of the case, the Tribunal were justified in law in allowing the assessee's claim for depreciation on new assets put into use du....
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....ars 1977-78, 1978-79 and 1979-80, the assessee claimed depreciation on the value of the building at the rate of 2.5 per cent. and they also claimed depreciation on furniture at the rate of 5 per cent. The question which arose before the court for determination was : whether depreciation could be denied to the assessee, as expenditure on acquisition of the assets had been treated as appli cation of income in the year of acquisition ? It was held by the Bom bay High Court that section 11 of the Income-tax Act makes a provision in respect of computation of income of the trust from prop erty held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, section 28 of the Income-tax Act deals with chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business shall be computed in accordance with section 30 to section 43C. That, section 32(1) of the Act provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, a simila....
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....' of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent 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 affirm ative, 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 that no substantial question of law now arises in the present appeals filed by the Revenue." 4. The third suggested question is also covered by another decision of this court in the case of CIT (Exemptions) v. Ohio University Christ College [2018] 408 ITR 352 (Karn) rendered on July 17, ....
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....years from the year of incurring of expenditure. The fact of amortization was not disputed by the Assessing Officer in the assessment proceedings for the assessment year 2007-08 where the entire amount was added back claiming 1/5th of the expenditure. The unamortized expenditure has been brought forward and set off as application of income in sub sequent years, including the assessment years 2008-09 and 2009-10 which are under consideration. We find that the issue before us is directly related to the issue decided by the hon'ble Karnataka High Court in the case of Society of the Sisters of St. Anne (supra) cited by the assessee. In the said case, the hon'ble Karnataka High Court at paras 8 to 10 thereof has held as under : . . . Further, the Central Board of Direct Taxes Circular No.5-P (LXX)- 6 of 1968 cited by the assessee makes it clear that income should be understood in its commercial sense ; in the case of trusts also and therefore the commercial principle enunciated by the hon'ble Karna taka High Court in the above referred case of Society of the Sisters of St. Anne (supra) applies to trusts as well. In view of the factual and legal matrix of this issue in th....
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....ves income from house property, interest on securities, capital gains, or other sources, the word 'income' should be understood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purpose of the trust or otherwise, and also after adding back any deb its made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax under section 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of the income computed in the aforesaid manner, should not be less than 75 per cent. of the latter, if the trust is to get the full benefit of the exemption under section 11(1)." In CIT v. Trustees of H. E. H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378 (AP), the Andhra Pradesh High Court has accepted the accounts maintained in respect of the trust in conformity with the principles of accountancy for the purposes of determining the income derived from the property held in trust....