TaxTMI 
TaxTMI 
2019 (1) TMI 1451
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....,52,14,568/- as application of income for the year under consideration in the computation of income as application. In the Income Tax Return for the year, the appellant has treated depreciation of Rs. 2,52,14,568 as application of income. But the JDlT (Exemption), Kolkata, while computing the total income of the appellant, did not consider the depreciation as application of income for medical purposes as referred to u/s.10(23C)(via) of the Act, 1961 The appellant has entirely relied upon the decision(s) taken by the erstwhile Ld. C.I.T.(A)-25, Kolkata, vide his appellate order passed on 18-07-2016 in the case of M P Birla Foundation Educational Society for the AY. 2009-10. The appellant claimed that the Assessing Officer erred in the assessment so made. The income of a charitable/religious trust has to be understood in its commercial sense and the concept of "commercial income" necessarily envisages deduction of depreciation on the assets of the trust. The appellant has relied his previous years argument that the issue is squarely covered by the judgement of the Hon'ble Calcutta High Court in the case of Commissioner of Income-tax v. Siliguri Regulated Market Committee [201....
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....ta) HIGH COURT OF CALCUTTA Commissioner of Income-tax vs.Siliguri Regulated Market Committee Has held as under:- "We have considered the submissions and perused the judgments of the Punjab and Haryana High Court and the Bombay High Court as also the judgment of this court in the case of Jayashree Charity Trust (supra) and in the case of Bheruka Public Welfare Trust (supra). We are of the opinion that the views expressed in the case of Jayashree Charity Trust (supra) are logical and in consonance with common sense. The object of section 11 of the Income-tax Act,1961 is to feed the public charity. By permitting computation of income in a commercial manner, the object of feeding the public charity is achieved. The amount deducted by way of depreciation is in that case is ploughed back for user on account of charity. It cannot be disputed that a building used for the purpose of charity diminishes in value over the time like any other building. Therefore, providing for such diminution of value would keep the corpus of the trust intact otherwise the corpus of the trust itself in course of time may get dissipated.' In the aforesaid decision, the Hon'ble High Court has clearly ....
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....iation is charged then every year appellant should show its accumulated fund on account of depreciation but neither any such accumulation is made nor its utilization is shown and surplus generated by debiting depreciation, goes out of books. The funds trail should always be there for the public but the same is without any record and in the present knowledge of the Trustees which gives loose end to the trustees for utilizing money for their benefits at their own discretion. The appellant has not complied by any documentation, by making as a part of return, to demonstrate The accumulation of fund on account of depreciation which is the intent of observation of Hon'ble Kolkata High Court to make the trust cash rich. Income Tax Appellate Tribunal - Chennai in the The Music Academy Madras, Chennai vs Assessee on 22 April, 2016 ITA NO.1098/Mds/2015 I Assessment Year: 2010- 11with regard to disallowance of depreciation has held as under:- "3. Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that the assessee was registered as charitable institution under Section 12AA of the Income-tax Act, 1961 (in short 'the Act'). During the year under consideration, the....
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....the Act provides for allowing depreciation in respect of the asset which used for business or profession. In this case, the assessee admittedly registered as a charitable institution under Section 12AA of the Act. The assessee is not doing any business or profession. If the assessee claims that it is doing business or profession, then the registration has to be cancelled under Section 12AA(3) of the Act and the assessee will not be eligible for exemption under Section 11 of the Act. The Ld. D.R. has also clarified that the assessee is not doing any business or profession. Therefore, the provisions of Section 32 is not at all applicable to the charitable institution. The Ld. D.R. further pointed out that Section 32 falls in Chapter IV of the Act which provides for computation of business income. The claim of the assessee under Section 11 falls in Chapter III of the Act which says that certain kind of income do not form part of total income. The Ld. D.R. further pointed out that it is not the case of the assessee that any business was held as property under the trust. The matter would stand in a different footing if the assessee claims depreciation on the business which was held as....
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....ion 32 of the Act as an incentive/allowance to the asset which was used for the business or profession. This can be construed as reduction in value in the balance sheet while computing the income from business or profession. 7. Section 32(1) of the Act clearly says that the asset owned wholly or partly by the assessee and "used for the purpose of business or profession". In view of the language employed by the Parliament, the asset used for the purpose of business or profession alone eligible for depreciation. The Income-tax Act does not provide for depreciation in respect of the asset other than the one which is used for business or profession. Therefore, it is for the assessee to establish that the assessee is carrying on any business or profession. In the case before us, the admitted case of the assessee is that the assessee is not carrying on any business or profession. Therefore, whatever be the nature of the asset, which was used as a tool for carrying out the object of the charitable institution, cannot be construed as an asset which is used for the business or profession of the assessee. Therefore, the assessee is not eligible for depreciation under Section 32 of the Inco....
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....The Income-tax Act does not provide for allowing depreciation other than the asset which was used for business or profession. There is no other provision in the Income-tax Act other than Section 32 of the Act for allowing depreciation. Therefore, the claim of the assessee that the depreciation has to be allowed on commercial principle or customary principle of computation of income is contrary to the specific provision, namely, Section 32 of the Act. 10. The next question arises for consideration is when there is a conflict between customary practice, commercial principle and provisions of Section 32, which one will prevail? The obvious answer to this question is the statutory provision, namely, Section 32 of the Act will prevail over the customary practice and commercial principle. Therefore, even on customary practice or commercial principle whereby the assessee claims depreciation while computing the income, Section 32 of the Act is a specific provision under Income-tax Act, which is contrary to commercial principle or customary practice. Therefore, this Tribunal is of the considered opinion that Section 32 will prevail over the customary practice or commercial principle. He....
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....ttine Society (1989) 180 ITR 579 (MP) 8. CIT v. Institute of Banking Personnel (2003) 264 ITR 110 (Bom) Selection 9. DIT(E) v. Framjee Cawasjee (1993) 109 CTR (Bom) 463 Institute 10. DOlT v. Lakshmi SaraswathilTA No.452/Mds/2014 Educational Trust Chennai ITAT 11. Apollo Hospitals Educational Trust v.ITA No.2090/Mds/2012 DCIT Chennai ITAT 12. Services Association of Seventh Day ITA No.1853/Mds/2011- Adventists Pvt. Ltd. v. ITO Chennai ITAT 13. Services Association of Seventh Day ITA No.427/Mds/2012 Adventists Pvt. Ltd. v. ITO Chennai ITAT 14. ACIT v. Mamallan Educational Trust ITA No.1808/Mds/2012 Chennai ITAT 15. DCIT v. Mamallan Educational Trust ITA No.91/Mds/2013 Chennai ITAT 16. ITO v. Sri Ranganathar Trust ITA No.1954/Mds/2012 Chennai ITAT 17. ITO v. KGISL Trust ITA No.1813/Mds/2012 Chennai ITAT 18. CIT v. Rao Bahadur Calavala Cunnan (1982) 135 ITR 485 (Mad) Chetty Charities 19. Devi Karumariamman Educational (2015) 60 taxmann.com Trust v. DCIT (Exemptions) 439 (Madras) 20. ITO v. The GRD Trust ITA NO.2537/Mds/2014 Chennai ITAT After going through all the judgments / decisions, we find that the conflict between the commercial principle or customary ....