TaxTMI 
TaxTMI 
2019 (6) TMI 665
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....rd deficit of Rs. 45,19,11,077/- pertaining to earlier years. The case was taken up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Act vide order dated 22.03.2013 by making the following disallowances: (i) Disallowance of claim of depreciation - Rs. 6,64,07,894/- (ii) Denial of carry forward of deficit (excess application over income) to the subsequent years. 2.2 Aggrieved by the order of assessment dated 22.03.2013 for Assessment Year 2010-11, the assessee filed an appeal before the CIT(A)-Mangaluru, who allowed the appeal vide order dated 18.09.2017; granting the assessee relief on both the issues raised; i.e., (1) Depreciation and (2) carry forward of deficit (excess of application over income) to subsequent years. 3. Revenue, being aggrieved by the order of CIT(A), Mangaluru dated 18.09.2017 for Assessment Year 2010-11, has filed this appeal before the Tribunal wherein it has raised the following grounds: 1. On Disallowance of depreciation: 1. Whether in the facts and circumstances of the case and in law, the learned CIT(A) erred in allowing depreciation in respect of assets which have already been allowed as applica....
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....A) has erred in directing the assessing officer to allow set-off of excess expenditure/application pertaining to current asst.year and earlier years against the income of the future asst.year without appreciating the fact that as per the scheme of taxation of charitable or religious trust/institution as codified u/s.11,12 and 13, there is no provision for computing loss from property held under trust/institution on account of excess application of income/funds of the trust. b) The CIT (A) has failed to appreciate the fact that the normal computation of income under respective heads as envisaged u/s 15 to 59 are not applicable to the computation of income in respect of charitable trust/institution for the purpose of claiming exemption under sec.11, 12 and 13 and, therefore, the provisions relating to set-off of loss from one source against the 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 u/s 70 to 79 are also not applicable to the charitable trusts/institutions. c) The CIT (A) has failed to discuss the issue in detail bringing out the facts and ....
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....i) ACIT Vs. Adi Chinchunagiri Shikshana Trust 775/Bang/2009. The learned CIT(A), in the impugned order dated 18.09.2017 for Assessment Year 2010-11, allowed the assessee's claim for depreciation on fixed assets by following the aforesaid decision of Hon'ble Karnataka High Court in Al-Ameen Charitable Fund Trust (supra). 4.1.3 Before us, the learned AR for the assessee reiterated the assessee's claim for being allowed deduction on account of depreciation on fixed assets and submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble Karnataka High Court in the case of Al-Ameen Charitable Fund Trust reported in (2016) 383 ITR 517 (Kar). 4.1.4 We find that an identical issue as the one before us in the case on hand came up for consideration before a coordinate bench of this Tribunal in the case of ACIT Vs. City Hospital Charitable Trust (2016) 68 taxmann.com 429 (Bangalore - Trib). In the aforesaid case, the assessee claimed deprecation on assets, which claim was denied by the AO on the ground that since at the time of acquisition of the relevant capital asset, cost of acquisition was considered as application of income, therefore if deprec....
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....of the Hon'ble Supreme Court in the case of Escorts Ltd. 199 ITR 3 (SC) have been referred to and distinguished by the Hon'ble Court in the aforesaid decisions. 2 1. The issue raised by the revenue in the ground of appeal is thus no longer res Integra and has been decided by the Hon'ble Punjab & Haryana High Court in the case of CIT v. Market Committee, Pipli, 330 ITR 16 (P&H). The Hon'ble Punjab & Haryana High Court after considering several decisions on that issue and also the decision of the Hon'ble Supreme Court in the case of Escorts Lid. (supra), came to the conclusion that depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the purpose of trusts in terms of section II of the Act. The Hon'ble Punjab & Haryana High Court made a reference to the decision of the Hon'ble Supreme Court in the case of Escorts Ltd (supra) and observed that the Hon'ble Supreme Court was dealing in the case of two deductions under different provisions of the Act, one u/s. 32 for depreciation and the other on account of expenditure of a capital nature incurred on scientific rese....
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.... by Finance Act No.2/2014 is prospective in nature and since it operates w.e.f 1/4/2015 will accordingly apply from asst. year 2015-16 and subsequent years. 4.1.6 In the factual and legal matrix of the issue before us, as discussed above the paras 4.1 to 4.1.6, we are of the opinion that the assessee trust in the case on hand is to be allowed its deduction of depreciation on assets while computing its income u/s 11 of the Act, even though the amount spent on acquisition of the said capital asset was already allowed as application of income in furtherance of the objects/charitable activities of the assessee trust in the year of acquisition. In coming to this view, we place reliance on the decisions of the Hon'ble Karnataka High Court in the cases of CIT Vs. Society of Sisters of St. Anne (Supra), Al-Ameen Charitable Fund Trust (Supra) and Karnataka Reddy Janasangha (Supra) and the decisions of the co-ordinate bench in the case of City Hospital Charitable Trust (Supra) and Jyothi Charitable (Trust) which have decided the issue in favour of the assessee and against revenue on the issue of the assessee being entitled to be allowed depreciation on assets, the cost of which has alr....
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.... applied for charitable or religious purpose only in the year in which the income has arisen. The application for charitable purposes as contemplated in section 11(1)(a) takes place in the year in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. 1-knee, even if the expenses for such purposes have been incurred in the earlier years and the said expenses are adjusted against the income of a subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. In other words, the set-off of excess of expenditure incurred over the income of earlier years against the income of a later year will amount to application of income of such later year. The above is the position of law as held in. the case of CIT v. Afaharana of Mewar. Charitable Foundation [1987] 164 ITR 439/[1986] 29 Taxman 476 (Raj) and CIT v. Plot Swetamber Afurti Pukik Jain Mandal [1995] 211 ITR 293 (Guj.). In CIT v. Institute of Banking Personnel Selection [2003] 264 ITR 1101 31 Taxman 386 (Born.) it was held that in case of charitable trust whose income is exempt under s. 11, ex....