AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 23
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....ding that only the portion of income which violates the provision are to be charged at MMR. 3. On the facts and circumstances of the case and in law the ld. CIT(A) erred in deleting the disallowances of depreciaton of Rs. 1,23,30,183/- ignoring the amendemtn made thorough Finance Act No. 2/2014 in Section by inserting sub-section (6) to the Section 11 of the Income Tax Act in the statute which became effective from the A.Y. 2015-16 and the fact that the assets on which depreciation have been claimed had already been claimed as application of income by the assessee in earlier years.s 4. On the facts and circumstances of the case and in law the ld. CIT(A) erred in deleting addition of Rs. 89,37,519/- u/s 40A(3) without verifying the fact that such expenditure had been claimed by the assessee as application and without appreciating the fact that the assessee has been assessed as an AOP and has made cash payment to the contractors in contravention to the provision of Section 40A(3) of the I.T. Act, 1961'' 2.1 Brief facts of the case are that the assessee filed its return of income on 29-09-2015 declaring a total income of Rs. 46,000/-. The assessee derives income from educational ....
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....there is violation of sec.13, entire income of the trust is not liable to be taxed at MMR but only the relevant part of the income which violates sec.13 attracts the MMR. For this purpose, the ld.AR of the assessee relied on following case laws:- (i) DIT Vs. Working Women's Forum (2015) 235 Taxman 516 (SC) - SLP dismissed against High Court's ruling that in case of trust registered u/s 12AA, only such part of income which is violative of section 13(1)(d) can be brought to tax at minimum marginal rate and entirety of income cannot be denied exemption u/s 11. (ii) CIT Vs. Fr. Mullers Charitable Institutions (2014) 227 Taxman 369 (SC) - High Court by impugned order held that in case of charitable trust, it is only income from investment or deposit which had been made in violation of section 11(5) that was liable to be taxed and that violation u/s 13(1)(d) does not tantamount to denial of exemption u/s 11 on total income of assessee trust. Special leave petition filed against impugned order was to be dismissed. It was further submitted that similar disallowance was made by the AO in AY 2014-15 where the ld. CIT(A) vide its order dated 28.12.2018 held that the entire exemption u/s ....
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....enied nor the surplus as such can be charged to tax at Maximum Marginal Rate. Section 164 deals with the charge of the tax where the share of the beneficiary is unknown. Section 164(2) deals with the charge of tax on the income of the trust which is derived by it from the property held wholly for charitable or religious purposes. The proviso to this section which is relevant in the present case reads as under:- ''Provided that in a case where the whole or any part of the relevant income is not exempt under section 11 or section 12 by virtue of the provisions contained in clause (c) or clause (d) of sub-section (1) of Section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate.'' From the plain reading of this proviso, it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of the Section 13(1)( c) or 13(1)(d), tax is chargeable on the relevant income or part of the relevant income at the maximum marginal rate (MMR). Therefore, in case there is violation of Sec 13, the entire income of the trust is not liable to be taxed at MMR but only the relevant part of th....
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....t cannot be denied nor the surplus as such can be charged to tax at Maximum Marginal Rate. Even otherwise, the provision of Section 164 specifically deals with the charge of tax where the shares of the beneficiary is unknown. Section 164(2) deals with charge of tax on the income of the trust which is derived by it from the property held wholly for charitable or religious purposes. From the plain reading of this proviso, it is evident that where the whole or any part of the relevant income is not exempt u/s 11 or 12 because of the provisions of the Section 13(1)( c) or 13(1)(d) then tax is chargeable on the relevant income or part of the relevant income at the maximum marginal rate (MMR). Thus in that eventuality, even in case there is violation of Sec 13, the entire income of the trust is not liable to be taxed at MMR but only the relevant part of the income which violates sec 13 attracts the MMR. We also found support from the decision in the case of DCIT vs Working Women's Form (2015) 235 Taxman 516 and CIT vs Fr.Mullers Charitable Institutions (2014) 227 Taxman 369 (SC). No new facts or circumstances have been brought before us in order to controvert or rebut the findings so rec....
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.... the disallowance of claim of depreciation was deleted by the ld. CIT(A) by merely relying on the decision of CIT vs Rajasthan and Gujarat Charitable Foundation (supra) whereas in the said judgement it has categorically been held that the amendment in Section 11(6) of the Act has been incorporated vide Finance Act (No. 2 ) of 2014 which became effective from Assessment Year 2015-16. The ld. DR has also drawn our attention to the clarification given by the Hon'ble Supreme Court wherein it has confirmed the prospective nature of Section 11(6) of the Act which clarifies that income of an institution would be calculated without provision for any depreciation or deduction in relation to an asset that has been acquired by the institution. From the records, we noticed that although it was submitted by the ld.AR of the assessee that it had not claimed cost of fixed asset as application of income as there was very meager surplus in earlier years and it only claimed depreciation of fixed asset. However, this fact has not been verified by the AO as to whether the assessee has claimed the cost of fixed assets as application of income in the previous year or not. Therefore, in our view and ....