TaxTMI 
TaxTMI 
2021 (4) TMI 1176
X X X X Extracts X X X X
X X X X Extracts X X X X
....appellant filed a return of income on 30.09.2009. In the said return, the appellant had claimed set off of excess application of income of the previous Assessment Year 2008-2009 to the tune of Rs. 1,00,70,474/-. The same was processed under section 143(1) on 06.02.2011. The return of income was taken up for scrutiny and statutory notices were issued. In response to the same, the appellant furnished the details as called for in the notice. (ii) The Assessing Officer, by order dated 14.12.2011, under section 143(3), disallowed the deduction under sections 23 and 24 of the Income Tax Act; restricted the excess application of income of previous Assessment Year 2008-2009 to Rs. 23,96,355/- as against Rs. 1,00,70,474/- claimed by the assessee on the ground that excess applications should be computed with reference to the gross receipts and not with reference to the minimum application of 85%; and disallowed the claim of depreciation on fixed assets to the extent of Rs. 13,71,516/- as the cost of capital assets were already claimed as application of income. The taxable income was computed as Rs. 13,03,861/-. (iii) Aggrieved over the Assessment Order, the assessee preferred an appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the learned counsel on either side submitted that the same was decided against the revenue and in favour of the assessee in the Judgment dated 02.03.2021 made in T.C.A. No.975 of 2010 [The Commissioner of Income Tax - III v. M/s. SRA Systems Ltd., Chennai], wherein this Court held as follows: "... 4.When the appeal is taken up for hearing, Mr.R.Sivaraman, learned counsel appearing for the respondent submitted that the Question of Law no.1 is covered by the decision of the Hon'ble Supreme Court reported in [2018] 93 taxmann.com 33 (SC) [Commissioner of Income-tax, Central - III Vs. HCL Technologies Ltd.], an un-reported judgment of the Division Bench of this Court dated 10.01.2019 made in T.C.A.Nos.1257 & 1258 of 2009 [Commissioner of Income Tax, Chennai Vs. M/s.Sak Soft Ltd.] and the Question of Law no.2 is covered by the decision of this Bench dated 19.01.2021 made in T.C.A.Nos.1470 to 1472 of 2010 [Commissioner of Income Tax, Chennai Vs. M/s.S.R.A. Systems Ltd., No.100, Valluvar Kottam High Road, Nungambakkam, Chennai] and the Question of law no.3 is covered by the decision of the Division Bench of this Court dated 18.03.2020 made in T.C.A.No.228 of 2011 [M/s.Comstar Auto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion under Section 10A is common to all the three Assessment Years, all the three Tax Appeals are taken up together and disposed of by this common judgment. For the Assessment Year 2000-01, the assessee had filed its return of income on 29.11.2000. The assessee claimed that it was eligible for deduction under Section 10B. The return was processed on 28.03.2002. Subsequently, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment on account of the assessee Company being ineligible for deduction under Section 10A. Subsequently, a notice dated 22.03.2007 was issued under Section 148 and after giving an opportunity of hearing, the scrutiny assessment order was passed on 17.12.2007, disallowing the entire claim of deduction under Section 10B. Further, the expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by the Assessing Officer on the ground that such expenses were in the nature of capital expenditure. The Assessing Officer in his re-assessment order noted that in terms of Section 10B(ii) an undertaking in order to be eligible for deduction under Section 10B must not be formed by s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce made by the Assessing Officer was not correct. Since the order passed under Section 263 itself has been set aside, the cause of action for re-assessment does not survive." (iv)Un-reported judgment of a Division Bench of this Court dated 18.03.2020 made in T.C.A.No.228 of 2011 [M/s.Comstar Automative Technologies Private Ltd., (formerly known as Visteon Powertrain Control Systems India Private Limited, Keelakaranai Village, Malrosapuram Post, Maraimalai Nagar, Chengalpattu District- 603 204 Vs. The Deputy Commissioner of Income Tax, Company Circle - I (3), 121, Nungambakkam High Road, Chennai - 600 034], the Division Bench held as follows: "... 27.Therefore the law has been settled by the said decision of the Hon'ble Apex Court, where in clear terms, it has been held that, the deductions either under Section 10A or 10B would be made while computing the gross total income of the eligible undertaking (like the Assessee) under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. 28.Here is the case in hand, the total income was first arrived at by the Revenue through the Assessing Officer in the Assessment order by co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents-assessees. It is a matter of record that all the assessees are charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as 'Act'). For this reason, in the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable puruposes under Section 11(1)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. Though it appears that in most of these cases, the CIT (Appeals) had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT thereby dismissing t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in 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 form 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. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforesatated judgment of the Bombay High Curt, we answer question No. 1 in the affirmative ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ws that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and dismiss these matters. (ii) (2017) 398 ITR 721 [Director of Income-Tax Exemption III, Chennai v. Medical Trust of the Seventh Day Adventists] wherein the Division Bench of this Court held as follows:- " ..............28. T.C.A.No.949 of 2015 has been filed by the assessee raising the following two substantial questions of law:- 1. Whether on the facts and circumstances of the case, the Tribunal was right in disallowing the claim of depreciation on assets acquired by way of application of funds in the earlier years, contrary to judgments of several High Courts? 2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the excess application of the earlier year could not be set off against the income of the current year contrary to the judgment of this Honourable Court in the case of Matriseva Trust (2000) 242 ITR 20(Mad)? 29. Learned senior counsel appearing for M/s.St. Thomas Orthodox Syrian Cathedral Parish Trust, the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1,050 made by the assessee to another institution, would tantamount to application of income for charitable purposes, thus satisfying the requirements of Section 11 ? and (2) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the deficiency of funds of this year could be set-off against the earlier year's surplus ?" 2. During the assessment year 1984-85, the assessee-trust had donated a sum of Rs. 31,050 to another charitable trust known as the service trust. The assessee-trust claimed exemption under Section 11 of the Act, which Was rejected by the Income-tax Officer. On appeal, the Commissioner (Appeals) had allowed the claim of the assessee. The Tribunal had confirmed the order of the Commissioner (Appeals). 3. With regard to the first question, this court in the decision reported in CIT v. Thanthi Trust [1982] 137 ITR 735, had held that the trust which has applied the money for charitable purposes was entitled to exemption without having to show how the money had been dealt with by the transferee institution. This court has answered the question referred there in favour of the assessee and against the R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ication for charitable purposes was determined. The Income Tax Officer took into consideration the gross rental receipt and did not consider the claim of depreciation. 10.1 As per the Income Tax Act, "income" means "net income", which is taxable. Income from property should be computed as per sections 22 to 27 of the Act and the income from business have to be computed under sections 28 and 44 of the Act. Such computed income is exempted from tax under sections 11 and 13, if 85% of the same is spent on the charitable objects. Once the income is computed and determined 85% of such computed income should be utilized for charitable objects. 10.2. Section 11(1)(a) of the Act provides that "income derived from property held under Trust wholly for charitable or religious purpose" shall not be included in the total income to the extent such income is applied for charitable or religious purpose in India. The Act also provides that upto 15% of such income is accumulated or set apart, then, that shall also not be included in the total income. 10.3. Section 11(1)(d) of the Act provides that income in the form of voluntary contribution made with specific direction that they shall form part ....