TaxTMI 
TaxTMI 
2013 (1) TMI 1025
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....tration under section 12AA of the Act had claimed capital expenditure of Rs. 12,13,81,530/- as well as depreciation of Rs. 10,22,644/- as part of its application for charitable purposes. A.O. was of the opinion that since assessee had claimed full value of the assets as application for charitable purposes, it could not thereafter again claim depreciation while computing its income. For coming to this conclusion, reliance was placed on the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Rao Bahadur Calavala Cunnan Chetty Charities (135 ITR 485) and that of Hon'ble Apex Court in the case of Escorts India Ltd. Vs. UOI in 199 ITR 43. 3. Assessee moved in appeal before the CIT(A) arguing that by the process of charging depr....
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....ions v .CIT(supra), after considering the decision of Hon'ble P&H High Court in the case of M/s.Tiny Tots Education Society (supra), which had in turn followed its own decision in the case of Market Committee, Pipli (supra), has held that notional claim of depreciation on an asset, the value of which was claimed as an application of income could not be allowed while computing the income of a charitable institution. Their Lordships held so, for a reason that by making such an allowance, a charitable institution got a permission to generate income outside the books. As against this, Hon'ble P&H High Court in the decisions of Market Committee, Pipli(supra) and of M/s.Tiny Tots Education Society (supra) had held clearly in favour of the assesse....
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....nfirmed in CIT v. Trustees of H.E.H. Nizam's Supplemental Religious Endowment Trust (1981) 127 ITR 378 (A.P.), CIT v. Rao Bahadur Calawala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad.) and CIT v. Estate of V.L. Ethiraj (1982) 136 ITR 12 (Mad.). This position is also confirmed by the CBDT vide its Circular No.5-P (LXX-6) dated 19th June, 1968. The concept of commercial income necessarily envisages deduction of depreciation on assets of the Trust. Depreciation on assets of a Trust is to be deducted for the purpose of calculating income of a Trust. This is because of the fact that the concept of commercial income necessarily envisages deduction of depreciation on assets of the Trust. Even reasonable depreciation on assets and interest on S....
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....computing such income under Section 11(i)(a) of the Act. Assessing Officer's stand that 'provision of computation of income under Section 11' does not contain any provision which may entitle an assessee to claim weighted deduction for any expenses incurred' is not acceptable as Section 11 provides that the income of the Trust is to be computed on commercial basis i.e. as per normal accounting principles. Normal Accounting Principles clearly provide for deducting depreciation to arrive at income. Income so arrived at (after deducting depreciation) is to be applied for charitable purpose. Capital expense is application of the income so determined. So there is no double deduction or double claim of the same amount as application. Thus depreci....