TaxTMI 
TaxTMI 
2022 (3) TMI 35
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.... 2. Whether in the facts and circumstances of the case the learned CIT(Appeals) is correct in law in holding that the assessee Trust is eligible for exemption under Section ll(l)(a) of the I.T. Act, 1961, on the capital expenditure made out of corpus funds, relying on the decision of the Hon'ble High Court of Orrisa in the case of CIT v. Silicon Institute of Technology reported in 370 ITR 567 [2015] (Orissa), where facts involved are quite distinct. 3. The Revenue craves to add, alter, amend, modify, substitute, delete and/or rescind all or any Grounds of Appeal on or before the final hearing, in necessity so arises. 3. Brief facts of the case is that the assessee is public charitable trust registered under Bombay Public Trust Act, 1950 as well as registered under section 12AA of the Income Tax Act, 1961 (for short "the Act") Assessee-trust was engaged for the services of poor people in the field of eye-care needs. The founder of the trust himself is Ophthalmologist. The Trust has begun with an eye-hospital in the rural tribal area of Mandvi taluka of Surat District and also running a hostel for blind children wherein 14 children were being trained with Braille ....
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....s donation could not be treated as income and would be chargeable to tax and the appellant has also not disputed this fact. On the contrary, the appellant had brought on record that it received the corpus donation of Rs. 2,68,45,899/- which had been applied for construction of the hospital building which was also to be treated as an application of income as there is no bar on incurring the capital expenditure out of the corpus donation which was also treated as income. Various Courts and the Tribunals have also held that the capital expenditure out of corpus donation was to be treated as exempt income as applied for the charitable purposes and also considered the controversial issue of allowing the depreciation. The amendment brought in the Statute book by inserting the provisions of sub-section (6) and (7) w.e.f. 1.04.2015 to redress the controversy over allowing the depreciation on the capital assets generated by spending the corpus donation or revenue receipts generated by carrying out other activities. In section 11 (6), it is specifically provided that "In this section, where any income is required to be applied or accumulated or set apart...." does not make any distinction as....
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....essee-trust was making systematic profit year after year, incurred capital expenditure and diverted income to capital funds which did not amount to application of income as per section 11(1). * On appeal, the Commissioner (Appeals), after considering (he submissions of the assessee, allowed the appeal by deleting all the additions made in the assessment order and directed the Assessing Officer to allow the benefit of exemption to the trust under section 11. * On appeal, the Tribunal, also upheld said order of the Commissioner (Appeals). * On appeal: HELD * The Tribunal, after hearing the appeal filed by the department did not incline to interfere with the order of the Commissioner (Appeals) by observing that the assessee is registered under section 12A and running the educational institution, imparting education in the fields of technical engineering and computer applications with the parameters laid down by the AICTE and the guidelines given by the Ministry of Human Resource Development, Government of India, New Delhi and the fees collected by the assessee from the students for imparting such education having been approved by the AICTE. The asse....
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....icon Institute of Technology, (2015) 56 taxmann.com 189 is distinguishable, and therefore, he submitted that order of the AO to be restored. 7. Per contra, the submissions of the assessee are more or less on similar line as were made before the Revenue authorities. The ld.AR has supported the order of the ld.CIT(A) by pleading that a very detailed judicious order passed by the ld.CIT(A) does not require any interference. He also produced a copy of the assessment order in the case of another trust viz. Bapu Ashram Ghantoli (PAN : AAATB2557K) for the assessment year 2016-17, wherein similar expenditure was allowed in favour of the assessee, and accordingly, applying the same ratio, the claim of the assessee be allowed. Further, Explanation (4) & (5) to section 11(1) was introduced from Finance Act, 2021 w.e.f. 1-4-2022 only, whereas in the present case, assessment year involved is 2015-16, and therefore, the assessee is eligible to claim the capital expenditure incurred by the Trust as application of income. 8. We have given out thoughtful consideration and perused the materials available on record. During the assessment year 2015-16, the assessee trust has received corpus dona....
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....tal income and scope of application includes application of capital nature. Further, even corpus donations are considered as a part of income under section 2(24)(iia) and subsequently exempted under section 11(1)(d) and similarly the word 'expenditure' is not used under section 11(1)(d) instead the word 'applied' has been used. Thus, it may be appreciated that unlike commercial or business organization, in case of charitable trusts, capital gains are also considered as a part of income under section 11(1) and are not computed under the head 'Capital Gain' under section 45 to 55. In other words, the scheme of computing income as well as application is totally different as far as charitable or religious organization are concerned. Moreover, amendment to section 11 by Finance Act i.e. insertion of sub section (6) and (7) after sub-section (5) of section 11, intension of the legislature is clear that there is no bar on the Charitable organization to acquire fixed assets out of Corpus donation. The only condition put by the newly inserted sub-section (6) is that double deduction of depreciation and capital expenditure are not allowable. Sub-section (6) of Section....