TaxTMI 
TaxTMI 
2026 (7) TMI 1488
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....ed in law and in facts in confirming the disallowance of depreciation made by the Assessing Officer of Rs. 37,95,579-despite disallowing claim for capital expenditure. 2. The learned Commissioner of Income Tax (CIT) Appeals erred in law and in facts in not allowing the claim of capital expenditure of Rs. 31,90,774/- as application of income as claimed in the income tax return which should have been considered in the alternative to Ground No 1. 3. The learned Commissioner of Income Tax (CIT) Appeals erred in law and in facts in confirming the disallowance of pre-operative expenses made by the Assessing Officer of Rs. 17,10,746/treating same as Prior Period expenses which is incorrect-. 4. The learned Commissioner of Income Tax (CIT) Appeals erred in law and in facts in providing directions to the JAO to allow the claim of deduction of the assessee only if it has applied 85% of its income, excluding depreciation and pre-operative expenses and thus ignoring the provisions of the Act. 5. Each of the above grounds of appeal are independent and without prejudice to each other. 6. The assessee craves to amend/delete/alter any of the above groun....
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....s allowable. Ld. AO was not convinced with the aforesaid submissions by the assessee, he observed that the contention of assessee is not acceptable as the assessee failed to prove any documentary evidence, which could support the claim in accordance with the amended provisions of section 11 of the Act. Accordingly, he disallowed the depreciation claimed by the assessee. (ii) The second issue raised by the Ld. AO was relating to pre-operative expenses claimed by the assessee for Rs. 17,10,746/-. The assessee was asked to explain as to how such expenditure is allowable. In response, assessee submitted that the expenditure incurred by the assessee having the nature of enduring benefit over a period of time, therefore such expenses incurred prior to commencement of its operations. The nature of these expenses are of deferred revenue expenditure. Therefore, as per settled principle, the assessee is eligible to claim such deferred expenditure. The reply of assessee was not found tenable by the Ld. AO, he noted that the case laws cited by the assessee are differed on facts as the assessee is a charitable organization and accordingly its income needs to be specifically spent for o....
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....red charitable institution is required to be allowed. The appeal of assessee has been partly allowed by the Ld. CIT(A). 6. Being dissatisfied with the aforesaid decision of Ld. CIT(A), the assessee has preferred the present appeal before us. 7. The first ground of appeal of the assessee is that the Ld. CIT(A) had erred in dismissing the ground of appeal of assessee for claiming depreciation despite disallowing the claim of capital expenditure. On this aspect, it is submitted by the Ld. AR that the capital expenditure of Rs. 31,90,774/- was claimed in schedule EC of ITR for AY 2017-18 (referred page no.15 of ITR, Sl. No.3 of Schedule EC and Sl. No.8 of Schedule EC). The said amount is appearing in part B of the total income at page 5 of the ITR at Sl No.4 II (relevant page of ITR duly marked as appendix III). It is submitted that this amount should be treated as application of income and Ld. AO should consider it as application of income. 8. Per contra, Ld. DR supported the order of Revenue Authorities. 9. On a careful consideration of aforesaid facts, we find substance in the submission of assessee that if the assessee is not entitled for depreciation in terms of amende....
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.... the income from such property, such income shall not be included in the total income of previous year as taxable income of the assessee-trust. Accordingly, the assessee trust is required to apply its income for charitable purposes, according to its objects upto 85% during the year under consideration and remaining 15% can be carried forward for utilization in future years. 13. As per Explanation (i) to Section 11(1), if in the previous year, the income applied to charitable or religious purpose in India fall short of 85% of the income derived during the year from property held under trust or as the case may be then it can be accumulated or set apart either in whole or part for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of previous year of the assessee subject to certain conditions u/s 11(2) of the Act. 14. Since the income of trust has to be accounted for and the entitlement of exemption u/s 11 and 12 is subject to certain conditions, therefore, the accounting of trust and claim of expenditure to remain eligible and titled u/s 11 and 12 of the Act has to be in accordance with the provisions of the ....