TaxTMI 
TaxTMI 
2026 (8) TMI 1462
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.... for exemption u/s 11(1)(a) of the I.T. Act, 1961 and depreciation claimed on assets not considered as application in the return filed for the impugned year. He has disallowed the depreciation as application of income in terms of section 11(6) of the Act ignoring that the capital expenditure of acquisition of such fixed assets was not treated as application of income for the impugned year as well as prior to F.Y. 2016-17. In the alternative, having disallowed depreciation the learned Assessing Officer should have allowed the application of income to the extent of Rs. 72,70,394 towards the acquisition of capital assets disclosed in the schedule of fixed assets of the audited financial statements. The learned AO has not appreciated that the appellant being a charitable society, having been granted registration u/s 12A of the I.T. Act, 1961 should not have suffered such disallowance merely on account of typographical error in the report filed in Form 10B. Further, the learned AO after considering the provisions of 11(6) of the I.T. Act, 1961 and not allowing the depreciation claim as application of income of the year should have corrected the consequential amount allowable u/s 11(1)(a....
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.... the year under consideration, no documentary evidence in support of the said contention has been placed on record for the claim of the same in preceding years. Further, the Assessing Officer has observed that the appellant has claimed the capital expenses amounting to Rs 1,21,06,451/- in the assessment year 2018-19. During the appellate proceedings, the appellant has not brought anything on record to make good the deficiency in evidence which has been pointed but in the rectification order. In the absence of satisfactory proof demonstrating that the cost of acquisition of the relevant fixed assets was not claimed as application of income in any preceding year, the bar contained in section 11(6) squarely applies. Consequently, depreciation on such assets cannot again be treated as application of income for charitable purposes, as the same would result in a double deduction, which is specifically prohibited by proviso of section 11(6) w.e.f. 01.04.2015. Accordingly, the Assessing Officer is correct in disallowing the claim of depreciation as application of income in accordance with law. These grounds of appeal are therefore Dismissed. 4. Aggrieved with the said order, the assesse....
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....ction 11(6) in respect of the depreciation claimed in the Income & Expenditure Account to the tune of Rs. 28,21,833, treated as application in the Form 10B filed. (both in original and revised). Your honour's kind attention is invited to the provisions of section 11(6) which are reproduced here under. "(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year." The rationale of introduction of the subsection (6) to section 11 of the Act is to be understood from the Memorandum explaining the provisions to Finance (No 2) Bill, 2014 which reads as under. Rationalisation of taxation regime in the case of charitable trusts and institutions The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Su....
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....een allowed. 6. That without prejudice submission in Para 5 above, considering the facts and circumstances of the case, the working of the taxable income of the appellant for the impugned year would be as under. Particulars Amount (Rs) Gross Income (total receipts) (A) 2,60,39,692 Application of Income (Revenue Expenditure) (B) 1,94,95,850 Application of Income (Capital Expenditure) (C) 72,70,314 Total Application of Income (D=B+C) 2,67,66,164 Total Income (A-D) (-) 7,26,472 * Since the total income has been applied towards the Charitable objects of the Society the resultant would be loss. In view of above facts and circumstances the working of the total income of Rs. 66,33,841/- for the impugned year by the learned AO is incorrect, fallacious and liable to be deleted. 6. On the other hand, the Ld. Sr. DR supported the orders of the authorities below. 7. We have heard both the parties and perused the material on record. The Ld. AR submits that the gross income (total receipts) of the assessee during the year was Rs. 2,60,39,692/- which is evident form page no. 44 of the paper book filed by....