TaxTMI 
TaxTMI 
2006 (3) TMI 191
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....) ignoring several judgments of Gujarat High Court on the aforesaid point inclusive of decision of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1994) 119 CTR (Guj) 144 : (1995) 211 ITR 293 (Guj). (3) That, both the authorities below have materially erred in ignoring the expressed provisions of law namely, s. 14, s. 22, s. 24(1)(i), etc. coupled with Form No. 3A prescribed under r. 12(1)(c) of IT Rules, 1962. (4) That, the said finding is otherwise unwarranted on facts, against expressed provisions of law and having been based on inapplicable case law, the same deserves to be reversed. II. Depreciation-(Rs. 6,49,856) (5) Without prejudice to the immediate above grounds, the learned CIT(A) ought to have taken into account the Gujarat High Court judgment in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 105 CTR (Guj) 303 : (1992) 198 ITR 598 (Guj), whereby it is held that the depreciation is deductible in computation of total income of a charitable trust. (6) Accordingly, the learned CIT(A) ought to have allowed the depreciation amounting to Rs. 6,49,856. (7) That the learned CIT(A) has grievously....
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....re made to the income of assessee-trust: 1. 1/5th repairs claimed of house property income of Rs. 2,96,702 2. Medical expenses of Rs. 79,346. Exemption under s. 11 was disallowed for the reasons that assessee did not produce registration under s. 12A of the IT Act, 1961. However, registration was produced before CIT(A) hence, disallowance of exemption under s. 11 was deleted, therefore, the only two additions of Rs. 2,96,702 and Rs. 79,346 as mentioned. above, were subject-matter of dispute. 4. The assessee-trust has earned income from house property amounting to Rs. 14,83,512 out of which a sum of Rs. 2,96,702 was claimed in the computation of income being an amount equal to 1/5th of the rental income on account of repairs. This claim of assessee was disallowed by the AO following the decision of Hon'ble Madras High Court in the case of CIT vs. Rao Bahadur Calawala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad). 5. In the aforementioned case it has been held that s. 11(1)(a) contemplates an application of the income for charitable purposes. The charity can accumulate 25 per cent of the income. The application as well as the accumulation has n....
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.... 11(1). The income from the properties held under trust would have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by s. 14. 6. The disallowance of Rs. 79,346 was made by AO on account that the said sum represents medical expenses. On scrutiny of objects of the trust he observed that according to the object No.4 of trust deed, the object was to construct hospital and it was not for the medical help to poor people. The AO observed that there being no provision in the trust deed, the claim of such expenditure, therefore, is not admissible. 7. Both the disallowances were agitated in appeal filed before CIT(A). Before CIT(A) it was pleaded that a sum of Rs. 2,96,702 being 1/5th of the income from house property is allowable as per provisions of s. 24(1)(i) of the IT Act, 1961. Reference was made to s. 5 of the IT Act, 1961 which defines the scope of total income and is subject to provisions of the Act. Referring to the wording of s. 5 it was pleaded that s. 20(1)(i) includes the scope of s. 5 and, therefore, assessee is entitled to get 1/5th deduction out of house property income as per s. 24(1)(i). In the alternative, it w....
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....eliance in this regard was placed on the decision in the case of CIT vs. Shri Plot Swetamber Murti Pujak Jain Mandal (1994) 119 CTR (Guj) 144: (1995) 211 ITR 293 (Guj). 11. So far as it relates to claim of depreciation, reliance was placed on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 105 CTR (Guj) 303 : (1992) 198 ITR 598 (Guj) wherein it has been held that income for the purpose of s. 11 has to be computed not in accordance with the provisions of the Act but in accordance with the normal rule of accountancy under which depreciation on house property has to be allowed. 12. In respect of expenses incurred with regard to medical help, he pleaded that though it is not specifically mentioned in the objects that the object of assessee is to provide medical help also but broad object has been written which is establishment of hospital. The establishment of hospital is wide enough to cover within itself the object of providing medical help and thus a narrower view has been taken by AO and the CIT(A) and this disallowance is to be deleted. 13. On the other hand, learned Departmental Representative re....
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....l Ranchhoddas Vishram Bhavan Trust. Two following questions were referred before their Lordships: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, while computing income under s. 11(1)(a) of the IT Act, 1961, depreciation has to be allowed? 2. Whether the Tribunal was right in law in holding that, having regard to the scheme of the Act, 'income'. referred to in s. 11(1)(a) of the Act is to be computed not in accordance with the provisions of the Act but in accordance with the normal rules of accountancy under which the depreciation has to be allowed while computing such income under s. 11(1)(a) of the Act?" Giving answer to the above two questions, the observations of their Lordships are as under: "2. The assessee is a trust registered under the Public Trusts Act. The income of the assessee is mainly from immovable property. In the returns of income filed for the asst. yrs. 1971-72 and 1972-73, the assessee claimed depreciation and calculated its income accordingly. The ITO has rejected the claim of the assessee as he was of the view that the income from house property was to b....
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....ation of some artificial provisions either giving or denying deduction. It observed that the computation under the different categories or heads arises only for the purposes of ascertaining the total income for the purposes of charge. Those provisions cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is, for the purpose of the exemptions under Chapter III. 6. We are in respectful agreement with the view taken by the Karnataka, Madhya Pradesh and Madras High Courts. We, therefore, answer both the questions referred to us in the affirmative and against the Revenue. No order as to costs." From the above observations it is clear that their Lordships have concurred with the decision of Hon'ble Madras High Court in the case of CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities which has been applied by AO while objecting to the claim of assessee under s. 24(1)(i) of the Act and they have approved the view that income has to be computed under the provisions of s. 11(1)(a) of the Act in the normal commercial manner without classification under the various heads set out in s. 14 and the ex....
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....at entire cost of the said building was allowed as an expenditure in the case of assessee. On the other hand, in the balance sheet the value of the building stands. Therefore, there being no supportive material with regard to this contention of learned Departmental Representative, we find no merit in such contention. Now there remains a question that whether the assessee is entitled to get depreciation? Answer to this question has also been given by the jurisdictional High Court in the aforementioned case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust wherein it was held that assessee-trust was entitled to get depreciation. The relevant observations have already been reproduced. Respectfully following the aforementioned decision of jurisdictional High Court, we direct AO to allow depreciation to the assessee. 19. On the issue of disallowance of Rs. 79,346, there is no dispute to the fact that the object of assessee-trust includes merely establishment of hospital. Establishment of hospital in itself embedded the provisions for medical help to be extended to the public. Establishment of hospital is one of the modes to provide such medical help. Taking a liberal view we ....