DCIT, Bangalore V. M/s Vidyanidhi Education Trust, Bangalore

ITA 1073/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7262 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 26-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Retrospective amendment; Question of law; Revenue expenditure
• Section: 12A; 12AA; 32; 10; 11

Judgement Text

ITA.1073/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'B', BENGALURU BEFORE SHRI. A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL MEMBER I.T.A NO.1073/BANG/2016 (ASSESSMENT YEAR : 2010-11) DEPUTY COMMISSIONER OF INCOME-TAX (EX), CIRCLE -1, BENGALURU .. APPELLANT V. VIDYANIDHI EDUCATION TRUST, NO.42/3, SHIVANAHALLI, YELAHANKA HOBLI, BENGALURU 560 064 .. RESPONDENT PAN : AAATV0825G ASSESSEE BY : SHRI. NARENDRA SHARMA, ADVOCATE REVENUE BY : SMT. PADMAMEENAKSHI, JCIT HEARD ON : 08.11.2017 PRONOUNCED ON : 10.11.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE CIT (A) -14, LTU, BENGALURU, DT.14.03.2016, FOR THE ASSESSMENT YEAR 2010-11, ON THE GROUND THAT THE CIT (A) HAS CO NFIRMED THE DISALLOWANCE OF DEPRECIATION. ITA.1073/BANG/2016 PAGE - 2 02. BRIEF FACTS ARE THAT THE ASSESSEE IS AN EDUCATI ON TRUST, WHICH FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-1 1, DECLARING TOTAL INCOME OF RS.35,15,007/-. THE AO HAS COMPLETED THE ASSESSMENT PROCEEDINGS U/S.143(3) BY DISALLOWING THEREIN THE C LAIM OF DEPRECIATION TO THE EXTENT OF RS.34,68,390/-. FEEL ING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFO RE THE CIT (A). 03. THE CIT (A) HAD ALLOWED THE GROUNDS OF APPEAL F ILED BY THE ASSESSEE. THEREFORE THE REVENUE IS IN APPEAL BEFOR E US. 04. THE LD. DR SUBMITTED THAT THE ORDER PASSED BY T HE CIT (A) WAS WITHOUT ANY BASIS AND IS THEREFORE REQUIRED TO BE S ET ASIDE. 05. ON THE OTHER HAND THE LD. AR RELIES UPON THE OR DERS PASSED BY THE CIT (A) AS ALSO THE ORDER OF THE COORDINATE BEN CH IN THE MATTER OF ACIT V. GOKULA EDUCATION FOUNDATION (MEDICAL) & TWO OTHERS [ITA NO.1609, 1610 & 1611, 1612, 1605 & 1615/BANG/2016, DT.14.07.2017]. 06. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. IN OUR VIEW, THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE COORDINATE BENCH IN GOKULA EDUC ATION FOUNDATION (MEDICAL) (SUPRA), WHEREIN THE COORDINATE BENCH HAS HELD AS UNDER : 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ISSUE RAISED IN THE PRESENT APPEALS IS SQUARELY COVERED B Y THE ORDER OF THE CO-ORDINATE BENCH IN ITA NO.899/BANG/2016 DATED 07/04/2017 IN T HE CASE OF ITO VS. SHRADDHA TRUST . THE RELEVANT PARAGRAPHS ARE REPRODUCED BELOW: ITA.1073/BANG/2016 PAGE - 3 6. GROUND NOS.1 TO 4 CHALLENGE THE DIRECTION O F THE CIT(A) ALLOWING DEPRECIATION AS PART OF APPLICATION OF INCOME OF TH E TRUST. THIS ISSUE IS NO MORE RES INTEGRA AS THE HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF CIT VS. KARNATAKA REDDY JANASANGHA (389 ITR 229)(KA R) CONSIDERING SEVERAL PRECEDENTS ON THE ISSUE, HELD THAT THE SAME DOES NOT AMOUNT TO DOUBLE DEDUCTION AND THE SAME IS ALLOWABLE AND THE AMENDED PROVISIONS OF SECTION 11(6) OF THE ACT ARE PROSPECTIVE IN NATURE AND OPERATIVE EFFECTIVE FROM 01/04/2015. THE RELEVANT PARAGRAPH OF THE JUD GMENT IS REPRODUCED BELOW: 15. THE QUESTION INVOLVED IN THIS CASE IS NO MORE RES INTEGRA. THIS QUESTION WAS CONSIDERED BY THIS COURT AS FAR BACK A S IN THE YEAR 1984, IN THE CASE OF SOCIETY OF THE SISTER'S OF ST.ANNE (SUP RA) WHEREIN THE DIVISION BENCH OF THIS COURT HAS HELD THUS: '9. IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNOT BE THE TOTAL INCOM E BECAUSE S. 11(1) SAYS THAT THE FORMER SHALL NOT BE INCLUDED IN THE LATTER , OF THE PERSON IN RECEIPT OF THE INCOME. THE EXPRESSION 'TOTAL INCOME' HAS BEEN DEFINED UNDER S. 2(45) OF THE ACT TO MEAN 'THE TOTAL AMOUNT OF INCOME REFERRE D TO IN S. 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT'. THE WORD 'INCOME ' IS DEFINED UNDER S. 2(24) OF THE ACT TO INCLUDE PROFITS AND GAINS, DIVI DENDS, VOLUNTARY PAYMENT RECEIVED BY TRUST, ETC. IT MAY BE NOTED THAT PROFIT S AND GAINS ARE GENERALLY USED IN TERMS OF BUSINESS OR PROFESSION AS PROVIDED U/S. 28. THE WORD 'INCOME', THEREFORE, IS A MUCH WIDER TERM THAN THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. NET RECEIPT AFTER DEDUCTING ALL THE NECESSARY EXPENDITURE OF THE TRUST (SIC). 10. THERE IS A BROAD AGREEMENT ON THIS PROPOSITION. BUT STILL THE CONTENTION FOR THE REVENUE IS THAT THE DEPRECIATION ALLOWANCE BEING A NOTIONAL INCOME (EXPENDITURE?) CANNOT BE ALLOWED TO BE DEBITED TO T HE EXPENDITURE ACCOUNT OF THE TRUST. THIS CONTENTION APPEARS TO PROCEED ON TH E ASSUMPTION THAT THE EXPENDITURE SHOULD NECESSARILY INVOLVE ACTUAL DELIV ERY OF OR PARTING WITH THE MONEY. IT SEEMS TO US THAT IT NEED NOT NECESSARILY BE SO. THE EXPENDITURE SHOULD BE UNDERSTOOD AS NECESSARY OUTGOINGS. THE DE PRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERTY THROUGH WEAR, DET ERIORATION OR OBSOLESCENCE AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING, ACCOUNTANCY, ETC. IN SPICER & PEGLER'S BOOK-KEEPING AND ACCOUNTS, 17TH EDN., PP. 44, 45 & 46, IT HAS BEEN NOTED AS FOLLOWS : 'DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LI FE OF A FIXED ASSET OWING TO 'USE' OR OBSOLESCENCE. IT MAY BE COMPUTED AS THAT P ART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINAL LY PUT OUT OF USE. THE ITA.1073/BANG/2016 PAGE - 4 OBJECT OF PROVIDING FOR DEPRECIATION IS TO SPREAD T HE EXPENDITURE, INCURRED IN ACQUIRING THE ASSET, OVER ITS EFFECTIVE LIFETIME; T HE AMOUNT OF THE PROVISION, MADE IN RESPECT OF AN ACCOUNTING PERIOD, IS INTENDE D TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE, WHICH HAS EXPIRED D URING THAT PERIOD.' 16. SIMILAR VIEW IS TAKEN BY THE OTHER HIGH COURTS VIZ., GUJARAT, PUNJAB AND HARYANA, DELHI, MADRAS, CALCUTTA AND MADHYA PRADESH IN THE FOLLOWING JUDGMENTS. (1) COMMISSIONER OF INCOME-TAX, V. FRAMJEE CAWASJEE INS TITUTE, 109 CTR 463 [GUJ.] ; (2) COMMISSIONER OF INCOME-TAX, V. RAIPUR PALLOTTINE SO CIETY,. [1989] 180 ITR 579 [MP] (3) COMMISSIONER OF INCOME-TAX, V. SETH MANILAL RANCHODDAS VISHRAM BHAVAN TRUST 198 ITR 598 [GUJ.] ; (4) COMMISSIONER OF INCOME-TAX, V. BHORUKA PUBLIC WELFA RE TRUST [1999] 240 ITR 513 [CAL.] ; (5) COMMISSIONER OF INCOME-TAX, V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES 135 ITR 485 (MAD.) ] (6) COMMISSIONER OF INCOME-TAX V. MARKET COMMITTEE, PIP LI [ (2011) 238 CTR (P&H) 103 ALLOWING DEPRECIATION IN SUBSEQUENT YEARS, ON THE C APITAL ASSET, WHICH HAS ALREADY AVAILED THE BENEFIT OF DEDUCTION IN COMPUTI NG THE INCOME OF THE TRUST IN THE YEAR OF ITS ACQUISITION IS CONSIDERED BY THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI (SUPRA ) AND HELD THUS: '9. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMI NG DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LE ARNED COUNSEL FOR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, T HE ASSESSEE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM T HE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO B E APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. JUDGMENT OF THE HON'BL E SUPREME COURT IN ESCORTS LTD., & ANR. (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLO WING CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. TH E QUESTIONS PROPOSED ITA.1073/BANG/2016 PAGE - 5 HAVE, THUS, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' 17. HIGH COURT OF BOMBAY IN THE CASE OF INSTITUTE O F BANKING (SUPRA) AFTER PLACING RELIANCE ON THE JUDGMENT OF CIT V. MUNISWAR AT JAIN (1994 TLR 1084) ON AN IDENTICAL ISSUE, HELD: 'IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON BEHALF OF THE REVENUE, NAMELY, THAT DEP RECIATION CAN BE ALLOWED AS DEDUCTION ONLY UNDER SECTION 32 OF THE INCOME TA X ACT AND NOT UNDER GENERAL PRINCIPLES. THE COURT REJECTED THIS ARGUMEN T. IT WAS HELD THAT NORMAL DEPRECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDU CTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES O R UNDER SECTION 11(1)(A) OF THE INCOME TAX ACT. THE COURT REJECTED THE ARGUM ENT ON BEHALF OF THE REVENUE THAT SECTION 32 OF THE INCOME TAX ACT WAS T HE ONLY SECTION GRANTING BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD THAT INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND M ACHINERY AND FURNITURE WAS LIABLE TO BE COMPUTED IN NORMAL COMMERCIAL MANN ER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING FOR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT A PPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDE R SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUS T. IN VIEW OF THE AFORE STATED JUDGMENT OF THE BOMBAY HIGH COURT, WE ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT.' 18. THE JUDGMENT IN ESCORTS LIMITED (SUPRA) WAS REN DERED BY THE APEX COURT IN THE CONTEXT OF SECTION 10(2)(VI) AND SECTI ON 10(2)(XIV) OF THE 1922 ACT OR UNDER SECTION 32(1)(II) AND SECTION 35(2)(IV ) OF THE 1965 ACT. IT WAS THE CASE OF THE ASSESSEE CLAIMING A SPECIFIED PERCE NTAGE OF THE WRITTEN DOWN VALUE OF THE ASSET AS DEPRECIATION BESIDES CLAIMING DEDUCTION IN 5 CONSECUTIVE YEARS OF THE EXPENDITURE INCURRED ON TH E ACQUISITION OF THE CAPITAL ASSET USED FOR SCIENTIFIC RESEARCH. IN SUCH CIRCUMSTANCES, THE APEX COURT HELD THUS: 'THERE IS AN APPARENT PLAUSIBILITY ABOUT THESE ARGU MENTS, PARTICULARLY IN THE CONTEXT OF THE ALLEGED DEPARTURE IN THE LANGUAG E USED BY S. 10(2)(XIV) FROM THAT EMPLOYED IN S. 20 OF THE U.K. FINANCE ACT , 1944. WE MAY, HOWEVER, POINT OUT THAT THE LAST FEW UNDERLINED WOR DS OF THE ENGLISH STATUTE SHOW THAT THERE IS REALLY NO DIFFERENCE BET WEEN THE ENGLISH AND INDIAN ACTS; THE FORMER ALSO IN TERMS PROHIBITS DEP RECIATION ONLY SO LONG AS THE ASSETS ARE USED FOR SCIENTIFIC RESEARCH. IN OUR OPINION, THE OTHER PROVISIONS OF THE ACT TO WHICH REFERENCE HAS BEEN M ADE - SOME OF WHICH ITA.1073/BANG/2016 PAGE - 6 WERE INSERTED AFTER THE PRESENT CONTROVERSY STARTED - ARE NOT HELPFUL AND WE HAVE TO CONSTRUE THE REAL SCOPE OF THE PROVISION S WITH WHICH WE ARE CONCERNED. WE THINK THAT ALL MISCONCEPTION WILL VAN ISH AND ALL THE PROVISIONS WILL FALL INTO PLACE, IF WE HEAR IN MIND A FUNDAMENTAL, THROUGH UNWRITTEN, AXIOM THAT NO LEGISLATURE COULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING, AND IF IT IS INTENDED IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE A BSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STATUTE S HOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS BOTH UNDER S. 10(2)(VI) AND S. 10(2)(XIV) UNDER THE 1922 ACT OR UNDER S. 32(1)(II) AND 35(2)(IV) OF THE 1922 ACT - QUA THE SAME EXPENDITURE. IS THEN THE US E OF THE WORDS 'IN RESPECT OF THE SAME PREVIOUS YEAR' IN CLAUSE (D) OF THE PROVISO TO S. 10(2)(XIV) OF THE 1922 ACT AND S. 35(2)(IV) OF THE 1961 ACT CONTRA- INDICATION WHICH PERMITS A DISALLOWANCE OF DEPRECIA TION ONLY IN THE PREVIOUS YEARS IN WHICH THE OTHER ALLOWANCE IS ACTU ALLY ALLOWED. WE THINK THE ANSWER IS AN EMPHATIC 'NO' AND THAT THE P URPOSE OF THE WORDS ABOVE REFERRED TO IS TOTALLY DIFFERENT. IF, AS CONT ENDED FOR BY THE ASSESSEES, THERE CAN BE NO OBJECTION IN PRINCIPLE T O ALLOWANCES BEING MADE UNDER BOTH THE PROVISIONS AS THEIR NATURE AND PURPOSE ARE DIFFERENT, THEN THE INTERDICT DISALLOWING A DOUBLE DEDUCTION WILL BE MEANINGLESS EVEN IN RESPECT OF THE PREVIOUS YEARS F OR WHICH DEDUCTION IS ALLOWED UNDER S. 10(2)(XIV)/S. 35 IN RESPECT OF THE SAME ASSET. IF THAT WERE THE CORRECT PRINCIPLE, THE ASSESSEE SHOULD LOG ICALLY BE ENTITLED TO DEDUCTION BY WAY OF DEPRECIATION FOR ALL PREVIOUS Y EARS INCLUDING THOSE FOR WHICH ALLOWANCE HAVE BEEN GRANTED UNDER THE PRO VISION RELATING TO SCIENTIFIC RESEARCH. THE STATUTE DOES NOT PERMIT TH IS. THE RESTRICTION IMPOSED WOULD, THEREFORE, BE ILLOGICAL AND UNJUSTIF IED ON THE BASIS SUGGESTED BY THE ASSESSEES. ON THE OTHER HAND, IF W E ACCEPT THE PRINCIPLE WE HAVE OUTLINED EARLIER VIZ. THAT, THERE IS A BASI C LEGISLATIVE SCHEME, UNSPOKEN BUT CLEARLY UNDERLYING THE ACT, THAT TWO A LLOWANCES CANNOT BE, AND ARE NOT INTENDED TO BE, GRANTED IN RESPECT OF T HE SAME ASSET OR EXPENDITURE, ONE WILL EASILY SEE THE NECESSITY FOR THE LIMITATION IMPOSED BY THE QUOTED WORDS. FOR, IN THIS VIEW, WHERE THE C APITAL ASSET IS ONE OF THE NATURE SPECIFIED, THE ASSESSEE CAN GET ONLY ONE OF THE TWO ALLOWANCES IN QUESTION BUT NOT BOTH.' 19. SECTION 11 OF THE ACT DEALS WITH APPLICATION OF INCOME DIFFERENT FROM REVENUE EXPENDITURE OR ALLOWANCE. THUS, THE JUDGMEN T OF THE APEX COURT IN THE CASE OF ESCORTS LTD., (SUPRA) IS DISTINGUISHABL E AND AS SUCH IS NOT APPLICABLE TO THE CHARITABLE TRUSTS WHERE INCOME IS TO BE COMPUTED UNDER CHAPTER III OF THE ACT. ACCORDINGLY, THE JUDGMENT O F LISSIE MEDICAL INSTITUTIONS (SUPRA) BASED ON ESCORTS LTD., (SUPRA) , IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. ITA.1073/BANG/2016 PAGE - 7 20. IT IS ALSO TO BE NOTICED THAT WHILE IN THE YEAR OF ACQUIRING THE CAPITAL ASSET, WHAT IS ALLOWED AS EXEMPTION IS THE INCOME O UT OF WHICH SUCH ACQUISITION OF ASSET IS MADE AND WHEN DEPRECIATION DEDUCTION IS ALLOWED IN THE SUBSEQUENT YEARS, IT IS FOR THE LOSSES OR EXPEN SES REPRESENTING THE WEAR AND TEAR OF SUCH CAPITAL ASSET INCURRED IF, NOT ALL OWED THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING ITS I NCOME AS HELD IN SOCIETY OF SISTERS OF ST. ANNE (SUPRA). THIS JUDGMENT OF CO-OR DINATE BENCH OF THIS COURT IS BINDING ON US AND WE HAVE NO REASONS TO DISTURB THE SETTLED POSITION OF LAW AT THIS LENGTH OF TIME/DEPART FROM THE SAID REASONI NG. AS SUCH, THE ARGUMENTS ADVANCED BY THE REVENUE APPREHENDING DOUBLE DEDUCTI ON IS TOTALLY MISCONCEIVED. 21. SECTION 11[6] INSERTED WITH EFFECT FROM 1.4.201 5 BY FINANCE ACT NO. 2/2014, READS AS UNDER: '(6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED T O BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWA NCE 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.' 22. THE PLAIN LANGUAGE OF THE AMENDMENT ESTABLISHES THE INTENT OF THE LEGISLATURE IN DENYING THE DEPRECIATION DEDUCTION I N COMPUTING THE INCOME OF CHARITABLE TRUST IS TO BE EFFECTIVE FROM 1.4.2015. THIS VIEW IS FURTHER SUPPORTED BY THE NOTES ON CLAUSES IN FINANCE [NO. 2 ] BILL, 2014, MEMO EXPLAINING PROVISIONS AND CIRCULARS ISSUED BY THE C ENTRAL BOARD OF DIRECT TAXES IN THIS REGARD. CLAUSE NO. 7 OF THE NOTES ON CLAUSES READS THUS: 'CLAUSE 7. OF THE BILL SEEKS TO AMEND SECTION 11 OF THE INCOME-TAX ACT RELATING INCOME FROM PROPERTY HELD FOR CHARITABLE O R RELIGIOUS PURPOSES. THE EXISTING PROVISIONS OF THE AFORESAID SECTION CONTAI N A PRIMARY CONDITION THAT FOR GRANT OF EXEMPTION IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, SUCH INCOME SHOULD BE APPLIED FOR THE CHARIT ABLE PURPOSES IN INDIA, AND WHERE SUCH INCOME CANNOT BE SO APPLIED DURING T HE PREVIOUS YEAR, IT HAS TO BE ACCUMULATED IN THE PRESCRIBED MODES. IT IS PR OPOSED TO INSERT SUB- SECTIONS (6) AND (7) IN THE SAID SECTION SO AS TO P ROVIDE THAT (I) WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUM ULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHO UT, ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATI ON OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS B EEN CLAIMED AS AN APPLICATION OF INCOME UNDER THIS SECTION IN ANY PRE VIOUS YEAR, AND ITA.1073/BANG/2016 PAGE - 8 (II) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB- SECTION (1) OF SECTION 12AA OR HAS OBTAINED REGISTR ATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE IS AMEND MENT BY THE FINANCE (NO. 2) ACT, 1996] AND THE SAID REGISTRATION IS IN FORCE FOR ANY PREVIOUS YE AR, THEN, NOTHING CONTAINED IN SECTION 10 [OTHER TH AN CLAUSE (1) AND CLAUSE (23C) THEREOF] SHALL OPERATE TO EXCLUDE ANY INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST FROM THE TOTAL INCOME OF THE PERSON IN RECEIPT THEREOF FOR THAT PREVIOUS YEAR. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2015-16 AN D SUBSEQUENT YEARS'. THE MEMO EXPLAINING THE PROVISIONS IN FINANCE [NO. 2] BILL, 2014 READS THUS: 'THE SECOND ISSUE WHICH HAS ARISEN IS THAT THE EXIS TING SCHEME OF SECTION 11 AS WELL AS SECTION 10(23C) PROVIDES EXEMPTION IN RE SPECT OF INCOME WHEN IT IS APPLIED TO ACQUIRE A CAPITAL ASSET. SUBSEQUENTLY , WHILE COMPUTING THE INCOME FOR PURPOSES OF THESE SECTIONS, NOTIONAL DED UCTION BY WAY OF DEPRECIATION ETC. IS CLAIMED AND SUCH AMOUNT OF NOT IONAL DEDUCTION REMAINS TO BE APPLIED FOR CHARITABLE PURPOSE. THEREFORE, DO UBLE BENEFIT IS CLAIMED BY THE TRUSTS AND INSTITUTIONS UNDER THE EXISTING LAW. THE PROVISIONS NEED TO BE RATIONALIZED TO ENSURE THAT DOUBLE BENEFIT IS NOT C LAIMED AND SUCH NOTIONAL AMOUNT DOES NOT EXCLUDED FROM THE CONDITION OF APPL ICATION OF INCOME FOR CHARITABLE PURPOSE'. 23. PARAGRAPHS 7.5, 7.5.1, 7.6 OF CENTRAL BOARD OF DIRECT TAXES CIRCULAR REPORTED IN 371 ITR 22 MAKES IT CLEAR THAT THE SAID AMENDMENT SHALL TAKE EFFECT FROM 1.4.2015 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2015-16 AND SUBSEQUENT ASSESSMENT YEARS. 24. THE CONSTITUTION BENCH OF THE APEX COURT IN VAT IKA TOWNSHIP (P.) LTD.'S CASE (SUPRA), HAD LAID DOWN GENERAL PRINCIPLES CONC ERNING RETROSPECTIVITY IN PARAGRAPHS 33 AND 34, AND THE SAME IS EXTRACTED HER EUNDER: '33. WE WOULD ALSO LIKE TO POINT OUT, FOR THE SAKE OF COMPLETENESS, THAT WHERE A BENEFIT IS CONFERRED BY A LEGISLATION, THE RULE A GAINST A RETROSPECTIVE CONSTRUCTION IS DIFFERENT. IF A LEGISLATION CONFERS A BENEFIT ON SOME PERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY, AND WHERE TO CONFER SUCH BENE FIT APPEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE THAT SUCH A LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WOULD WARRANT I T TO BE GIVEN A RETROSPECTIVE EFFECT. THIS EXACTLY IS THE JUSTIFICA TION TO TREAT PROCEDURAL PROVISIONS AS RETROSPECTIVE. IN GOVERNMENT OF INDIA & ORS. V. INDIAN ITA.1073/BANG/2016 PAGE - 9 TOBACCO ASSOCIATION, THE DOCTRINE OF FAIRNESS WAS H ELD TO BE RELEVANT FACTOR TO CONSTRUE A STATUTE CONFERRING A BENEFIT, IN THE CONTEXT OF IT TO BE GIVEN A RETROSPECTIVE OPERATION. THE SAME DOCTRINE OF FAIRN ESS, TO HOLD THAT A STATUTE WAS RETROSPECTIVE IN NATURE, WAS APPLIED IN THE CAS E OF VIJAY V. STATE OF MAHARASHTRA & ORS. IT WAS HELD THAT WHERE A LAW IS ENACTED FOR THE BENEFIT OF COMMUNITY AS A WHOLE, EVEN IN THE ABSENCE OF A P ROVISION THE STATUTE MAY BE HELD TO BE RETROSPECTIVE IN NATURE. HOWEVER, WE ARE CONFRONTED WITH ANY SUCH SITUATION HERE. 34. IN SUCH CASES, RETROSPECTIVELY IS ATTACHED TO B ENEFIT THE PERSONS IN CONTRADISTINCTION TO THE PROVISION IMPOSING SOME BU RDEN OR LIABILITY WHERE THE PRESUMPTION ATTACHES TOWARDS PROSPECTIVITY. IN THE INSTANT CASE, THE PROVISO ADDED TO SECTION 113 OF THE ACT IS NOT BENE FICIAL TO THE ASSESSEE. ON THE CONTRARY, IT IS A PROVISION WHICH IS ONEROUS TO THE ASSESSEE. THEREFORE, IN A CASE LIKE THIS, WE HAVE TO PROCEED WITH THE NORMA L RULE OF PRESUMPTION AGAINST RETROSPECTIVE OPERATION. THUS, THE RULE AGA INST RETROSPECTIVE OPERATION IS A FUNDAMENTAL RULE OF LAW THAT NO STAT UTE SHALL BE CONSTRUED TO HAVE A RETROSPECTIVE OPERATION UNLESS SUCH A CONSTR UCTION APPEARS VERY CLEARLY IN THE TERMS OF THE ACT, OR ARISES BY NECES SARY AND DISTINCT IMPLICATION. DOGMATICALLY FRAMED, THE RULE IS NO MO RE THAN A PRESUMPTION, AND THUS COULD BE DISPLACED BY OUTWEIGHING FACTORS' . 25. THE APEX COURT IN THE SAID JUDGMENT, WHILE INTE RPRETING THE PROVISO, WHETHER TO BE APPLIED RETROSPECTIVELY OR PROSPECTIV ELY, HAS CONSIDERED THE NOTES ON CLAUSES APPENDED, THE FINANCE BILL AND THE UNDERSTANDING OF THE CENTRAL BOARD OF DIRECT TAXES IN THIS REGARD. THE A PEX COURT HAS ALSO TAKEN COGNIZANCE OF THE FACT THAT THE LEGISLATURE IS FULL Y AWARE OF 3 CONCEPTS INSOFAR AS AMENDMENTS MADE TO A STATUTE: (I) PROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIXED DAT E; (II) RETROSPECTIVE AMENDMENTS WITH EFFECT FROM A FIXED A NTERIOR DATE; AND (III) CLARIFICATORY AMENDMENTS WHICH ARE PROSPECTIVE IN N ATURE. KEEPING IN VIEW, THE AFORESAID PRINCIPLES ENUNCIATE D BY THE APEX COURT, IN VATIKA TOWNSHIP (P.) LTD.'S CASE (SUPRA), IT WOULD BE SAFELY HELD THAT SECTION 11(6) OF THE ACT IS PROSPECTIVE IN NATURE AND OPERA TES WITH EFFECT FROM 01.04.2015. THIS IS FURTHER CLARIFIED WHEN COMPARED WITH CERTAIN OTHER PROVISIONS WHICH HAVE BEEN MADE RETROSPECTIVELY IN THE SAME FINANCE ACT. 26. FOR THE FOREGOING REASONS, WE ANSWER THE QUESTI ON OF LAW IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 27. IN THE RESULT, ALL THE APPEALS ARE DISMISSED.' ITA.1073/BANG/2016 PAGE - 10 5. IN VIEW OF THE ABOVE, AS THE QUESTIONS ARE ALREADY COVERED BY THE DECISION OF THIS COURT AS CONCEDED BY THE LEARNED COUNSEL FOR T HE APPELLANTS-REVENUE, IT CANNOT BE SAID THAT ANY SUBSTANTIAL QUESTION OF LAW WOULD ARISE FOR CONSIDERATION. THE DECISION OF THE CIT(A) IS IN CONSONANCE WITH TH E LAW LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KA RNATAKA REDDY JANASANGHA (SUPRA) IN THE ABOVE CASE. WE DO NOT FI ND ANY FALLACY IN THE REASONING ADOPTED BY THE CIT(A). HENCE, THE GROUND S OF APPEAL NO.1 TO 4 ARE DISMISSED. 7. THE OTHER GROUNDS OF APPEAL RELATES TO WHET HER ACCUMULATION OF INCOME SHOULD BE ON GROSS RECEIPT OR NET INCOME AFT ER DEDUCTING THE EXPENDITURE, IS COVERED BY THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ORGANISATIO N (248 ITR 1)(SC) WHEREIN IT WAS HELD THAT 25% SHOULD BE CALCULATED O N THE GROSS RECEIPTS OF INCOME AND NOT ON THE NET INCOME. THEREFORE, THESE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. . . . . . FOLLOWING THE RATIO LAID DOWN IN THE ABOVE DECISION OF THE COORDINATE BENCH, WE DISMISS THE GROUNDS OF APPEAL RAISED BY T HE REVENUE. 07. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF NOVEMBER, 2017. SD/- SD/- (A. K. GARODIA) (LALIT KUMAR) ACCOUNTANT MEMBER JUDICIAL M EMBER BENGALURU DATED : 10.11.2017 MCN* ITA.1073/BANG/2016 PAGE - 11 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY