Foundation for Ecological Research Advocacy and Learning, CHENNAI V. ITO, Pondicherry

ITA 1330/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7927 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2016
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Charitable institution; Scheme of amalgamation; Capital expenditure
• Section: 12AA; 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1330/MDS./2016 / ASSESSMENT YEAR : 2011-12 FOUNDATION FOR ECOLOGICAL RESEARCH ADVOCACY AND LEARNING , NO.170/3,MORATTANDI,AUROVILLE POST,VANUR TK, VILLUPURAM DIST 605 101. VS. ITO WARD 1(1) PONDICHERRY [PAN AAATF0264H ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.T.VASUDEVAN,ADVOCATE /RESPONDENT BY : MR.SHIVA SRINIVAS, JCIT,D.R / DATE OF HEARING : 04 - 1 0 - 201 6 !' / DATE OF PRONOUNCEMENT : 30 - 11 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), PUDUCHER RY DATED 23.02.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. ITA NO.1330 /MDS./2016 :- 2 -: 2. IN THIS APPEAL, THE MAIN GRIEVANCE OF THE ASSES SEE IS THAT THE LD.CIT(A) ERRED IN APPRECIATING THAT DEPRECIATION O N ASSETS IS GOVERNED BY THE PROVISIONS OF THE SECTION 32 OF THE ACT AND THE SAID SECTION IS APPLICABLE TO ALL ASSESSEES INCLUDING CHARITABLE TR USTS. FURTHER, BY VIRTUE OF EXPLANATION 5 TO SEC.32, DEPRECIATION IS A MANDATORY ALLOWANCE AND THE SAME CANNOT BE DENIED TO THE ASSE SSEE COMPANY. 3. THE FACTS OF THE ISSUE ARE THAT ASSESSEE TRUST CLAIMED DEPRECIATION U/S.11 OF THE ACT. THE AO COMPLETED TH E ASSESSMENT U/S.143(3) OF THE ACT VIDE ORDER DATED 24..12.2013 DETERMINING THE TOTAL INCOME OF ` 5,43,970/-. WHILE DOING SO, THE AO HAD DISALLOWED T HE DEPRECIATION OF ` 5,44,481/- CLAIMED BY THE ASSESSEE BY STATING THAT PURCHASE OF THE ASSET HAS BEEN TREATED AS APPLICATI ON OF INCOME, HENCE THE CLAIM OF DEPRECIATION WOULD AMOUNT TO DOUBLE DE DUCTION WHILE GRANTING EXEMPTION U/S.11 OF THE ACT. AGAINST THIS , THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). 4. ON APPEAL LD.CIT(A) OBSERVED THAT ONCE THE INV ESTMENT IN FIXED ASSET IS CLAIMED AS APPLICATION OF INCOME, CO RRESPONDINGLY THE DEPRECIATION CANNOT BE ALLOWED. FOR THIS PURPOSE HE RELIED ON THE VARIOUS JUDGEMNETS OF THE TRIBUNAL. AGAINST THIS, T HE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US, THE LD.A.R PLACED RELIANCE ON THE JU DGEMENT OF KARNATAKA HIGH COURT IN THE CASE OF PR.CIT VS. SRI ADHICHUNCHUNGIRI ITA NO.1330 /MDS./2016 :- 3 -: SHIKSHANA TRUST ADICHUNCHUNGIRI KSHETRA NAGAMANGALA TALUK MANDYA IN ITA NO.384 OF 2016 VIDE ORDER DATED 28 TH JUNE 2016 WHEREIN HELD THAT THE ASSESSEE IS ENTITLED FOR CLAIMING DEPRECIA TION ON CAPITAL ASSETS, EVEN THOUGH IN EARLIER YEAR THE COST OF FIXED ASSET IS ALLOWED AS AN APPLICATION OF INCOME AND PROVISIONS OF THE SECTION 11(6) OF THE ACT IS PROSPECTIVE NATURE AND OPERATES WITH EFFECT FROM 01 .04.2015. 6. ON THE OTHER HAND, LD.D.R RELIED ON ORDER OF LO WER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE IS SQUARELY COVE RED BY THE LATEST DECISION OF CO-ORDINATE BENCH IN THE CASE OF THE MU SIC ACADEMY MADRAS, CHENNAI IN ITA NO.1098/MDS./2015 DATED 22.0 4.2016 WHEREIN HELD THAT: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECO RD. THE ISSUE ARISES FOR CONSIDERATION IS WHETHER A CHARITABLE IN STITUTION IS ELIGIBLE FOR DEPRECIATION IN RESPECT OF ITS ASSET, WHICH WAS USED AS A TOOL FOR CARRYING OUT ITS OBJECT. DEPRECIATION I S PROVIDED UNDER SECTION 32 OF THE ACT, WHICH READS AS FOLLOWS:- DEPRECIATION 32 (1) IN RESPECT OF DEPRECIATION OF-- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE BEING TANGIBLE ASSETS ; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGH TS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTE R THE 1ST DAY OF APRIL, 1998, ITA NO.1330 /MDS./2016 :- 4 -: OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWIN G DEDUCTIONS SHALL BE ALLOWED-- (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCE NTAGE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESC RIBED. (II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED: PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED UNDER THIS CLAU SE IN RESPECT OF--(A) ANY MOTOR CAR MANUFACTURED OUTSIDE INDIA, WHERE SUCH MOTOR CAR IS ACQIRED BY THE ASSESSEE AFTER THE 28TH DAY OF FEBRUARY, 1975 5BUT BEFORE THE 1ST DAY OF APRIL, 20 01, UNLESS IT IS USED--(I) IN A BUSINESS OF RUNNING IT ON HIRE FO R TOURISTS; OR(II) OUTSIDE INDIA IN HIS BUSINESS OR PROFESSION IN ANOT HER COUNTRY ; AND(B) ANY MACHINERY OR PLANT IF THE ACTUAL COST TH EREOF IS ALLOWED AS A DEDUCTION IN ONE OR MORE YEARS UNDER A N AGREEMENT ENTERED INTO BY THE CENTRAL GOVERNMENT UNDER SECTIO N 42: PROVIDED FURTHER THAT WHERE ANY ASSET REFERRED TO IN CLAUSE (I) OR CLAUSE (II) OR CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DA YS IN THAT PREVIOUS YEAR, THE DEDUCTION UNDER THIS SUB-SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTED TO FIFTY PER CENT. O F THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR AN ASSE T UNDER CLAUSE (I) 6OR CLAUSE (II) OR CLAUSE (IIA), AS THE CASE MAY BE: PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTIO N UNDER THIS SUB-SECTION IN RESPECT OF SUCH ASSET IS RESTRICTED TO FIFTY PER CENT. OF THE AMOUNT CALCULATED AT THE PERCENTAGE PR ESCRIBED FOR AN ASSET UNDER CLAUSE (IIA) FOR THAT PREVIOUS YEAR, THEN, THE DEDUCTION FOR THE BALANCE FIFTY PER CENT. OF THE AM OUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR SUCH AS SET UNDER CLAUSE (IIA) SHALL BE ALLOWED UNDER THIS SUB-SECTIO N IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET : PROVIDED ALSO THAT WHERE AN ASSET BEING COMMERCIAL VEHICLE IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, ITA NO.1330 /MDS./2016 :- 5 -: 1998, BUT BEFORE THE 1ST DAY OF APRIL, 1999, AND IS PUT TO USE BEFORE THE 1ST DAY OF APRIL, 1999, FOR THE PURPOSES OF BUSINESS OR PROFESSION, THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE ALLOWED ON SUCH PERCENTAGE ON THE WRITTEN DOWN VALU E THEREOF AS MAY BE PRESCRIBED. EXPLANATION FOR THE PURPOSES OF THIS PROVISO,-- (A) THE EXPRESSION 'COMMERCIAL VEHICLE' MEANS 'HEAV Y GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT M OTOR VEHICLE', 'MEDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT DOES NOT INCLUDE 'MAXI CAB', 'MOTOR-CAB', 'TRAC TOR' AND 'ROAD-ROLLER' ; (B) THE EXPRESSIONS 'HEAVY GOODS VEHICLE', 'HEAVY P ASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOOD S VEHICLE', 'MEDIUM PASSENGER MOTOR VEHICLE', 'MAXI-CAB', 'MOTO R-CAB', 'TRACTOR' AND 'ROAD-ROLLER' SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHIC LES ACT, 1988 (59 OF 1988). PROVIDED ALSO THAT, IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF AP RIL, 1991, THE DEDUCTION IN RELATION TO ANY BLOCK OF ASSETS UN DER THIS CLAUSE SHALL, IN THE CASE OF A COMPANY, BE RESTRICTED TO S EVENTY-FIVE PER CENT.OF THE AMOUNT CALCULATED AT THE PERCENTAGE, ON THE WRITTEN DOWN VALUE OF SUCH ASSETS, PRESCRIBED UNDER THIS AC T IMMEDIATELY BEFORE THE COMMENCEMENT OF THE TAXATION LAWS (AMEND MENT) ACT, 1991. PROVIDED ALSO THAT THE AGGREGATE DEDUCTION, IN RESPECT OF DEPRECIATION OF BUILDINGS, MACHINERY, PLANT OR FURN ITURE, BEING TANGIBLE ASSETS OR KNOW-HOW, PATENTS, COPYRIGHTS, T RADEMARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMME RCIAL RIGHTS OF SIMILAR NATURE, BEING INTANGIBLE ASSETS ALLOWABLE T O THE PREDECESSOR AND THE SUCCESSOR IN THE CASE OF SUCCES SION REFERRED TO IN CLAUSE (XIII), CLAUSE (XIIIB) AND CLAUSE (XIV ) OF SECTION 47 OR SECTION 170 OR TO THE AMALGAMATING COMPANY AND THE AMALGAMATED COMPANY IN THE CASE OF AMALGAMATION, OR TO THE DEME RGED COMPANY AND THE RESULTING COMPANY IN THE CASE OF DE MERGER, AS THE CASE MAY BE, SHALL NOT EXCEED IN ANY PREVIOUS Y EAR THE DEDUCTION CALCULATED AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AMALGAMATION OR THE DEMERGER, AS THE CASE MA Y BE, HAD NOT TAKEN PLACE, AND SUCH DEDUCTION SHALL BE APPORT IONED BETWEEN THE PREDECESSOR AND THE SUCCESSOR, OR THE AMALGAMAT ING COMPANY AND THE AMALGAMATED COMPANY, OR THE DEMERGED COMPAN Y AND THE ITA NO.1330 /MDS./2016 :- 6 -: RESULTING COMPANY, AS THE CASE MAY BE, IN THE RATIO OF THE NUMBER OF DAYS FOR WHICH THE ASSETS WERE USED BY THEM. EXPLANATION 1. WHERE THE BUSINESS OR PROFESSION OF THE ASSESSEE IS CARRIED ON IN A BUILDING NOT OWNED BY H IM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHE R RIGHT OF OCCUPANCY AND ANY CAPITAL EXPENDITURE IS INCURRED B Y THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON T HE CONSTRUCTION OF ANY STRUCTURE OR DOING OF ANY WORK, IN OR IN RELATION TO, AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING, THEN, THE PROVISIONS OF THIS CLAUSE SHALL APPLY AS IF THE SAID STRUCTURE OR WORK IS A B UILDING OWNED BY THE ASSESSEE. EXPLANATION 2. FOR THE PURPOSES OF THIS SUB-SECTION 'WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS' SHALL HAVE THE S AME MEANING AS IN CLAUSE (C) OF SUB-SECTION (6) OF SECTION 43; EXPLANATION 3. FOR THE PURPOSES OF THIS SUB-SECTION , 10THE EXPRESSIONS 'ASSETS' SHALL MEAN-- (A) TANGIBLE ASSETS, BEING BUILDINGS, MACHINERY, PL ANT OR FURNITURE ; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COP YRIGHTS, TRADE MARKS, LICENCES, FRANCHISES OR ANY OTHER BUSINESS O R COMMERCIAL RIGHTS OF SIMILAR NATURE. EXPLANATION 4. FOR THE PURPOSES OF THIS SUB-SECTION , THE EXPRESSION 'KNOW-HOW' MEANS ANY INDUSTRIAL INFORMAT ION OR TECHNIQUE LIKELY TO ASSIST IN THE MANUFACTURE OR PR OCESSING OF GOODS OR IN THE WORKING OF A MINE, OIL-WELL OR OTHE R SOURCES OF MINERAL DEPOSITS (INCLUDING SEARCHING FOR DISCOVERY OR TESTING OF DEPOSITS FOR THE WINNING OF ACCESS THERETO) ; EXPLANATION 5. FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT O F DEPRECIATION IN COMPUTING HIS TOTAL INCOME ; (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLE D AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THIN G, A FURTHER SUM EQUAL TO TWENTY PER CENT. OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II) : PROVIDED THATWHERE AN ASSESSEE, SETS UP AN UNDERTAKING OR ENTERPRISE FOR MANUFACTURE OR PRODUCTION OF ANY ART ICLE OR THING, ON OR AFTER THE 1ST DAY OF APRIL, 2015 IN ANY BACKW ARD AREA NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF, IN THE STATE OF ANDHRA PRADESH OR IN THE STATE OF BIHAR OR IN THE S TATE OF TELANGANA OR IN THE STATE OF W EST BENGAL, AND ACQUIRES AND ITA NO.1330 /MDS./2016 :- 7 -: INSTALLS ANY NEW MACHINERY OR PLANT (OTHER THAN SHI PS AND AIRCRAFT) FOR THE PURPOSES OF THE SAID UNDERTAKING OR ENTERPRISE DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL , 2015 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2020 IN THE SAI D BACKWARD AREA, THEN, THE PROVISIONS OF CLAUSE (IIA) SHALL HA VE EFFECT, AS IF FOR THE WORDS TWENTY PER CENT., THE WORDS THIRTY -FIVE PER CENT. HAD BEEN SUBSTITUTED : PROVIDED FURTHER NO DEDUCTION SHALL BE ALLOWED IN RESPECT O F- (A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTAL LATION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA B Y ANY OTHER PERSON ; OR (B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE ; OR (C) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLE S ; OR (D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPREC IATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' OF AN Y ONE PREVIOUS YEAR ; (III) IN THE CASE OF ANY BUILDING, MACHINERY, PLANT OR FURNITURE IN RESPECT OF WHICH DEPRECIATION IS CLAIMED AND ALLOWE D UNDER CLAUSE (I) AND WHICH IS SOLD, DISCARDED, DEMOLISHED OR DES TROYED IN THE PREVIOUS YEAR (OTHER THAN THE PREVIOUS YEAR IN WHIC H IT IS FIRST BROUGHT INTO USE), THE AMOUNT BY WHICH THE MONEYS P AYABLE IN RESPECT OF SUCH BUILDING, MACHINERY, PLANT OR FURNI TURE, TOGETHER WITH THE AMOUNT OF SCRAP VALUE, IF ANY, FALL SHORT OF THE WRITTEN DOWN VALUE THEREOF : PROVIDED THAT SUCH DEFICIENCY IS ACTUALLY WRITTEN OFF IN TH E BOOKS OF THE ASSESSEE. EXPLANATION FOR THE PURPOSES OF THIS CLAUSE,-- (1) 'MONEYS PAYABLE' IN RESPECT OF ANY BUILDING, MA CHINERY, PLANT OR FURNITURE INCLUDES-- (A) ANY INSURANCE, SALVAGE OR COMPENSATION MONEYS P AYABLE IN RESPECT THEREOF ; (B) WHERE THE BUILDING, MACHINERY, PLANT OR FURNITU RE IS SOLD, THE PRICE FOR WHICH IT IS SOLD, SO, HOWEVER, THAT WHERE THE ACTUAL COST OF A MOTOR CAR IS, IN ACCORDANCE WITH THE PROVISO TO CLAUSE (1) OF SECTIO N 43, TAKEN TO BE TWENTY-FIVE THOUSAND RUPEES, THE MONEYS PAYABLE IN RESPECT OF SUCH MOTOR CAR SHALL BE TAKEN TO BE A SUM WHICH BEA RS TO THE AMOUNT FOR WHICH THE MOTOR CAR IS SOLD OR, AS THE C ASE MAY BE, ITA NO.1330 /MDS./2016 :- 8 -: THE AMOUNT OF ANY INSURANCE, SALVAGE OR COMPENSATIO N MONEYS PAYABLE IN RESPECT THEREOF (INCLUDING THE AMOUNT OF SCRAP VALUE, IF ANY) THE SAME PROPORTION AS THE AMOUNT OF TWENTY -FIVE THOUSAND RUPEES BEARS TO THE ACTUAL COST OF THE MOT OR CAR TO THE ASSESSEE AS IT WOULD HAVE BEEN COMPUTED BEFORE APPL YING THE SAID PROVISO (2) 'SOLD' INCLUDES A TRANSFER BY WAY OF EXCHANGE O R A COMPULSORY ACQUISITION UNDER ANY LAW FOR THE TIME BEING IN FOR CE BUT DOES NOT INCLUDE A TRANSFER, IN A SCHEME OF AMALGAMATION, OF ANY ASSET BY THE AMALGAMATING COMPANY TO THE AMALGAMATED COMPANY WHERE THE AMALGAMATED COMPANY IS 8AN INDIAN COMPANY OR IN A SCHEME OF AMALGAMATION OF A BANKING COMPANY, AS REFERRED T O IN CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 194 9 (10 OF 1949), WITH A BANKING INSTITUTION AS REFERRED TO IN SUB-SE CTION (15) OF SECTION 45 OF THE SAID ACT, SANCTIONED AND BROUGHT INTO FORCE BY THE CENTRAL GOVERNMENT UNDER SUB-SECTION (7) OF SEC TION 45 OF THAT ACT, OF ANY ASSET BY THE BANKING COMPANY TO TH E BANKING INSTITUTION. (2) WHERE, IN THE ASSESSMENT OF THE ASSESSEE, FULL EFFECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING TO THERE BEING NO PROFITS OR GAINS CHAR GEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHA RGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVI SIONS OF SUB- SECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SE CTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFF ECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO T HE AMOUNT OF THE ALLOWANCE FOR DEPRECIATION FOR THE FOLLOWING PR EVIOUS YEAR AND DEEMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE T HE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDIN G PREVIOUS YEARS. A BARE READING OF SECTION 32 OF THE ACT CLEARLY SAY S THAT DEPRECIATION HAS TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME ON BUILDING, MACHINERY, PLANT, ETC. WHICH IS OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS. DEPRECIATION IS NOTHING BUT AN INHERENT DECLINE IN THE VALUE OF THE ASSET FROM WEAR AND TEAR. IN RESPECT OF THE BUSIN ESS ASSETS, THE PARLIAMENT THOUGHT IT FIT IN THEIR WISDOM TO ALLOW DEPRECIATION FOR WEAR AND TEAR OF THE BUILDING, MACHINERY, PLANT, ET C. DEPRECIATION IN CERTAIN CASES IS TREATED AS EXPENDI TURE LAID OUT ITA NO.1330 /MDS./2016 :- 9 -: OVER THE YEARS DURING THE LIFE TIME OF THE MACHINER Y. IN OTHER WORDS, THE VALUE OF THE ASSET, MACHINERY, ETC. REDU CED PRO TANTO. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DEPRECIATION IS SPREAD OVER DURING THE EFFECTIVE LIFE TIME OF THE M ACHINERY OR ASSET, ETC. USED FOR BUSINESS BY ALLOWING THE SAME AS DEDUCTION ON NOTIONAL BASIS. THE AMOUNT OF DEPRECIATION ALLOWED IN A PARTICULAR YEAR IS INTENDED TO REPRESENT THE LIFE OF THE MACHI NERY SUCH AS EXPENDITURE DURING THE ABOVE SAID PERIOD. IN OTHER WORDS, THE VALUE OF THE MACHINERY WAS SPREAD OVER FOR THE EFFE CTIVE LIFE TIME OF THE ASSET AND A PROVISION WAS MADE BY WAY OF NOT IONAL DEDUCTION TO REPLACE THE MACHINERY AFTER EXPIRY OF ITS ENTIRE LIFE TIME. THEREFORE, THE LEGISLATURE PROVIDED DEPRECIA TION UNDER SECTION 32 OF THE ACT AS AN INCENTIVE/ALLOWANCE TO THE ASSET WHICH WAS USED FOR THE BUSINESS OR PROFESSION. THIS CAN BE CONSTRUED AS REDUCTION IN VALUE IN THE BALANCE SHEET WHILE COMPU TING THE INCOME FROM BUSINESS OR PROFESSION. 7. SECTION 32(1) OF THE ACT CLEARLY SAYS THAT THE A SSET OWNED WHOLLY OR PARTLY BY THE ASSESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN VIEW OF THE LANGUAGE E MPLOYED BY THE PARLIAMENT, THE ASSET USED FOR THE PURPOSE OF BUSIN ESS OR PROFESSION ALONE ELIGIBLE FOR DEPRECIATION.THE INCO ME-TAX ACT DOES NOT PROVIDE FOR DEPRECIATION IN RESPECT OF THE ASSE T OTHER THAN THE ONE WHICH IS USED FOR BUSINESS OR PROFESSION. THERE FORE, IT IS FOR THE ASSESSEE TO ESTABLISH THAT THE ASSESSEE IS CARR YING ON ANY BUSINESS OR PROFESSION. IN THE CASE BEFORE US, THE ADMITTED CASE OF THE ASSESSEE IS THAT THE ASSESSEE IS NOT CARRYIN G ON ANY BUSINESS OR PROFESSION. THEREFORE, WHATEVER BE THE NATURE OF THE ASSET, WHICH WAS USED AS A TOOL FOR CARRYING OUT TH E OBJECT OF THE CHARITABLE INSTITUTION, CANNOT BE CONSTRUED AS AN A SSET WHICH IS USED FOR THE BUSINESS OR PROFESSION OF THE ASSESSEE . THEREFORE, ITA NO.1330 /MDS./2016 :- 10 - : THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 OF THE INCOME-TAX ACT. 8. THE LD.COUNSEL FOR THE ASSESSEE HAS ALSO CLARIFI ED THAT THE ASSESSEE IS NOT CLAIMING DEPRECIATION UNDER SECTION 32 OF THE ACT. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS CLAIM ING DEPRECIATION ON THE COMMERCIAL PRINCIPLE. ON A QUERY FROM THE B ENCH WHAT IS MEANT BY COMMERCIAL PRINCIPLE?, HE CLARIFIED THAT COMPUTATION OF INCOME OF THE TRUST IN A CUSTOMARY METHOD OF ACCOUN TANCY. ON A QUERY FROM THE BENCH, THE LD.COUNSEL HAS ALSO CLARI FIED THAT THERE IS NO CONFLICT BETWEEN THE CUSTOMARY WAY OF COMPUTA TION OF INCOME AND PROVISIONS OF SECTION 32 OF THE ACT. TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 PROVIDES FOR DEPRECIATION ONLY IN RESPECT OF THE ASSET WHICH IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE COMMERCIAL PRINCIPLE O F COMPUTING INCOME OR THE CUSTOMARY PRACTICE OF COMPUTING INCOM E MAY ALSO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF COMPUTI NG BUSINESS OR PROFESSIONAL INCOME. 9. INCOME-TAX ACT PROVIDES FOR PROCEDURE AND METHOD FOR COMPUTING INCOME UNDER DIFFERENT HEADS. DEPRECIATI ON IS PROVIDED UNDER SECTION 32 OF THE ACT WHEN COMPUTING INCOME U NDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. IN RESP ECT OF OTHER HEADS, NO DEPRECIATION IS PROVIDED UNDER THE SCHEME OF THE ACT. THE INCOME OF THE TRUST IS EXEMPTED ON APPLICATION AND ACCUMULATION AS PROVIDED UNDER THE ACT. IF ANY VIO LATION, THE INCOME OF THE TRUST IS LIABLE FOR TAXATION, IN SUCH A CASE, IF THE INCOME IS ASSESSED AS INCOME FROM BUSINESS OR PROFE SSION, THE ASSESSEE MAY BE ELIGIBLE FOR DEPRECIATION. THE ASS ESSEE IS CERTAINLY NOT ENTITLED FOR DEPRECIATION, WHEN THE I NCOME WAS EXEMPTED ON APPLICATION OR ACCUMULATION AS PROVIDED UNDER THE SCHEME OF THE ACT. THE CHARITABLE INSTITUTION UNDE R THE SCHEME OF ITA NO.1330 /MDS./2016 :- 11 - : INCOME-TAX ACT IS ON A DIFFERENT FOOTING. THE ENTI RE INCOME OF THE ASSESSEE-TRUST FROM THE PROPERTY HELD UNDER TRUST D O NOT FORM PART OF TOTAL INCOME UNDER SECTION 11 OF THE ACT PROVIDE D THE SAME IS APPLIED FOR CHARITABLE OBJECT. SECTION 11 OF THE A CT ALSO PROVIDES FOR ACCUMULATION OF 15% OF INCOME FOR FUTURE APPLIC ATION FOR THE OBJECT OF THE TRUST. THEREFORE, THE BUSINESS AND C HARITABLE INSTITUTION ARE TWO DIFFERENT CATEGORIES IN THE SCH EME OF INCOME- TAX ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT THE CUSTOMARY WAY OF COMPUTING INCOME OR THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME CANNOT OVERRIDE THE SPECIFIC PR OVISION OF INCOME-TAX ACT. THE INCOME-TAX ACT DOES NOT PROVID E FOR ALLOWING DEPRECIATION OTHER THAN THE ASSET WHICH WA S USED FOR BUSINESS OR PROFESSION. THERE IS NO OTHER PROVISIO N IN THE INCOME- TAX ACT OTHER THAN SECTION 32 OF THE ACT FOR ALLOWI NG DEPRECIATION. THEREFORE, THE CLAIM OF THE ASSESSEE THAT THE DEPRE CIATION HAS TO BE ALLOWED ON COMMERCIAL PRINCIPLE OR CUSTOMARY PRI NCIPLE OF COMPUTATION OF INCOME IS CONTRARY TO THE SPECIFIC P ROVISION, NAMELY, SECTION 32 OF THE ACT. 10. THE NEXT QUESTION ARISES FOR CONSIDERATION IS W HEN THERE IS A CONFLICT BETWEEN CUSTOMARY PRACTICE, COMMERCIAL P RINCIPLE AND PROVISIONS OF SECTION 32, WHICH ONE WILL PREVAIL? THE OBVIOUS ANSWER TO THIS QUESTION IS THE STATUTORY PROVISION, NAMELY, SECTION 32 OF THE ACT WILL PREVAIL OVER THE CUSTOMARY PRACT ICE AND COMMERCIAL PRINCIPLE. THEREFORE, EVEN ON CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE WHEREBY THE ASSESSEE CLAIMS DE PRECIATION WHILE COMPUTING THE INCOME, SECTION 32 OF THE ACT I S A SPECIFIC PROVISION UNDER INCOME-TAX ACT, WHICH IS CONTRARY T O COMMERCIAL PRINCIPLE OR CUSTOMARY PRACTICE. THEREFORE, THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT SECTION 32 WILL PREVAIL OVE R THE CUSTOMARY PRACTICE OR COMMERCIAL PRINCIPLE. HENCE, THE ASSES SEE IS NOT ITA NO.1330 /MDS./2016 :- 12 - : ELIGIBLE FOR DEPRECIATION IN RESPECT OF BUILDING, P LANT, MACHINERY, ETC. WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. 11. EVEN ASSUMING FOR ARGUMENT SAKE THAT THE ASSESS EE WAS DOING BUSINESS, THEN THE ASSESSEE IS NOT ELIGIBLE F OR EXEMPTION UNDER SECTION 11 OF THE ACT AND AS RIGHTLY SUBMITTE D BY THE LD. DEPARTMENTAL REPRESENTATIVE, THE REGISTRATION UNDER SECTION 12AA OF THE ACT HAS TO BE CANCELLED UNDER SECTION 12AA(3 ) OF THE ACT. MOREOVER, THE ASSESSEE WILL NOT BE ELIGIBLE FOR EXE MPTION UNDER SECTION 11 OF THE ACT IF IT IS CARRYING ON ANY BUSI NESS ACTIVITY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECIATION. 12. AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE, IN VIEW OF SECTION 11(4) & (4A) OF THE ACT, IF THE PROPERTY HELD UNDER TRUST IS A BUSINESS UNDERTAKING , THEN THE INCOME OF THE BUSINESS UNDERTAKING, WHICH WAS SO HE LD AS PROPERTY HELD UNDER TRUST, HAS TO BE COMPUTED BY AP PLYING THE PROVISIONS OF INCOME-TAX ACT UNDER CHAPTER IV. WHI LE COMPUTING INCOME OF THE BUSINESS UNDERTAKING, ALL EXPENDITURE , INCLUDING DEPRECIATION, HAS TO BE ALLOWED AND THE INCOME OF S UCH BUSINESS UNDERTAKING WHICH WAS HELD UNDER TRUST HAS TO BE AL LOWED AS EXEMPTION UNDER SECTION 11 ON APPLICATION AND ACCUM ULATION. IN THIS CASE, AS RIGHTLY SUBMITTED BY THE LD. D.R., NO BUSINESS UNDERTAKING WAS HELD UNDER TRUST AS PROVIDED UNDER SECTION 11(4) & (4A) OF THE ACT. THE ASSESSEE IS CLAIMING DEPREC IATION IN RESPECT OF ASSET WHICH WAS USED AS TOOL FOR CARRYIN G OUT CHARITABLE OBJECT OF THE INSTITUTION. WHEN THE ASSET WAS USED AS TOOL FOR CARRYING OUT THE OBJECT OF THE CHARITABLE INSTITUTI ON, SUCH ACTIVITY CANNOT BE CONSTRUED AS A BUSINESS OR PROFESSION OF THE ASSESSEE. THEREFORE, SECTION 32 OF THE ACT IS NOT APPLICABLE IN THIS CASE. ITA NO.1330 /MDS./2016 :- 13 - : 13. WE HAVE CAREFULLY GONE THROUGH ALL THE JUDGMENT S AND DECISIONS CITED BY THE LD.COUNSEL FOR THE ASSESSEE, WHICH ARE AS UNDER:- 1. DIT V. VISHWAJAGRITI MISSION (2012) 73 DTR (DEL) 195 2. CIT V. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) 3. CIT V. SOCIETY OF SISTERS OF ST.ANNE (1984) 146 ITR 28 (KAR) 4. CIT V. BHORUKA PUBLIC WELFARE TRUST (1999) 240 ITR 513 (CAL) 5. CIT V. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) 6. CIT V. SHETHMANILALRANCHHODDASVISHRAMBHAVAN TRUST (1992) 198 ITR 598 (GUJ) 7. CIT V. RAIPUR PALLOTTINE SOCIETY (1989) 180 ITR 579 (MP) 8. CIT V. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) 264 ITR 110 (BOM) 9. DIT(E) V. FRAMJEECAWASJEE INSTITUTE (1993) 109 CTR (BOM) 463 10. DDIT V. LAKSHMI SARASWATHI EDUCATIONAL TRUST ITA NO.452/MDS/2014 CHENNAI ITAT 11. APOLLO HOSPITALS EDUCATIONAL TRUST V. DCIT ITA NO.2090/MDS/2012 CHENNAI ITAT 12. SER VICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT. LTD. V. ITO ITA NO.1853/MDS/2011 CHENNAI ITAT 13. SERVICES ASSOCIATION OF SEVENTH DAY ADVENTISTS PVT. LTD. V. ITO ITA NO.427/MDS/2012 CHENNAI ITAT 14. ACIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.1808/M DS/2012 CHENNAI ITAT 15. DCIT V. MAMALLAN EDUCATIONAL TRUST ITA NO.91/MDS/2013 CHENNAI ITAT 16. ITO V. SRI RANGANATHAR TRUST ITA NO.1954/MDS/2012 CHENNAI ITAT 17. ITO V. KGISL TRUST ITA NO.1813/MDS/2012 CHENNAI ITAT 18. CIT V. RAO BAHADUR CALAVA LACUNNANCHETTY CHARITIES (1982) 135 ITR 485 (MAD) 19. DEVI KARUMARIAMMAN EDUCATIONAL TRUST V. DCIT (EXEMPTIONS) (2015) 60 TAXMANN.COM 439 (MADRAS) 20. ITO V. THE GRD TRUST ITA NO.2537/MDS/2014 CHENNAI ITAT AFTER GOING THROUGH ALL THE JUDGMENTS / DECISIONS, WE FIND THAT THE CONFLICT BETWEEN THE COMMERCIAL PRINCIPLE OR CUSTOM ARY PRACTICE IN COMPUTING INCOME AND THE PROVISIONS OF SECTION 32 W ERE NOT ITA NO.1330 /MDS./2016 :- 14 - : BROUGHT TO THE NOTICE OF THE COURTS / TRIBUNAL. TH EREFORE, THOSE JUDGMENTS / DECISIONS ARE NOT APPLICABLE TO THE FAC TS OF THE CASE. 14. IN VIEW OF THE ABOVE DISCUSSION, WE FIND NO MER IT IN THE APPEAL OF THE ASSESSEE. ACCORDINGLY, THE SAME IS D ISMISSED. IN VIEW OF THE ABOVE, WE ARE INCLINED TO DECIDE THE ISSUE AGAINST THE ASSESSEE. ACCORDINGLY, THE APPEAL OF ASSESSEE IS DI SMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 30 TH NOVEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30 TH NOVEMBER , 2016 K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF