ITO, Coimbatore V. M/s. Ramanandha Adigalar Foundation, Coimbatore

ITA 1790/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0763 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-02-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Charitable institution; Question of law; Capital expenditure
• Section: 12AA; 32; 131; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER] I.T.A.NO.1790/MDS/2012 ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER COMPANY WARD-I COIMBATORE VS M/S RAMANANDHA ADIGALAR FOUNDATION KUMARAGURU COLLEGE OF TECH CAMPUS CHINNAVEDAMPATTI COIMBATORE 641 006 [PAN AAATR 3640 M] (APPELLANT) (RESPONDENT) APPELLANT BY : SH RI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE I.T.A.NO.1791/MDS/2012 ASSESSMENT YEAR: 20 09-10 THE INCOME TAX OFFICER COMPANY WARD-I COIMBATORE VS M/S KONGUNADU ARTS & SCIENCE COLLEGE COUNCIL GNANAMBIKA MILLS POST COIMBATORE 641 029 [PAN AAAAK 1198 E] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : NONE DATE OF HEARING : 13-02-2013 DATE OF PRONOUNCEMENT : 14-02-2013 I.T.A.NO.1790 & 1791/12 :- 2 -: O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY DIF FERENT ASSESSEES AGAINST THE ORDERS OF THE CIT(A)-I, COIMBATORE, DATED 27.7. 2012 AND 19.7.2012, FOR ASSESSMENT YEAR 2009-10. AS THE FAC TS AND ISSUE INVOLVED IN BOTH THE CASES ARE IDENTICAL, THEY ARE BEING DISPOSED OF BY THIS COMBINED ORDER. 2. IN THE CASE OF M/S KONGUNADU ARTS AND SCIENCE COLL EGE COUNCIL, I.T.A.NO.1791/MDS/2012, NONE APPEARED ON B EHALF OF THE ASSESSEE NOR ANY APPLICATION FOR ADJOURNMENT WAS FI LED. THE BENCH WAS OF THE VIEW THAT THE APPEAL CAN BE DISPOSED OF WITHOUT THE PRESENCE OF THE ASSESSEE, THEREFORE, THE APPEAL WA S HEARD EX-PARTE QUA THE RESPONDENT- ASSESSEE AND DISPOSED OF AFTER CONSIDERING THE SUBMISSIONS OF THE DR. 3. IN BOTH THE APPEALS OF THE REVENUE, THE ISSUE INVO LVED IS THAT THE CIT(A) ERRED IN ALLOWING THE CLAIM OF DEPR ECIATION TO THE ASSESSEE IN SPITE OF THE FACT THAT THE ENTIRE COST OF DEPRECIABLE ASSETS HAD BEEN ALLOWED TO THE ASSESSEE AS AN APPLICATION OF INCOME TOWARDS OBJECT OF THE TRUST AND THEREFORE, AGAIN ALLOWING O F THE DEPRECIATION IN SAME ASSETS HOLDING IT AS APPLICATION IF FOR CHARI TABLE PURPOSES AMOUNTS TO DOUBLE DEDUCTION. I.T.A.NO.1790 & 1791/12 :- 3 -: 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES ARE AOP TRUSTS WHICH ARE ELIGIBLE FOR EXEMPTION OF THEIR IN COME U/S 11(1) OF THE ACT. IN THE RETURN OF INCOME FILED, THE ASSES SEE, M/S KONGUNADU ARTS AND SCIENCE COLLEGE COUNCIL CLAIMED DEPRECIATI ON OF ` 1,76,82,258/- AND THE ASSESSEE, M/S RAMANANDHA ADI GALAR FOUNDATION CLAIMED DEPRECIATION OF ` 8,21,52,114/-. THIS CLAIM OF DEPRECIATION WAS DISALLOWED BY THE ASSESSING OFFICE R ON THE GROUND THAT PROVISIONS OF SECTION 11 ARE DISTINCT FROM THA T OF SECTION 14. THE DEDUCTION OR ALLOWANCE PROVIDED IN CHAPTER-IV I.E S ECTIONS 14 TO 59 OF THE ACT, CANNOT BE APPLIED FOR DETERMINING THE INC OME FOR THE PURPOSES OF SECTION 11 OF THE INCOME-TAX ACT, 1961. THE PROVISION OF DEPRECIATION U/S 32 OF THE ACT IS A SPECIALLY PERM ITTED ALLOWANCE WHILE COMPUTING THE INCOME UNDER THE HEAD BUSINESS OR PR OFESSION BECAUSE IN SUCH A SITUATION THE CAPITAL EXPENDITURE CANNOT BE ALLOWED AS DEDUCTION. UNDER THE PROVISIONS OF SECTION 11, THE ACTUAL EXPENDITURE ALONE IS TO BE CONSIDERED AS APPLICATIO N AND NOT THE NOTIONAL EXPENDITURE/ALLOWANCES LIKE DEPRECIATION. HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F ESCORTS LTD VS UOI, 199 ITR 43, AND THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS RAO BAHADUR CALAVALA CUNNAN CHETTY C HARITIES, 135 ITR 485 (MAD). I.T.A.NO.1790 & 1791/12 :- 4 -: 5. BEING AGGRIEVED, THE ASSESSEES FILED APPEAL BEFORE THE CIT(A) AND THE CIT(A) ALLOWED THE CLAIM OF DEPRECIA TION TO THE ASSESSEES BY OBSERVING AS UNDER: 6. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND THE ORDER OF THE ASSESSING OFFICER. T HE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P & H) AND IN T HE CASE OF CLT VS TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P & H) HELD THAT THE ESCORTS CASE CITED BY THE DEPARTME NT IS DISTINGUISHABLE AND NOT APPLICABLE IN RELATION TO T HE TRUST AND THERE IS NO DOUBLE DEDUCTION OF DEPRECIATION AND CA PITAL EXPENDITURE ON FIXED ASSETS IN RESPECT OF TRUST, SIMILARLY, THE ITAT 'C' BENCH, CHENNAI IN THE CASE OF GKR CHARITIES VS DDLT (EXEMPTIONS)-1, CHENNAI IN APPEAL NO.1812/MDS/2011 IN THE JUDGEMENT DATED APRIL 30, 2 012 HAS ALLOWED THE CLAIM OF DEPRECIATION FOR THE ASSESSEE TRUST. THE TRIBUNAL FOLLOWED THE JUDGEMENT OF THE CHENNAI TRIB UNAL IN THE CASE OF RENGALATCHUMI EDUCATIONAL TRUST VS ITO IN I T APPEAL NO.681 OF 2010 DATED 25.03.2011. THE TRIBUNAL HELD THAT WHILE CALCULATING APPLICATION OF 85% OF TRUST INCOM E FOR PURPOSE OF SECTION 11, ASSESSEE'S TRUST CLAIM FOR D EPRECIATION IS TO BE ALLOWED. FURTHER, THE JURISDICTIONAL TRIBU NAL IN THE CASE OF COIMBATORE STOCK EXCHANGE FOR THE ASSESSMEN T YEAR 2005-06 AND 2006-07 HAS DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. IN VIEW OF THE JUDGEMENTS REFERRED TO AB OVE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION. 6. THE DR RELIED ON THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS CIT, 348 ITR 344, AND SUBMITTED THAT THE HON'BLE HIGH COURT HAS HELD THAT ALLOWING OF DEPRECIATION TO A TRUST WHOSE INCOME IS ASSESSED U /S 11 OF THE ACT WOULD AMOUNT TO DOUBLE DEDUCTION. I.T.A.NO.1790 & 1791/12 :- 5 -: 7. ON THE OTHER HAND, THE A.R RELIED ON THE DECISION O F THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX VS VISHWA JAGRITI MISSION, 2012-TIOL-271-HC-DEL-IT, AN D SUBMITTED THAT THE HON'BLE HIGH COURT HELD THAT THE INCOME OF THE ASSESSEE-TRUST SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND WHI LE DOING SO, DEPRECIATION ON FIXED ASSETS UTILIZED FOR THE CHARI TABLE PURPOSES SHOULD BE ALLOWED. HE FURTHER RELIED ON THE DECISION OF P &H HIGH COURT IN THE CASE OF CIT VS MARKET COMMITTEE, PIPLI, 330 ITR 16, WHERE IT WAS HELD THAT INCOME OF THE ASSESSEE TRUST BEING EXEMPT, TH E ASSESSEE WAS ONLY CLAIMING FOR DEPRECIATION SHOULD BE REDUCED FR OM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRUST AND THEREFORE, THERE WAS NO D OUBLE DEDUCTION CLAIMED BY THE ASSESSEE AND IT CANNOT BE HELD THAT DOUBLE BENEFIT WAS GIVEN IN ALLOWING THE CLAIM OF DEPRECIATION WHILE C OMPUTING INCOME FOR THE PURPOSES OF SECTION 11. FURTHER, HE RELIED ON THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S GREAT LAKES INSTITUTE O F MANAGEMENT, IN I.T.A.NOS.931 & 932/MDS/2012, FOR ASSESSMENT YEARS 2006-07 AND 2007-08, ORDER DATED 22.6.2012, AND SUBMITTED THAT THE TRIBUNAL, IN SIMILAR FACTS AND CIRCUMSTANCES, HAS ALLOWED THE CL AIM OF DEPRECIATION TO THE ASSESSEE. I.T.A.NO.1790 & 1791/12 :- 6 -: 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEES ARE AOP TRUSTS AND REG ISTERED U/S 12AA OF THE ACT. WHILE COMPUTING INCOME U/S 11 OF THE ACT, THE ASSESSEE, M/S KONGUNADU ARTS AND SCIENCE COLLEGE COUNCIL CLAI MED DEPRECIATION OF ` 1,76,82,258/- AND THE ASSESSEE, M/S RAMANANDHA AD IGALAR FOUNDATION CLAIMED DEPRECIATION OF ` 8,21,52,114/- AS DEDUCTION. THE CLAIM OF DEPRECIATION WAS DISALLOWED BY THE ASSESSI NG OFFICER ON THE GROUND THAT AS THE COST OF THE ASSETS WAS ITSELF AL LOWED AS APPLICATION OF INCOME, THEREFORE, ALLOWING DEPRECIATION ON THE VERY SAME ASSETS WOULD AMOUNT TO DOUBLE DEDUCTION. 9. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN THE CASE OF M/S GREAT LAKES INSTITUTE OF MANAGEM ENT (SUPRA) WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 4. THE ONLY ISSUE INVOLVED IN BOTH THE YEARS UNDE R CONSIDERATION IS THAT THE CIT(A) ERRED IN HOLDING T HAT CAPITAL EXPENDITURE IS TO BE TREATED AS APPLICATION OF INCOME OF THE TRUST AS PER SECTION 11 AND ANY FURTH ER ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE WOULD AMOUNT TO EXTRA DEDUCTION OR DOUBLE DEDUCTION WHICH IS NOT PERMITTED IN THE INCOME-TAX ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER EXCLUDED THE ASSESSEES CLAIM OF DEPRECIAT ION WHILE COMPUTING THE APPLICATION OF 85% OF THE TRUST S INCOME AS ENTIRE CAPITAL EXPENDITURE ITSELF WAS TRE ATED AS APPLICATION OF INCOME. ACCORDING TO THE ASSESSI NG I.T.A.NO.1790 & 1791/12 :- 7 -: OFFICER, THE ALLOWANCE OF DEPRECIATION U/S 11(1)(A ) AMOUNTS TO DOUBLE DEDUCTION AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD VS UNION O F INDIA, 199 ITR 43(SC). 6. ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF T HE ASSESSING OFFICER. 7.THE A.R OF THE ASSESSEE FILED COPY OF THE ORDER OF THE HON'BLE P&H HIGH COURT IN THE CASE OF CIT VS MARKET COMMITTEE, PIPLI, [2011] 330 ITR 16 (P&H) AND ALSO COPY OF THE ORDER OF THE P&H HIGH COURT IN THE CASE OF CIT VS TINY TOTS EDUCATION SOCIETY [2011] 330 ITR 21(P&H) AND SUBMITTED THAT IT HAS BEEN HELD BY THE HIGH COURT THAT ALLOWING DEPRECIATION TO THE ASSESSEE T RUST WOULD NOT AMOUNT TO DOUBLE DEDUCTION AS HELD BY THE ASSESSING OFFICER. HE ALSO RELIED ON THE DECISION OF THE CHENNAI D BENCH OF THE TRIBUNAL IN THE CASE OF D Y. CIT VS M/S COIMBATORE STOCK EXCHANGE IN I.T.A.NOS.1086 AND 1087/MDS/2010 WHEREIN VIDE CONSOLIDATED ORDER DATED 8.2.2011 THE TRIBUNAL DISMISSED THE APPEALS O F THE REVENUE ON THE SIMILAR ISSUE FOLLOWING THE DECISION OF THE HON'BLE P&H HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI (SUPRA). 8. THE DR SUPPORTED THE ORDERS OF THE LOWER AUTHO RITIES. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE, THE ASSESSEE CLAIMED DEPRECIATION OF ` 46,30,368/- IN ASSESSMENT YEAR 2006-07 AND ` 41,81,550/- IN ASSESSMENT YEAR 2007-08 AND THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROU ND THAT THE ENTIRE INVESTMENT IN FIXED ASSETS WAS CONSIDERED AS APPLICATION OF INCOME AND ALLOWING OF DEPRECIATION TO THE ASSESSEE WOULD AMOUNT TO DOUBL E DEDUCTION. ON APPEAL, THE CIT(A) CONFIRMED THE ACT ION OF THE ASSESSING OFFICER FOR THE VERY SAME REASON. WE FIND THAT THE HON'BLE P&H HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI(SUPRA) HAS HELD AS UNDER: 10. IN THE PRESENT CASE, THE ASSESSEE IS NOT CLA IMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LEARNED COUNSEL FOR THE REVENUE. I.T.A.NO.1790 & 1791/12 :- 8 -: THE INCOME OF THE ASSESSE BEING EXEMPT, THE ASSESSE IS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCE D FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE IS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE AS CANVASSED BY THE REVENUE. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN ESCORTS LTD. CASE [1993]199 ITR 43 IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CANNOT BE HELD THAT DOUBLE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING IN COME FOR PURPOSES OF SECTION 11. THE QUESTIONS PROPOSED HAVE, THUS, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 10. FURTHER, THE CHENNAI D BENCH OF THE TRIBUNAL IN THE CASE OF COIMBATORE STOCK EXCHANGE(SUPRA) HAS HELD A S UNDER: 5. WE ARE UNABLE TO ACCEPT THE SUBMISSION. 6. THE MATTER WAS DISCUSSED IN OUR RECENT JUDGEM ENT DATED 5.7.2010 IN ITA NO.535 OF 2009, THE CIT,KARNAL V. M ARKET COMMITTEE,PIPLI. AFTER REFERRING TO JUDGMENTS IN CI T V. SETH MANILAL RANCHHODDAS VISHRAM BHAWAN TRUST [1992] 198 ITR 598 (GUJ.) AND CIT V. INSTITUTE OF BANKING PERSONAL SELECTION (IBP S) (2003) 131 TAXMAN 386 (BOM.), CIT V. RAO BAHADUR CALAVALA CUNN AN CHETTY CHARITIES [1982] 135 ITR 485 (MAD.), CIT V. SOCIETY OF THE SISTERS OF ST. ANNE [1984] 146 ITR 28 (KAR) AND CIT V. RAIPUR PALLOTTINE SOCIETY [1989] 180 ITR 579 (M.P.), THE JUDGMENT OF THE HONBLE SUPREME COURT IN ESCORTS LTD., (SUPRA), WAS HELD NO T TO BE APPLICABLE TO THE SITUATION WHERE DEPRECIATION WAS CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPL IED FOR THE PURPOSES OF CHARITABLE OBJECTS. IT WAS OBSERVED:-9 . IN THE PRESENT CASE, THE ASSESSEE IS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION AS HAS BEEN SUGGESTED BY LD. COUNSEL F OR THE REVENUE. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESS EE 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 T HE HONBLE SUPREME COURT IN ESCORTS LTD AND ANOTHER (SUPRA) IS DISTINGUISHABLE FOR THE ABOVE REASONS. IT CAN NOT BE HELD THAT DOUB LE BENEFIT IS GIVEN IN ALLOWING CLAIM FOR DEPRECIATION FOR COMPUTING IN COME FOR PURPOSES OF SEC.11. THE QUESTIONS PROPOSED HAVE, TH US, TO BE ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE A SSESSEE. 7. IN VIEW OF ABOVE, WE ARE UNABLE TO HOLD THAT T HE QUESTIONS I.T.A.NO.1790 & 1791/12 :- 9 -: PROPOSED BY THE REVENUE ARE SUBSTANTIAL QUESTIONS O F LAW. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF TH E ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIAL OR ANY HIGHER COURTS ORDER IN ITS FAVOUR, THEREFORE, WE DO NOT FI ND ANY INFIRMITY OR FLAW IN THE ORDERS OF THE CIT(A) IN THIS REGARD AS SUCH WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY THE CIT( A), WE UPHOLD HIS ORDERS AND DISMISS THE APPEALS OF THE RE VENUE BEING DEVOID OF ANY MERITS. 5. SINCE THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND DEPARTMENT HAS NOT BROUGHT ANY CONTRARY MATERIAL OR ANY HIGHER COURTS ORDER IN ITS FAVOUR, THEREFORE, WE DO NOT FI ND ANY INFIRMITY OR FLAW IN THE ORDERS OF THE CIT(A) IN THIS REGARD AS SUCH WHILE CONCURRING WITH THE CONCLUSION AS DRAWN BY THE CIT(A), WE UPHOLD HI S ORDERS AND DISMISS THE APPEALS OF THE REVENUE BEING DEVOID OF ANY MERITS. 11. THUS, THE FACTS BEING IDENTICAL, RESPECTFULLY F OLLOWING THE ABOVE QUOTED DECISIONS OF THE HON'BLE P&H HIGH COUR T AND THE DECISION OF THIS TRIBUNAL, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSING OFFICER TO ALL OW THE CLAIM OF DEPRECIATION TO THE ASSESSEE FOR BOTH THE ASSESSM ENT YEARS UNDER CONSIDERATION. THUS, THE GROUNDS OF APPEAL O F THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS UNDER CONSID ERATION ARE ALLOWED. 10. FURTHER, WE FIND THAT WHILE CONSIDERING SIMILAR ISS UE, THE HON'BLE DELHI HIGH COURT IN THE CASE OF VISHWA JAGRITI MISS ION (SUPRA) HAS HELD AS UNDER: 11. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID ORDER OF THE TRIBUNAL. WE ARE NOT INCLINED TO ADMIT THE A PPEAL AND FRAME ANY SUBSTANTIAL QUESTION OF LAW SINCE NON E ARISES FROM THE ORDER OF THE TRIBUNAL. THERE IS NO DISPUTE THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION UND ER SECTION 12AA VIDE ORDER DATED 11TH SEPTEMBER, 2009 AND, THEREFORE, IT WAS ENTITLED TO EXEMPTION OF ITS INCOME UNDER SECTION 11. THE ONLY QUESTION IS WHETHER THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN DOING SO WHETHER I.T.A.NO.1790 & 1791/12 :- 10 -: DEPRECIATION ON FIXED ASSETS UTILISED FOR THE CHARI TABLE PURPOSES SHOULD BE ALLOWED. ON THIS ISSUE, THERE SE EMS TO BE A CONSENSUS OF JUDICIAL THINKING AS IS SEEN F ROM THE AUTHORITIES RELIED UPON BY THE CIT(APPEALS) AS WELL AS THE TRIBUNAL. IN CIT VS. THE SOCIETY OF THE SISTERS OF ST. ANME (SUPRA), AN IDENTICAL QUESTION AROSE BEFORE TH E KARNATAKA HIGH COURT. THERE THE SOCIETY WAS RUNNING A SCHOOL IN BANGALORE AND WAS ALLOWED EXEMPTION UNDER SECTION 11. THE QUESTION AROSE AS TO HOW THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIO US PURPOSES SHOULD BE COMPUTED. JAGANNATHA SETTY, J. SPEAKING FOR THE DIVISION BENCH OF THE COURT HELD T HAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNO T BE THE TOTAL INCOME AS DEFINED IN SECTION 2(45) OF T HE ACT AND THAT THE WORD INCOME IS A WIDER TERM THAN THE EXPRESSION PROFITS AND GAINS OF BUSINESS OR PROFES SION. REFERENCE WAS MADE TO THE NATURE OF DEPRECIATION AN D IT WAS POINTED OUT THAT DEPRECIATION WAS NOTHING BUT DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE. IT WAS OBSERVED THAT DEPRECIATION, IF NOT ALLOWED AS A NECESSARY DEDUCTI ON FOR COMPUTING THE INCOME OF CHARITABLE INSTITUTIONS, TH EN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THE CIRCULAR NO.5-P (LXX-6) OF 1968, DATED JULY 19,1968 WAS REPRODUCED IN THE JUDGMENT IN WHICH THE BOARD HAS TAKEN THE VIEW THAT THE INCOME OF THE TRUST SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. THE CIRCULAR IS AS UNDER:- WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY , INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOU RCES, THE WORD INCOME SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSE OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX U/S. 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUS T. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF TH E TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER CENT. OF THE LATTER, IF THE TRUST IS TO GET THE FUL L BENEFIT OF THE EXEMPTION U/S. 11(1). I.T.A.NO.1790 & 1791/12 :- 11 -: 12. A SIMILAR VIEW WAS EARLIER EXPRESSED BY THE AN DHRA PRADESH HIGH COURT IN COMMISSIONER OF INCOME-TAX. V. NIZAM'S SUPPL. RELIGIOUS ENDOWMENT TRUST (1981) 127 ITR 378 AND BY THE MADRAS HIGH COURT IN COMMISSIONER OF INCOME-TAX VS RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) 135 ITR 485. THE MADHYA PRADESH HIGH COURT IN CIT VS. RAIPUR PALLOTTINE SOCIETY (SUPRA) HAS HELD, FOLLOWING THE JUDGMENT OF THE KARNATAKA HIGH COURT CITED ABOVE, THAT IN COMPUTING THE INCOME OF A CHARITABLE INSTITUTION/TRUST, DEPRECIATION OF ASSETS OWNED BY THE TRUST/INSTITUTION IS A NECESSARY DEDUCTION ON COMME RCIAL PRINCIPLES. THE GUJARAT HIGH COURT, AFTER REFERRING TO THE JUDGMENTS OF THE KARNATAKA, MAHARASHTRA AND MADHYA PRADESH HIGH COURTS CITED ABOVE, ALSO CAME TO THE S AME CONCLUSION AND HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF THE CHARITABLE INSTITUTI ON HAS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. 13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS L IMITED VS. UNION OF INDIA (SUPRA) HAS BEEN RIGHTLY HELD TO BE INAPPLICABLE TO THE PRESENT CASE. THERE ARE TWO REA SONS AS TO WHY THE JUDGMENT CANNOT BE APPLIED TO THE PRESEN T CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH T HE CASE OF A CHARITABLE TRUST/INSTITUTION INVOLVING THE QUE STION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCO ME AVAILABLE FOR APPLICATION TO CHARITABLE PURPOSES. I T WAS A CASE WHERE THE ASSESSEE WAS CARRYING ON BUSINESS AN D THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER IV-D OF THE ACT WERE APPLICABLE. IN THE PRESENT CASE, WE ARE NOT CO NCERNED WITH THE APPLICABILITY OF THESE PROVISIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOME AS UNDER STOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMA L COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS AUTHORIT Y FOR THE PROPOSITION THAT DEPRECIATION IS A NECESSARY CHARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COU RT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE COST OF THE ASSET UNDER SE CTION 35(1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPIT AL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. THE QU ESTION WAS WHETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE ASSET UNDER SECTION 35(1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPE CT OF THE SAME ASSET. THE SUPREME COURT RULED THAT, UNDER GEN ERAL PRINCIPLES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE I.T.A.NO.1790 & 1791/12 :- 12 -: SAME BUSINESS OUTGOING IS NOT INTENDED UNLESS CLEAR LY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE , AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS). 14. HAVING REGARD TO THE CONSENSUS OF JUDICIAL OPI NION ON THE PRECISE QUESTION THAT HAS ARISEN IN THE PRESENT APPEAL, WE ARE NOT INCLINED TO ADMIT THE APPEAL AND FRAME A NY SUBSTANTIAL QUESTION OF LAW. THERE DOES NOT APPEAR TO BE ANY CONTRARY VIEW PLAUSIBLE ON THE QUESTION RAISED BEFORE US AND AT ANY RATE NO JUDGMENT TAKING A CONTRARY VI EW HAS BEEN BROUGHT TO OUR NOTICE. IN THE CIRCUMSTANCES, W E DECLINE TO ADMIT THE PRESENT APPEAL AND DISMISS THE SAME WITH NO ORDER AS TO COSTS. 11. FURTHER, THE HON'BLE P&H HIGH COURT IN THE CASE OF MARKET COMMITTEE, PIPLI, HAS HELD AS UNDER: THE ASSESSEE WAS REGISTERED UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 AS A CHARITABLE TRUST. THE ASSESSING OFFI CER DISALLOWED THE DEPRECIATION ON THE GROUND THAT SINCE THE INCOME OF THE ASSESSEE WAS EXEMPT FROM TAX UNDER SECTIONS 11 TO 13, ALLOWING D EPRECIATION TO ASCERTAIN WHETHER 85 PER CENT. OF FUNDS WERE APPLIE D FOR PURPOSES OF TRUST, WOULD AMOUNT TO CONFERRING DOUBLE BENEFIT. T HIS VIEW WAS AFFIRMED BY THE COMMISSIONER (APPEALS). THE APPEAL OF THE ASSESSEE TO THE TRIBUNAL WAS ALLOWED ON A STATEMENT THAT THE MATTER WAS COVERED IN FAVOUR OF THE ASSESSEE BY ANOTHER ORDER OF THE TRIBUNAL. ON APPEAL : _HELD,_ DISMISSING THE APPEAL, THAT THE INCOME OF T HE ASSESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECI ATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENT AGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRU ST. THERE WAS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE. IT COULD NOT BE HELD THAT DOUBLE BENEFIT WAS GIVEN IN ALLOWING THE CLAIM FOR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. 12. RESPECTFULLY FOLLOWING THE ABOVE QUOTED DECISIONS O F THE HIGH COURTS AND THE TRIBUNAL, WE DO NOT FIND ANY GOOD AN D JUSTIFIABLE REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A) I N BOTH THE CASES I.T.A.NO.1790 & 1791/12 :- 13 -: WHICH ARE CONFIRMED AND THE GROUNDS OF APPEAL OF TH E REVENUE ARE DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 14 TH OF FEBRUARY, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 14 TH FEBRUARY, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR