The Dy. CIT (Exemptions), Circle-1, Ahmedabad V. Utthan Sewa Trust, Ahmedabad

ITA 21/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4139 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-02-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 01-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JIGNESHKUMAR P PARIKH
• Keywords: Capital asset; Depreciation; Charitable institution; Capital expenditure
• Section: 142(1); 12A; 250; 32; 63; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 21/AHD/2018 (ASSESSMENT YEAR: 2014-15) THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTIONS), CIRCLE1, AHMEDABAD V/S UTTHAN SEVA TRUST 31-314, AKSHAR COMPLEX, NR. JODHPUR CHAR RASTA, SATELLITE ROAD, AHMEDABAD-380015 (APPELLANT) (RESPONDENT) PAN: AAATU 1815H APPELLANT BY : SHRI VINOD TANWANI, SR. D .R. RESPONDENT BY : SHRI JIGNESH KUMAR P. PARIKH, A.R. ( )/ ORDER DATE OF HEARING : 18 -02-202 0 DATE OF PRONOUNCEMENT : 20 -02-2020 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 12.10.2017 PERTAINING TO A.Y. 2014-15 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 2 1. THE LD. CIT(A) HAS ERRED IN THE LAW ALLOWING THE DEPRECIATION OF RS,47,10,927/- TO THE ASSESSEE WHICH AMOUNTS TO DOUBLE DEDUCTION A S 100% DEDUCTION WAS ALLOWED TO THE ASSESSEE AS APPLICATION OF INCOME. 2. THE LD.CIT(A) HAS ERRED IN THE LAW AND ON FACT S IN ALLOWING THE BENEFIT OF THE DEFICIT OF RS.2,59,85,896/- FOR EARLIER YEARS AGAIN ST THE INCOME OF SUBSEQUENT YEAR IN ABSENCE OF ANY EXPRESS PROVISION M THE ACT REGAR DING THE SAME AND ALSO BY OVERLOOKING THE DECISIONS IN FAVOUR OF REVENUE IN T HIS REGARD. 3. THE REVENUE CRAVES OVER LEAVE TO ADD, ALTER, A MEND, MODIFY, SUBSTITUTE, DELETE AND/OR RESCIND ALL OR ANY GROUNDS OF APPEAL ON OR B EFORE THE FINAL HEARING, IN NECESSITY SO ARISES. 2. FACTS OF THE CASE ARE THAT AS EMANATED FROM THE ASS ESSMENT ORDER: 4). DURING THE COURSE OF ASSESSMENT IT WAS SE EN THAT THE ASSESSEE CLAIMED DEPRECIATION OF RS.47,10,927/- AND ALSO CLAIMED THE CAPITAL EXPENDITURE OF RS. 2,05,97,811/- AS APPLICATION OF INCOME TOWARDS THE OBJECTS OF THE TRUST. SINCE THE ASSESSEE HAD CLAIMED THE CAPITAL EXPENSES AS APPLIC ATION TOWARDS THE OBJECTS OF THE TRUST, THE CLAIM OF DEPRECIATION WOULD AMOUNT T O DOUBLE DEDUCTION, SINCE THE BENEFITS OF. 100% DEDUCTION OF THE EXPENSES HAD ALR EADY BEEN ALLOWED TO THE ASSESSEE TRUST. 4.1 IN THIS REGARD, VIDE NOTICE U/S. 142(1) (IN POI NT NO. 18) DATED 12/08/2016, THE ASSESSEE WAS REQUIRED TO SHOW-CAUSE AS TO WHY THE C LAIM OF DEPRECIATION SHOULD NOT DISALLOWED AS IT AMOUNTS TO DOUBLE DEDUCTION. I N THIS REGARD THE ASSESSEE SUBMITTED THE REQUIRED DETAILS VIDE LETTER DT. 29/0 8/2016 THAT, I. THE SCHEME OF TAXATION OF CHARITABLE/ RELIG IOUS TRUSTS IS QUITE DIFFERENT FROM THE TAXATION OF OTHER TAXABLE ENTITIES UNDER THE IN COME-TAX ACT,1961. IN THIS REGARD, IT WILL BE APPROPRIATE TO REFER TO THE PROV ISION OF SECTION 11(1) OF THE ACT. FOR SAKE OF READY REFERENCE THE RELEVANT PART OF SE CTION 11(1) IS PRODUCE AS FOLLOW: II. INCOME FROM PROPERTY HELD FOR CHARITABLE OR REL IGIOUS PURPOSES. 1. SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63 , THE FOLLOWING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME- A. INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SU CH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART F OR APPLICATION TO SUCH ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 3 PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOM E SO ACCUMULATED OR SET APART IS NOT EXCESS OF FIFTEEN PERCENT OF INCOME FROM SUC H PROPERTY; B. INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN PAR ONLY FOR SUCH PURPOSES, THE TRUST HAVING BEEN CREATED BEFORE THE COMMENCEME NT OF THIS ACT, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURP OSES IN INDIA; AND WHERE ANY SUCH INCOME IS FINALLY SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO SET APART IS NOT IN E XCESS OF FIFTEEN PERCENT OF THE INCOME FROM SUCH PROPERTY: C. INCOME DERIVED FROM PROPERTY HELD UNDER TRUST- I. CREATED ON OR AFTER THE FIRST DAY OF APRIL, 1952 , FOR A CHARITABLE PURPOSE WHICH TENDS TO PROMOTE INTERNATIONAL WELFARE IN WHI CH INDIA IS INTERESTED, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURP OSE OUTSIDE INDIA, AND II. FOR CHARITABLE OR RELIGIOUS PURPOSES, CREATED BEFORE THE FIRST DAY OF APRIL,1952, TO THE EXTENT TO WHICH SUCH INCOME IS A PPLIED TO SUCH PURPOSES OUTSIDE INDIA PROVIDED THAT THE BOARD, BY GENERAL O R SPECIAL ORDER, HAS DIRECTED IN EITHER CASE THAT IT SHALL NOT BE INCLUDED IN THE TO TAL INCOME OF THE PERSON IN RECEIPT OF SUCH INCOME; D. INCOME IN THE FORM OF VOLUNTARY CONTRIBUTION M ADE WITH SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION. FROM THE AFORESAID PROVISIONS OF SECTION LL(L)(A) O F THE ACT, IT MAY BE SEEN THAT INCOME DERIVED FROM PROPERTY HELD UNDER THE TRUST, WHOLLY FOR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXEMPT TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TOWARDS THE OBJECTS OF THE TRUST IN INDIA WHERE SUC H INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TOWARDS SUCH OBJECT IN INDIA, THEN THE SAME WILL ALSO BE EXEMPT TO THE EXTENT TO WHICH THE INCOME IS SO ACCU MULATED OR SET APART, PROVIDED THE SAME IS NOT IN EXCESS OF FIFTEEN PERCE NT OF THE INCOME FROM SUCH PROPERTY. BESIDES, IN THIS CONNECTION THE PROVISION OF SECTION 11(2), AS WELL AS SECTION 11(3) OF THE I.T.ACT ARE ALSO RELEVANT. FROM THE AFORESAID PROVISIONS OF SECTION 11(1)(A) O F THE ACT, IT IS QUITE CLEAR THAT THE SCHEME OF TAXATION OF CHARITABLE/RELIGIOUS TRUS T IS QUITE DIFFERENT FROM THE TAXATION OF OTHER TAXABLE ENTITIES UNDER THE ACT. T HE REASON FOR THE SAME IS THEREFORE EXEMPTION UNDER SECTION 11(1)(A), THE APP LICATION OF INCOME AND /OR ACCUMULATION OF SUCH INCOME FOR THE PURPOSES OF THE OBJECTS OF THE TRUST, IS RELEVANT. THUS, THE CONCEPT OF 'TOTAL INCOME', AS CONTEMPLATED U/S. 2(45) OF THE ACT, IS NOT RELEVANT IN THE PRESENT CONTEXT. 2. THE CONCEPT OF 'TOTAL INCOME', IS NOT APPLI CABLE IN CASE OF CHARITABLE/ RELIGIOUS TRUST ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 4 FROM THE PROVISIONS OF SECTION 11(1)(A) OF THE ACT, IT MAY BE SEEN THAT THE TERM USED THEREIN IS 'INCOME ' AND NOT 'TOTAL INCOME', WHI CH IS APPLICABLE FOR THE PURPOSES OF TAXATION OF OTHER TAXABLE ENTITIES UNDE R THE ACT. 3. BUT LD. A.O. DID NOT AGREE WITH THE CONTENTION OF T HE ASSESSEE AND MADE AN ADDITION OF RS. 47,10,927/- FOR DISALLOWING THE DEP RECIATION AND RS. 2,59,85,896/- FOR DISALLOWING THE BENEFIT OF DEFICI T FOR EARLY YEARS AGAINST THE INCOME OF SUBSEQUENT YEAR. 4. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEA L BEFORE THE LD. CIT(A) WHO GRANTED RELIEF TO THE ASSESSEE WITH FOLLOWING OBSER VATION: 5.2 I HAVE CAREFULLY CONSIDERED RIVAL CONTENTIONS A ND OBSERVATIONS MADE BY THE A.O. IN THE ASSESSMENT ORDER. IT IS SEEN FROM THE O RDER OF ASSESSMENT THAT A.O. HAS DISALLOWED CARRY FORWARD OF DEFICIT OF RS.2,59, 85,896/- TO BE SET OFF AGAINST CURRENT YEAR'S INCOME. THE APPELLANT HAS RELIED UPO N THE ORDER OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SHRI PLOT SHWETAMB A-R MURTIPUJAK JAIN MANDAL 211 ITR 293(GUJ.), CIT VS MAHARANA OF MEWAR CHARITA BLE FOUNDATION (1987) 164 ITR 439 476 (RAJ), RAGUVANSHI CHARITABLE TRUST & OT HERS V. DIT (2011) 211 TAXATION 250 (DEL) ETC.. HON'BLE GUJARAT HIGH COURT IN THE CASE OF SHRI PLOT SHWETAMBAR MURTIPUJAK JAIN MANDAL HAS HELD AS FOLLO WS :- 'A BARE PERUSAL OF SECTION 11 OF THE INCOME-TAX ACT , 1961, SHOWS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCO ME IS APPLIED TO SUCH PURPOSES IN INDIA IS TO BE EXCLUDED FOR THE PURPOSE S OF COMPUTING THE INCOME OF THE TRUST FOR THE PURPOSE OF ASSESSMENT. THERE ARE NO WORDS OF LIMITATION IN THIS SECTION PROVIDING THAT THE INCOM E SHOULD HAVE BEEN APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES ONLY I N THE YEAR IN WHICH THE INCOME HAD ARISEN. THE WORD 'APPLY' MEANS 'TO PUT TO USE' OR 'TO TURN TO USE' OR 'TO MAKE USE' OR 'TO PUT TO PRACTICAL USE'. H AVING REGARD THE PROVISIONS OF SECTION 11 OF THE ACT, IT IS CLEAR TH AT WHEN THE INCOME OF A TRUST IS USED OR PUT TO USE TO MEET THE EXPENSES IN CURRED FOR RELIGIOUS OR CHARITABLE PURPOSES, IT IS APPLIED FOR CHARITABLE O R RELIGIOUS PURPOSES. THE APPLICATION OF THE INCOME FOR CHARITABLE OR RELIGIO US PURPOSES TAKES PLACE IN THE YEAR IN WHICH THE INCOME IS ADJUSTED TO MEET THE EXPENSES INCURRED ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 5 FOR CHARITABLE OR RELIGIOUS PURPOSES. IN OTHER WORD S, EVEN IF EXPENSES FOR CHARITABLE AND RELIGIOUS PURPOSES HAVE BEEN INCURRE D FOR THE EARLIER YEAR AND THE SAID EXPENSES ARE ADJUSTED AGAINST THE INCO ME OF A SUBSEQUENT YEAR, THE INCOME OF THAT YEAR CAN BE SAID TO HAVE B EEN APPLIED FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE YEAR IN WH ICH THE EXPENSES INCURRED FOR CHARITABLE AND RELIGIOUS PURPOSES HAD BEEN ADJUSTED. THERE IS NOTHING IN THE LANGUAGE OF SECTION 11(1)(A) OF THE ACT TO INDICATE THAT THE EXPENDITURE INCURRED IN THE EARLIER YEAR CANNOT BE MET OUT OF THE INCOME OF THE SUBSEQUENT YEAR AND UTILIZATION OF SUCH INCO ME FOR MEETING THE EXPENDITURE OF THE EARLIER YEAR, WOULD NOT AMOUNT T O SUCH INCOME BEING APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. INCOM E DERIVED FROM TRUST PROPERTY HAS TO BE DETERMINED ON COMMERCIAL PRINCIP LES AND IF COMMERCIAL PRINCIPLES FOR DETERMINING THE INCOME AR E APPLIED, IT IS BUT NATURAL THAT THE ADJUSTMENT OF THE EXPENSES INCURRE D BY THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES IN THE EARLIER YE AR AGAINST INCOME EARNED BY THE TRUST IN THE SUBSEQUENT YEAR WILL HAV E TO BE REGARDED AS APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE A ND RELIGIOUS PURPOSES IN THE SUBSEQUENT YEAR IN WHICH SUCH ADJUSTMENT HAS BE EN MADE HAVING REGARD TO THE BENEVOLENT PROVISIONS CONTAINED IN SE CTION 11 OF THE ACT AND WILL HAVE TO BE EXCLUDED FROM THE INCOME OF THE TRU ST UNDER SECTION 11 ( 1)(A).' 5.3 I AGREE WITH THE CONTENTION OF THE APPELLANT AS WELL AS THE RELIANCE PLACED ON THE: DECISION OF JURISDICTIONAL GUJARAT HIGH COURT AND HEREBY DIRECT THE A.O. TO ALLOW THE BENEFIT OF THE DEFICIT OF CURRENT YEAR AG AINST THE FUTURE INCOMES. WHILE GIVING EFFECT OF THIS ORDER, AO IS DIRECTED TO ALLO W CAPITAL EXPENDITURE INCURRED FROM INCOME OF THE TRUST AS APPLICATION OF INCOME I NCLUDING DEPRECIATION AND DEFICIT OF EARLIER YEARS FIRST. THEREAFTER THE EXCE SS OF EXPENDITURE OVER THE INCOME OF CURRENT YEAR WOULD BE ALLOWED TO CARRY FORWARD A S DEFICIT. NO ACCUMULATION U/S 11(1)(A) @ 15% WOULD BE ALLOWED ALONGWITH CARRY FOR WARD OF DEFICIT. ACCORDINGLY, GROUND OF APPEAL NO. 2 IS ALLOWED SUBJECT TO THESE REMARKS. 6 THE LAST GROUND OF APPEAL IS RESIDUARY IN NATURE. APPELLANT HAS NOT AVAILED THIS GROUND OF APPEAL. ACCORDINGLY, THIS GROUND OF APPEA L IS DISMISSED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 5. NOW REVENUE HAS COME BEFORE US BY WAY OF SECOND STA TUTORY APPEAL. ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 6 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER AND HEARD BOTH THE PARTIES. AT THE OUTSET, LD. A.R. STATED THAT TH E MATTER IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIVIL APPEAL NO. 7186 OF 2014 IN THE MATTER OF RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA WHEREIN HONBLE SUPREME COURT HAS ALLOWED SUCH CLAIM AND DI SMISS THE APPEAL OF THE REVENUE WITH FOLLOWING OBSERVATION: THESE ARE THE PETITIONS AND APPEALS FILED BY THE I NCOME TAX DEPARTMENT AGAINST THE ORDERS PASSED BY VARIOUS HIGH COURTS GRANTING B ENEFIT OF DEPRECIATION ON THE ASSETS ACQUIRED BY THE RESPONDENTS-ASSESSEES. IT IS A MATTER OF RECORD THAT ALL THE ASSESSEES ARE CHARITABLE INSTITUTIONS REGISTERED UN DER SECTION 12A OF THE INCOME TAX ACT (HEREINAFTER REFERRED TO AS 'ACT'). FOR THI S REASON, IN THE PREVIOUS YEAR TO THE YEAR WITH WHICH WE ARE CONCERNED AND IN WHICH Y EAR THE DEPRECIATION WAS CLAIMED, THE ENTIRE EXPENDITURE INCURRED FOR ACQUIS ITION OF CAPITAL ASSETS WAS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PUR UPOSES UNDER SECTION 11(1)(A) OF THE ACT. THE VIEW TAKEN BY THE ASSESSING OFFICER IN DISALLOWING THE DEPRECIATION WHICH WAS CLAIMED UNDER SECTION 32 OF THE ACT WAS T HAT ONCE THE CAPITAL EXPENDITURE IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE ASSESSEES HAD VIRTUALLY ENJOYED A 100 PER CENT WRIT E OFF OF THE COST OF ASSETS AND, THEREFORE, THE GRANT OF DEPRECIATION WOULD AMOUNT T O GIVING DOUBLE BENEFIT TO THE ASSESSEE. THOUGH IT APPEARS THAT IN MOST OF THESE C ASES, THE CIT (APPEALS) HAD AFFIRMED THE VIEW, BUT THE ITAT REVERSED THE SAME A ND THE HIGH COURTS HAVE ACCEPTED THE DECISION OF THE ITAT THEREBY DISMISSIN G THE APPEALS OF THE INCOME TAX DEPARTMENT. FROM THE JUDGMENTS OF THE HIGH COUR TS, IT CAN BE DISCERNED THAT THE HIGH COURTS HAVE PRIMARILY FOLLOWED THE JUDGMEN T OF THE BOMBAY HIGH COURT IN 'COMMISSIONER OF INCOME TAX V. INSTITUTE OF BANK ING PERSONNEL SELECTION (IBPS)' [(2003) 131 TAXMAN 386 (BOMBAY)]. IN THE SAID JUDGM ENT, THE CONTENTION OF THE DEPARTMENT PREDICATED ON DOUBLE BENEFIT WAS TURNED DOWN IN THE FOLLOWING MANNER: 3. AS STATED ABOVE, THE FIRST QUESTION WHICH REQUIR ES CONSIDERATION BY THIS COURT IS: WHETHER DEPRECIATION WAS ALLOWABLE ON THE ASSETS, THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCO ME UNDER SECTION 11 IN THE PAST YEARS? IN THE CASE OF CIT V. MUNISUVRAT JA IN 1994 TAX LAW REPORTER, 1084 THE FACTS WERE AS FOLLOWS. THE ASSES SEE WAS A CHARITABLE TRUST. IT WAS REGISTERED AS A PUBLIC CHARITABLE TRU ST. IT WAS ALSO REGISTERED WITH THE COMMISSIONER OF INCOME TAX, PUNE. THE ASSE SSEE DERIVED INCOME ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 7 FROM THE TEMPLE PROPERTY WHICH WAS A TRUST PROPERTY . DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 1977 -78, 1978-79 AND 1979-80, THE ASSESSEE CLAIMED DEPRECIATION ON THE V ALUE OF THE BUILDING @2% AND THEY ALSO CLAIMED DEPRECIATION ON FURNITUR E @ 5%. THE QUESTION WHICH AROSE BEFORE THE COURT FOR DETERMINA TION WAS : WHETHER DEPRECIATION COULD BE DENIED TO THE ASSESSEE, AS EX PENDITURE ON ACQUISITION OF THE ASSETS HAD BEEN TREATED AS APPLI CATION OF INCOME IN THE YEAR OF ACQUISITION? IT WAS HELD BY THE BOMBAY HIGH COURT THAT SECTION 11 OF THE INCOME TAX ACT MAKES PROVISION IN RESPECT OF . COMPUTATION OF INCOME OF THE TRUST FROM THE PROPERTY HELD FOR CHAR ITABLE OR RELIGIOUS PURPOSES AND IT ALSO PROVIDES FOR APPLICATION AND A CCUMULATION OF INCOME. ON THE OTHER HAND, SECTION 28 OF THE INCOME TAX ACT DEALS WITH CHARGEABILITY OF INCOME FROM PROFITS AND GAINS OF B USINESS AND SECTION 29 PROVIDES THAT INCOME FROM PROFITS AND GAINS OF BUSI NESS AHLL BE COMPUTED IN ACCORDANCE WITH SECTION 30 TO SECTION 43C. THAT, SECTION 32(1) OF THE ACT PROVIDES FOR DEPRECIATION IN RESPECT OF BUILDIN G, PLANT AND MACHINERY OWNED BY THE ASSESSEE AND USED FOR BUSINESS PURPOSE S. IT FURTHER PROVIDES FOR DEDUCTION SUBJECT TO SECTION 34. IN THAT MATTER ALSO, A SIMILAR ARGUMENT, AS IN THE PRESENT CASE, WAS ADVANCED ON B EHALF OF THE REVENUE, NAMELY, THAT DEPRECIATION CAN BE ALLOWED AS DEDUCTI ON ONLY UNDER SECTION 32 OF THE INCOME TAX ACT AND NOT UNDER GENERAL PRIN CIPLES. THE COURT REJECTED THIS ARGUMENT. IT WAS HELD THAT NORMAL DEP RECIATION CAN BE CONSIDERED AS A LEGITIMATE DEDUCTION IN COMPUTING T HE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11( 1)(A) OF THE INCOME TAX ACT THE COURT REJECTED THE ARGUMENT ON BEHALF OF TH E REVENUE THAT SECTION 32OF THE INCOME TAX ACT WAS THE ONLY SECTION GRANTI NG BENEFIT OF DEDUCTION ON ACCOUNT OF DEPRECIATION. IT WAS HELD T HAT INCOME OF A CHARITABLE TRUST DERIVED FORM 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 A SSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE INCOME TAX ACT PROVIDING F OR DEPRECIATION FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROF ESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQ UIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PRO VIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM GROSS INCOME OF THE TRUST. IN VIEW OF THE AFORESATATED JUDGMENT OF THE BOMBAY HIGH CURT, WE ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 8 ANSWER QUESTION NO. 1 IN THE AFFIRMATIVE I.E., IN F AVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. 4. QUESTION NO. 2 HEREIN IS IDENTICAL TO THE QUESTI ON WHICH WAS RAISED BEFORE THE BOMBAY HIGH COURT IN THE CASE OF DIRECTO R OF INCOME-TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993] 10 9 CTR 463. IN THAT CASE, THE FACTS WERE AS FOLLOWS: THE ASSESSEE WAS T HE TRUST. IT DERIVED ITS INCOME FROM DEPRECIABLE ASSETS. THE ASSESSEE TOOK I NTO ACCOUNT DEPRECIATION ON THOSE ASSETS IN COMPUTING THE INCOM E OF THE TRUST. THE ITO HELD THAT DEPRECIATION COULD NOT BE TAKEN INTO ACCOUNT BECAUSE, FULL CAPITAL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS. THE ASSESSEE WENT IN APPEAL BEFORE THE ASSI STANT APPELLATE COMMISSIONER. THE APPEAL WAS REJECTED. THE TRIBUNAL , HOWEVER, TOOK THE VIEW THAT WHEN THE ITO STATED THAT FULL EXPENDITURE HAD BEEN ALLOWED IN THE YEAR OF ACQUISITION OF THE ASSETS, WHAT HE REAL LY MEANT WAS THAT THE AMOUNT SPENT ON ACQUIRING THOSE ASSETS HAD BEEN TRE ATED AS 'APPLICATION OF INCOME' OF THE TRUST IN THE YEAR IN WHICH THE IN COME WAS SPENT IN ACQUIRING THOSE ASSETS. THIS DID NOT MEAN THAT IN C OMPUTING INCOME FROM THOSE ASSETS IN SUBSEQUENT YEARS, DEPRECIATION IN R ESPECT OF THOSE ASSETS CANNOT BE TAKEN INTO ACCOUNT. THIS VIEW OF THE TRIB UNAL HAS BEEN CONFIRMED BY THE BOMBAY HIGH COURT IN THE ABOVE JUD GMENT. HENCE, QUESTION NO. 2 IS COVERED BY THE DECISION OF THE BO MBAY HIGH COURT IN THE ABOVE JUDGMENT. CONSEQUENTLY, QUESTION NO. 2 IS ANS WERED IN THE AFFIRMATIVE I.E., IN FAVOUR OF THE ASSESSEE AND AGA INST THE DEPARTMENT. AFTER HEARING LEARNED COUNSEL FOR THE PARTIES, WE A RE OF THE OPINION THAT THE AFORESAID VIEW TAKEN BY THE BOMBAY HIGH COURT CORRE CTLY STATES THE PRINCIPLES OF LAW AND THERE IS NO NEED TO INTERFERE WITH THE SAME . IT MAY BE MENTIONED THAT MOST OF THE HIGH COURTS HA VE TAKEN THE AFORESAID VIEW WITH ONLY EXCEPTION THERETO BY THE HIGH COURT OF KE RALA WHICH HAS TAKEN A CONTRARY VIEW IN 'LISSIE MEDICAL INSTITUTIONS V. CO MMISSIONER OF INCOME TAX'. IT MAY ALSO BE MENTIONED AT THIS STAGE THAT THE LEG ISLATURE, REALISING THAT THERE WAS NO SPECIFIC PROVISION IN THIS BEHALF IN THE INC OME TAX ACT, HAS MADE AMENDMENT IN SECTION 11(6) OF THE ACT VIDE FINANCE ACT NO. 2/2014 WHICH BECAME EFFECTIVE FROM THE ASSESSMENT YEAR 2015-2016 . THE DELHI HIGH COURT HAS TAKEN THE VIEW AND RIGHTLY SO, THAT THE SAID AMENDM ENT IS PROSPECTIVE IN NATURE. IT ALSO FOLLOWS THAT ONCE ASSESSEE IS ALLOWED DEPRE CIATION, HE SHALL BE ENTITLED TO CARRY FORWARD THE DEPRECIATION AS WELL. ITA NO . 21/ AHD/2018 . A.Y. 2014- 15 9 FOR THE AFORESAID REASONS, WE AFFIRM THE VIEW TAKEN BY THE HIGH COURTS IN THESE CASES AND DISMISS THESE MATTERS. 7. ON THE OTHER HAND, LD. D.R. HAS NOTHING TO CONTROVE RT. 8. RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF TH E SUPREME COURT AND IN OUR CONSIDERED OPINION, LD. CIT(A) HAS PASSED DETAILED AND REASONED ORDER AFTER FOLLOWING THE JUDGMENTS OF THE HIGHER COURTS AND WE DO NOT FIND ANY AMBIGUITY IN THE ORDER PASSED BY THE LD. CIT(A). 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 20 - 02- 2020 SD/- SD/- (PRADIP KUMAR KEDIA) TRUE COPY (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 20/02/2020 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD