Mary Immaculate Society, Bangalore V. DYDIT, Bangalore

ITA 240/BANG/2015

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9766 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDANA RAMACHANDRAN CITIIIDR
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Benefit of exemption; Capital expenditure
• Section: 143(3); 32; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER ITA NOS.240 & 241/BANG/2015 ASSESSMENT YEARS : 2010-11 & 2011-12 MARY IMMACULATE SOCIETY, 18 TH CROSS, WILSON GARDEN, BANGALORE 560 030. PAN: AAATM 2014N VS. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI CHAVALI NARAYAN, CA RESPONDENT BY : SMT. CHANDANA RAMACHANDRAN, CIT-III(DR) DATE OF HEARING : 17.06.2015 DATE OF PRONOUNCEMENT : 23.06.2015 O R D E R PER BENCH THESE ARE APPEALS BY THE ASSESSEE AGAINST COMMON ORDER DATED 31.10.2014 OF THE CIT(APPEALS), V, BANGALORE RELATI NG TO ASSESSMENT YEARS 2010-11 & 2011-12. 2. THE FIRST COMMON ISSUE THAT ARISES FOR CONSIDERA TION IN THESE APPEAL IS AS TO WHETHER THE CIT(APPEALS) WAS RIGHT IN DIRE CTING THE AO TO ALLOW ITA NOS.240 & 241/BANG/2015 PAGE 2 OF 11 DEPRECIATION ON THE CAPITAL ASSETS, DESPITE THE FAC T THAT AT THE TIME WHEN THE CAPITAL ASSETS WERE ACQUIRED, THE SAME WERE TREATED AS APPLICATION OF INCOME IN THOSE YEARS. THE ASSESSEE IS A CHARITABL E TRUST RUNNING EDUCATIONAL INSTITUTIONS. IN THE COURSE OF ASSESSM ENT U/S. 143(3) OF THE ACT FOR AY 2010-11 & 2011-12 THE AO NOTICED FROM THE DE TAILS OF DEPRECIATION CLAIMED, THAT THE DEPRECIATION WAS CLAIMED ON ASSET S, THE COST OF ACQUISITION OF THE SAID ASSETS HAD BEEN CLAIMED BY THE ASSESSEE AS CAPITAL EXPENDITURE TOWARDS APPLICATION OF FUNDS TOWARDS TH E OBJECTS OF THE TRUST AND ALLOWED AS SUCH. ACCORDING TO THE AO, ALLOWING SUCH A CLAIM WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION. ON THE FACTS O F THE PRESENT CASE, HE WAS OF THE VIEW THAT THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 IT R 43 IS SQUARELY APPLICABLE, WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED IN RESPECT OF CAPITAL EXPENDIT URE ON SCIENTIFIC RESEARCH, NO DEPRECIATION IS ALLOWABLE U/S 32 ON THE SAME ASS ET. 3. THE ASSESSEE POINTED OUT BEFORE CIT(A) THAT HON' BLE HIGH COURT OF KARNATAKA IN THE CASE OF ALL SAINTS CHURCH, 148 ITR 786 (KAR) AND SOCIETY OF SISTERS OF ST. ANN, 146 ITR 28 (KAR) HAS TAKEN THE VIEW THAT WHERE CAPITAL EXPENDITURE ON ACQUISITION OF DEPRECI ABLE ASSET IS CONSIDERED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE, AL LOWING DEPRECIATION ON THE VERY SAME CAPITAL ASSET WOULD NOT AMOUNT TO DOU BLE ALLOWANCE. THE ITA NOS.240 & 241/BANG/2015 PAGE 3 OF 11 ASSESSEE ALSO POINTED OUT THAT THE DECISION OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE AS IT WAS RENDERED ON A DIFFERENT SET OF FACTS. 4. THE CIT(A) HOWEVER, HELD THAT ALLOWANCE OF DEPRE CIATION WHEN THE COST HAS ALREADY BEEN RECOVERED BY WAY OF EXEMPTION AS APPLICATION OF INCOME AMOUNTS TO DOUBLE DEDUCTION AND DOUBLE BENEF IT ON THE SAME ASSET. THE CIT(A) REFERRED TO THE DECISION OF THE OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF DDIT(E) V. LISSIE MEDICAL INSTITUTIONS, 348 ITR 344 (KER) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION OF A DEPRECIABLE ASSET WHEN THE COST OF ACQUISITION OF DEPRECIABLE A SSET WAS ALLOWED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE AMOUNT S TO DOUBLE DEPRECIATION AND THEREFORE DEPRECIATION CANNOT BE A LLOWED. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSESSEE HAS PREFERR ED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE HAVE HE ARD THE SUBMISSIONS OF THE LD. DR, WHO RELIED ON THE ORDER OF AO. HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIT(E) VS. CHARANJIV CHARITABLE TRUST (2014) TAXMAN N.COM 300 (DELHI) WHEREIN IT WAS HELD THAT ALLOWING DEPRECIATION ON ASSETS, THE COST OF ACQUISITION OF WHICH WAS ALREADY CONSIDERED AS APPL ICATION OF INCOME IS NOT PERMISSIBLE. ITA NOS.240 & 241/BANG/2015 PAGE 4 OF 11 6. WE HAVE CONSIDERED THE ORDER OF THE AO. IDENTIC AL ISSUE CAME UP FOR CONSIDERATION BEFORE ITAT BANGALORE BENCH IN TH E CASE OF DDIT(E) V. CUTCHI MEMON UNION (2013) 60 SOT 260 BANGALORE ITAT , WHEREIN SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL. IN THE AFORESAID CASE, THE ASSESSEE CLAIMED DEPRECIATION AND THE AO DENIED DEPRECIATION ON THE GROUND THAT AT THE TIME OF ACQUIRING THE RELEVANT C APITAL ASSET, COST OF ACQUISITION WAS CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWING DE PRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN ESCORTS LTD. (SUPRA) . THE CIT(A), HOWEVER, ALLOWED THE CLAIM OF ASSESSEE. ON FURTHER APPEAL BY THE REVENU E, THE TRIBUNAL HELD AS FOLLOWS:- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTI NG INCOME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PR ESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHI NG BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATIO N, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECT ION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMO UNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS E DUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHA RITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPL IED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAIM FOR DEPRECIATI ON WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) H AVE BEEN ITA NOS.240 & 241/BANG/2015 PAGE 5 OF 11 REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND OF APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. M ARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H). THE HONBLE P UNJAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISI ONS ON THAT ISSUE AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA), CAME TO THE CONCLUSIO N THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUN DS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COURT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCT IONS UNDER DIFFERENT PROVISIONS OF THE ACT, ONE U/S. 32 FOR DE PRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITURE OF A CAPITAL NA TURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECI ATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HON BLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO T HE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHERE IN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUT ED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DE BITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. I N VIEW OF THE AFORESAID DECISION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENU E IS DISMISSED. 9. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) IS CONTRARY TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SOCIETY OF SISTERS OF ANNE ITA NOS.240 & 241/BANG/2015 PAGE 6 OF 11 (SUPRA) . WE ARE BOUND TO FOLLOW THE VIEW OF THE HONBLE K ARNATAKA HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT AS FAR AS THE BANGALORE BENCH OF ITAT IS CONCERNED. WE THEREFORE PREFER TO FOLLO W THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. 10. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SIN CE BEEN AMENDED BY A PROSPECTIVE AMENDMENT BY THE FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015 BY INSERTION OF SUB-SECTION (6) TO SECTION 11 OF TH E ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICATION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMINED WITHOUT ANY DEDUCTION OR ALLOWANCE 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 SAM E OR ANY OTHER PREVIOUS YEAR. 11. AS ALREADY STATED, THE AFORESAID AMENDMENT IS PROSPECTIVE AND WILL APPLY ONLY FROM A.Y. 2015-16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) IS NOT JUST A ND PROPER. THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF DEPRECIATI ON IS THEREFORE DIRECTED TO BE ALLOWED. CONSEQUENTLY THE FIRST ISSUE IS DE CIDED IN FAVOUR OF THE ASSESSEE. 12. THE NEXT ISSUE RAISED BY THE ASSESSEE IN ITS GR OUNDS OF APPEAL IN THE APPEAL RELATING TO AY 2011-12 IS WITH REGARD TO DISALLOWANCE OF ITA NOS.240 & 241/BANG/2015 PAGE 7 OF 11 ACCUMULATION OF INCOME U/S 11(1)(A) OF THE ACT. SE C.11(1)( A) OF THE ACT PROVIDES AS FOLLOWS: 11. (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 INCOM E ( A ) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND, WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET AP ART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FRO M SUCH PROPERTY; 13. THE ASSESSEE CLAIMED ACCUMULATION OF INCOME FOR APPLICATION FOR CHARITABLE PURPOSE AT 15% OF THE GROSS RECEIPTS AMO UNTING TO RS.47,19,039. THE AO WAS OF THE VIEW THAT ACCUMULA TION WILL BE ALLOWED ONLY TO THE EXTENT OF 15% OF THE INCOME AFTER REVEN UE EXPENDITURE. IN OTHER WORDS INCOME TO BE SET APART U/S.11(1)(A) OF THE AC T HAS TO BE COMPUTED AT 15% OF THE NET INCOME I.E., GROSS RECEIPTS MINUS RE VENUE EXPENDITURE AND NOT ON THE GROSS RECEIPTS AS CLAIMED BY THE ASSESSE E. SINCE IN THE CASE OF THE ASSESSEE, THE GROSS RECEIPTS AFTER REVENUE EXPE NDITURE WAS NIL, THE AO DENIED THE BENEFIT OF ACCUMULATION TO THE ASSESSEE. 14. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRME D THE ORDER OF THE AO. HENCE APPEAL BY THE ASSESSEE BEFORE THE TRIBUN AL. ITA NOS.240 & 241/BANG/2015 PAGE 8 OF 11 15. THE ISSUE TO BE DECIDED IS THEREFORE AS TO WHE THER FOR THE PURPOSE OF COMPUTING ACCUMULATION OF INCOME OF 15% UNDER SE C.11(1)((A) OF THE ACT, ONE HAS TO TAKE THE GROSS RECEIPTS OR GROSS RE CEIPTS AFTER EXPENDITURE FOR CHARITABLE PURPOSE I.E., THE NET RECEIPTS. THI S IS ISSUE IS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE SPECIAL BENCH M UMBAI IN THE CASE OF BAI SONABAI HIRJI AGIARY TRUST VS. ITO, 93 ITD 0070 (SB) . THE FACTS IN THE AFORESAID CASE WERE THAT THE ASSESSEE WAS A PUB LIC CHARITABLE TRUST ENJOYING EXEMPTION UNDER S. 11 OF THE IT ACT. AS PE R THE REQUIREMENT OF S. 11(1) OF THE IT ACT, AS IT PREVAILED AT THAT POINT OF TIME, THE ASSESSEE HAD TO APPLY 75 PER CENT OF ITS INCOME FOR THE OBJECTS AND PURPOSES OF THE TRUST AND THE ASSESSEE WAS PERMITTED TO ACCUMULATE OR SET APA RT UP TO 25 PER CENT OF ITS INCOME, WHICH WAS SUBJECT TO FULFILLMENT OF OTH ER CONDITIONS. WHILE CALCULATING THE AFORESAID 25 PER CENT, THE IMPORTAN T QUESTION WHICH AROSE WAS AS TO WHETHER FOR THIS PURPOSE, THE GROSS INCOM E EARNED BY THE ASSESSEE IS RELEVANT OR THE INCOME AS COMPUTED IN A CCORDANCE WITH THE PROVISIONS OF IT ACT. IN OTHER WORDS, WHETHER OUTGO INGS FROM OUT OF GROSS INCOME WHICH ARE IN THE NATURE OF APPLICATION OF IN COME, SHOULD BE FIRST DEDUCTED FROM THE GROSS INCOME AND 25 PER CENT OF O NLY THE REMAINING AMOUNT SHOULD BE ALLOWED TO BE ACCUMULATED OR SET A PART. THE SPECIAL BENCH OF THE ITAT ON THE ISSUE HELD AS FOLLOWS:- 9. COMING TO THE MERITS OF THE ISSUE, WE ARE OF THE VI EW THAT THE SAME IS CLEARLY COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. PROGRAMME FOR COMMUNITY ITA NOS.240 & 241/BANG/2015 PAGE 9 OF 11 ORGANIZATION (SUPRA). IN THE DECISION, THEIR LORDSH IPS, AFTER TAKING NOTE OF PROVISIONS OF S. 11(1)(A), HAVE HELD AS UND ER : 'HAVING REGARD TO THE PLAIN LANGUAGE OF THE ABOVE PROVISION, IT IS CLEAR THAT A CHARITABLE OR RELIGIO US TRUST IS ENTITLED TO ACCUMULATE TWENTY-FIVE PER CENT OF ITS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. FOR THE PRE SENT PURPOSES, THE DONATIONS THE ASSESSEE RECEIVED, IN T HE SUM OF RS. 2,57,376, WOULD CONSTITUTE ITS PROPERTY AND IT IS ENTITLED TO ACCUMULATE TWENTY-FIVE PER CENT THEREOU T. IT IS UNCLEAR ON WHAT BASIS THE REVENUE CONTENDED THAT IT WAS ENTITLED TO ACCUMULATE ONLY TWENTY FIVE PER CENT OF RS. 87,010. FOR THE AFORESAID REASONS, THE CIVIL APPEAL IS DISM ISSED.' IT IS CLEAR FROM THE ABOVE THAT DEDUCTION OF TWENTY -FIVE PER CENT WAS HELD TO BE ALLOWABLE NOT ON TOTAL INCOME AS COM PUTED UNDER THE IT ACT. ANY AMOUNT OR EXPENDITURE, WHICH WAS AP PLICATION OF INCOME, IS NOT TO BE CONSIDERED FOR DETERMINING TWE NTY FIVE PER CENT TO BE ACCUMULATED. THEIR LORDSHIPS, AS NOTED E ARLIER, AFFIRMED THE DECISION OF KERALA HIGH COURT IN (1997 ) 141 CTR (KER) 502 : (1997) 228 ITR 620 (KER) (SUPRA) WHEREI N IT IS HELD AS UNDER : 'AT THE OUTSET, THE STATUTORY LANGUAGE OF S. 11(1)( A) OF THE IT ACT, 1961, RELATES TO THE INCOME DERIVED BY THE TRUST FROM PROPERTY. THE TRUST IS REQUIRED TO BE WHOLLY F OR CHARITABLE OR RELIGIOUS PURPOSES, AND THE INCOME IS EXPECTED TO HAVE RELATION TO THE EXTENT TO WHICH SU CH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. IT IS THEREAFTER THE STATUTORY PROVISION PROCEEDS FURTHER THAT SUCH INCOME IS NOT TO BE UNDERSTOOD TO BE IN EXCESS OF 25 PER CENT OF THE INCOME FROM SUCH PROPERTIES. IN OTH ER WORDS, THE VERY LANGUAGE OF THE STATUTORY PROVISION UNDER CONSIDERATION SETS APART 25 PER CENT OF THE INCOME FROM THE SOURCE OF PROPERTY WITH REFERENCE TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED FOR SUCH PURPOSES, CHARITABLE OR RELIGIOUS. IN OTHER WORDS, FOR THE PU RPOSE OF S. 11(1)(A) OF THE ACT, THE INCOME IN TERMS OF RELE VANCE WOULD BE THE INCOME OF THE TRUST FROM AND OUT OF WH ICH 25 PER CENT IS SET APART IN ACCORDANCE WITH THE SPI RIT OF THE STATUTORY PROVISION.' ITA NOS.240 & 241/BANG/2015 PAGE 10 OF 11 THIS MEANS THAT, WHEN IT IS ESTABLISHED THAT TRUST IS ENTITLED TO FULL BENEFIT OF EXEMPTION UNDER S. 11(1), THE SAID TRUST IS TO GET THE BENEFIT OF TWENTY-FIVE PER CENT AND THIS TWENTY-FIV E PER CENT HAS TO BE UNDERSTOOD AS INCOME OF THE TRUST UNDER THE R ELEVANT HEAD OF S. 11(1). IN OTHER WORDS, INCOME THAT IS NOT TO BE INCLUDED FOR THE PURPOSE OF COMPUTING THE TOTAL INCOME WOULD BE THE AMOUNT EXPENDED FOR PURPOSES OF TRUST IN INDIA. THEIR LORD SHIPS IN THE ABOVE CASE HAVE EMPHASIZED ON THE CLEAR AND UNAMBIG UOUS LANGUAGE OF S. 11(1)(A) AND DECIDED THE MATTER ON T HE BASIS OF THE SAME. IT HAS BEEN HELD THAT AS PER THE STATUTORY LA NGUAGE OF THE ABOVE SECTION THE INCOME WHICH IS TO BE TAKEN FOR P URPOSE OF ACCUMULATION IS THE INCOME DERIVED BY THE TRUST FRO M PROPERTY. IF BOTH THE DECISIONS ARE CAREFULLY READ, IT BECOME S EVIDENT THAT ANY EXPENDITURE WHICH IS IN THE SHAPE OF APPLICATIO N OF INCOME IS NOT TO BE TAKEN INTO ACCOUNT. HAVING FOUND THAT TRU ST IS ENTITLED TO EXEMPTION UNDER S. 11(1), WE ARE TO GO TO THE STAGE OF INCOME BEFORE APPLICATION THEREOF AND TAKE INTO ACCOUNT 25 PER CENT OF SUCH INCOME. THEIR LORDSHIPS HAVE POINTED THAT THE SAME HAS TO BE TAKEN ON 'COMMERCIAL' BASIS AND NOT 'TOTAL INCOM E' AS COMPUTED UNDER THE IT ACT. THEIR LORDSHIPS IN THE D ECIDED CASE REJECTED THE CONTENTION OF THE REVENUE THAT THE SUM OF RS 1,70,369 WHICH WAS SPENT AND APPLIED BY THE ASSESSE E FOR CHARITABLE PURPOSES WAS REQUIRED TO BE EXCLUDED FOR PURPOSE OF TAKING AMOUNT TO BE ACCUMULATED. HAVING REGARD TO THE CLEAR PRONOUNCEMENT OF THEIR L ORDSHIPS OF THE SUPREME COURT, IT IS DIFFICULT TO ACCEPT THAT O UTGOINGS WHICH ARE IN THE NATURE OF APPLICATION OF INCOME ARE TO B E EXCLUDED. THE INCOME AVAILABLE TO THE ASSESSEE BEFORE IT WAS APPL IED IS DIRECTED TO BE TAKEN AND THE SAME IN THE PRESENT CASE IS RS. 3,42,174. TWENTY FIVE PER CENT OF THE ABOVE INCOME IS TO BE A LLOWED AS A DEDUCTION. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE MADHYA PRADESH HIGH COURT IN PARSI ZORASTRIAN ANJUM AN TRUST VS. CIT (SUPRA). NO REASON WHATSOEVER HAS BEEN GIVE N BY THE REVENUE AUTHORITIES FOR DEDUCTING RS. 2,17,126 IN T HIS CASE FOR PURPOSES OF S. 11(1)(A). THE DECISION CITED ON BEHA LF OF THE REVENUE DID NOT TAKE INTO ACCOUNT THE DECISION OF T HE SUPREME COURT REFERRED TO ABOVE. THE CIRCULAR OF CBDT HAS A LSO BEEN CONSIDERED BY THE HONBLE KERALA HIGH COURT IN ITS DECISION REFERRED TO ABOVE. ACCORDINGLY THE QUESTION REFERRE D TO IS ANSWERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE AS SESSEE. ITA NOS.240 & 241/BANG/2015 PAGE 11 OF 11 16. THE AFORESAID DECISION CLEARLY SUPPORTS THE PL EA OF THE ASSESSEE. FOLLOWING THE SAME, WE HOLD THAT THE ACCUMULATION U /S.11(1)(A) OF THE ACT SHOULD BE ALLOWED AS CLAIMED BY THE ASSESSEE. 17. IN THE RESULT, THE APPEALS BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JUNE , 2015 . SD/- SD/- (ABRAHAM P. GEORGE) ( N.V. VASUDEV AN ) ACCOUNTANT MEMBER JUDICIAL MEM BER BANGALORE, DATED, THE 23 RD JUNE, 2015 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.