DCIT, CHENNAI V. M/s. Tamil Nadu Cricket Association, CHENNAI

ITA 2556/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4458 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: V RA VICHANDRAN
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Scheme of amalgamation; Capital expenditure
• Section: 12AA; 32; 63; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !.. # $%, ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.2556 & 2557/MDS/2016 & C.O. NOS.158 & 159/MDS/2016 (IN ITA NOS.2556 & 2557/MDS/2016) + ,+ / ASSESSMENT YEARS : 2011-12 & 2012-13 THE DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHENNAI CIRCLE, CHENNAI - 600 034. V. M/S TAMIL NADU CRICKET ASSOCIATION, NO.5, M.A. CHIDAMBARAM STADIUM, HOSTEL ROAD, CHEPAUK, CHENNAI - 600 005. PAN : AAAAT 0398 M (.// APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) ./ 0 1 / APPELLANT BY : DR. MILIND MADHUKAR BHUSARI, CIT 23./ 0 1 / RESPONDENT BY : SHRI V. RAVICHANDRAN, CA # 0 4' / DATE OF HEARING : 14.03.2017 56, 0 4' / DATE OF PRONOUNCEMENT : 31.05.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGA INST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME T AX (APPEALS)-17, CHENNAI, DATED 30.03.2016, FOR THE AS SESSMENT YEARS 2011-12 AND 2012-13. THE ASSESSEE HAS ALSO FILED C ROSS- 2 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 OBJECTIONS AGAINST THE VERY SAME ORDER OF THE CIT(A PPEALS). THEREFORE, WE HEARD BOTH THE APPEALS AND THE CROSS- OBJECTIONS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON O RDER. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS OF THE REVENUE IS WITH REGARD TO EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 11 OF THE INCOME-TAX ACT, 1961 (IN SH ORT 'THE ACT'). 3. DR. MILIND MADHUKAR BHUSARI, THE LD. DEPARTMENTA L REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE-SOCIETY WAS ESTABLISHED FOR PROMOTING SPORTS IN THE STATE OF TA MIL NADU AND PONDICHERRY. THE ASSESSEE-SOCIETY WAS AFFILIATED T O BOARD OF CONTROL FOR CRICKET IN INDIA. THE ASSESSEE DERIVES INCOME FROM SUBSCRIPTION, RENT FOR HIRING CRICKET GROUND, SPONS ORSHIP, FEE FOR PROVIDING SERVICE TO IPL, INCOME FROM ADVERTISEMENT , SUBSIDY / SUBVENTION FROM BCCI, SALE OF TICKETS FOR CONDUCTIN G MATCHES, RESTAURANT AND CATERING INCOME, ETC. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE-SOCIETY WAS REGISTERED UNDER SECT ION 12AA OF THE ACT. THE REGISTRATION CONTINUED DURING THE YEAR UN DER CONSIDERATION ALSO. THE ASSESSING OFFICER DISALLOWED THE CLAIM O F THE ASSESSEE MAINLY ON THE GROUND THAT ACTIVITY OF THE ASSESSEE IS COMMERCIAL IN 3 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 NATURE. THIS TRIBUNAL, ACCORDING TO THE LD. D.R., EXAMINED THE ACTIVITIES OF THE ASSESSEE ON IDENTICAL SET OF FACT S FOR ASSESSMENT YEARS 2008-09 TO 2010-11 AND FOUND THAT THE ASSESSE E IS ELIGIBLE FOR EXEMPTION. 4. WE HAVE HEARD SHRI V. RAVICHANDRAN, THE LD. REPR ESENTATIVE FOR THE ASSESSEE ALSO. THE ASSESSING OFFICER DISAL LOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 11 OF THE ACT ON THE GROUND THAT THE ACTIVITY OF THE ASSESSEE IS COMMERCIAL IN NATURE. THE ASSESSING OFFICER ALSO FOUND THAT PROVISO TO SECTION 2(15) OF THE ACT WOULD COME INTO OPERATION SINCE THE GROSS RECEIPTS OF THE ASSESSEE EXCEEDED THE PRESCRIBED LIMIT. ON IDENTICAL SET OF FACTS, THIS ISSUE WAS EXAMINED BY THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2008-09 TO 2010-11 IN I.T.A. NOS.1 535, 1536 & 1537/MDS/2014 AND THIS TRIBUNAL FOUND THAT THE ACTI VITY OF THE ASSESSEE CANNOT BE CONSIDERED TO BE BUSINESS ACTIVI TY. IT WAS FURTHER FOUND THAT THE ASSESSEE IS NOT PROVIDING AN Y SERVICES TO ANY TRADE OR COMMERCE OR INDUSTRY. THEREFORE, THE PROV ISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE. IN FACT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS:- 4 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 14. THE NEXT CONTENTION OF THE LD. D.R. THAT THE ASSE SSEE IS ENGAGED IN BUSINESS ACTIVITY. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(15) OF THE ACT AN D THE CIRCULAR ISSUED BY THE CBDT. IN FACT, THE ASSESSEE HAS FILED A COPY OF THE SAID CIRCULAR AT PAGE 1 OF ITS PAPER- BOOK. FOR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING SECT ION 2(15) OF THE ACT HEREUNDER:- 2(15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, 79[PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES O R OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY : PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN T HE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY ; PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TWENTY-FIVE LAKH RUPEES OR LESS IN THE PREVIOUS YEAR ; ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY IS ALSO ONE OF THE CHARITABLE PURPOSES INCLUDED IN SEC TION 2(15) OF THE ACT. HOWEVER, PROVISO TO SECTION 2(15) OF THE ACT CLARIFIES THAT IF THE ASSESSEE INVOLVES IN CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS, OR RENDERING ANY ACTIVITY IN RELATION TO TRADE, COMMER CE OR BUSINESS, THE SAME SHALL NOT BE TREATED AS CHARITAB LE 5 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 PURPOSE. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSEE INVOLVES ITSELF IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ITS ACTIVITY WOULD A MOUNT TO RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERC E OR BUSINESS. WE HAVE CAREFULLY GONE THROUGH THE OBJEC T OF THE ASSESSEE-SOCIETY, A COPY OF WHICH IS AVAILABLE AT P AGES 62 TO 65 OF THE PAPER-BOOK. FOR THE PURPOSE OF CONVENIENCE , WE ARE REPRODUCING THE OBJECT:- (A) TO TAKE OVER ON REGISTRATION UNDER THE SOCIETIE S REGISTRATION ACT XXI OF 1860 AND ASSUME THE AFFAIRS AN D ACTIVITIES OF THE MADRAS CRICKET ASSOCIATION, AS SU BSEQUENTLY APPELLATED AS TAMIL NADU CRICKET ASSOCIATION AND CO NTINUE AND TAKE OVER THE DUES TO AND ASSETS, LIABILITIES, COMM ITMENTS AND UNDERTAKINGS OF THE SAID MADRAS CRICKET ASSOCIATION . (B) TO MAINTAIN A GENERAL CONTROL OF THE GAME OF CR ICKET IN THE STATE AND THE UNION TERRITORY OF PONDICHERRY AND GI VE ITS DECISION ON ALL MATTERS CONCERNING THE SAME EITHER WHEN REFERRED TO OR SUO MOTO. THE ACTIVITIES WOULD BE CO NFINED TO INDIA. (C) TO SPREAD THE GAME THROUGHOUT THE STATE BY ORGA NIZING TOURNAMENTS, INCLUDING INTER-UNIVERSITY, INTER-SCHO OL AND INTER-ASSOCIATION MATCHES, TO EDUCATE YOUN SPORTSME N IN THE GAME GENERALLY AND ALSO IN THE FIELD OF PHYSICAL CU LTURE AND THE SPIRIT OF SPORTSMANSHIP. THE BENEFITS WOULD BE AVA ILABLE TO THE GENERAL PUBLIC IRRESPECTIVE OF CASTE, CREED, RE LIGION OR SEX. (D) TO MAINTAIN A LIBRARY OF BOOKS, PUBLICATIONS A ND PERIODICALS OF INTEREST OF SPORTSMEN AND TO DIFUSE KNOWLEDGE OF CRICKET AND ITS IDEALS OF SPORTSMANSHIP. (E) TO COMMUNICATE WITH PUBLIC AUTHORITIES AND VARI OUS SPORTS ORGANIZATIONS IN INDIA AND ABROAD AND CONCERT AND P ROMOTE MEASURES FOR THE DEVELOPMENT OF THE GAME AND TO PRO VIDE SOCIAL SECURITY SAFE GUARDS FOR THE P1AYERS, OFFICI ALS SUCH AS 6 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 MANAGERS, COACHES, UMPIRES,, SELECTORS AND OTHERS W HO ARE DIRECTLY CONNECTED WITH THE GAME. (F) TO PROVIDE, ACQUIRE AND MAINTAIN SUITABLE PLACE S, PLAY- GROUNDS, BUILDINGS AND CLUB HOUSES TO AFFORD REQUIR ED FACILITIES FOR THE CRICKETERS, OFFICIALS SUCH AS MANAGERS, COA CHES, UMPIRES, SELECTORS AND OTHERS WHO ARE DIRECTLY CONN ECTED WITH THE GAME, MEMBERS TO ACQUIRE BY PURCHASE, LEAS E, HIRE OR OTHERWISE SUITABLE PLAYGROUNDS, STADIA AND ANY OTHE R PROPERTY, MOVABLE AND IMMOVABLE, RIGHTS OR PRIVILEGES TO THE SAME AND TO PROVIDE ALL AMENITIES THEREON FOR THE PROMOTION OF THE OBJECTS OF THE ASSOCIATION. (G) TO LAY OUR ANY GROUND FOR PLAYING THE GAME AND FOR OTHER PURPOSES AND TO PROVIDE PAVILION, CANTEEN AND OTHER CONVENIENCES AND AMENITIES IN CONNECTION THEREWITH AND FOR SUCH PURPOSE PURCHASE, LEASE OR OTHERWISE ACQUIRE T HE LAND AT SUCH PRICE OR RENT FOR SUCH PERIOD AND UPON SUCH TE RMS AND CONDITIONS AS MAY SEEM EXPEDIENT. (H) TO ESTABLISH PROMOTE OR ASSIST IN ESTABLISHING AND PROMOTING AND TO SUBSCRIBE TO AND BECOME A MEMBER O F ANY OTHER ASSOCIATION OR CLUB WHETHER INCORPORATED OR N OT WHOSE OBJECTS ARE SIMILAR OR IN PART TO THE OBJECTS OF TH E ASSOCIATION, THE ESTABLISHMENT OR PROMOTION OF WHIC H MAY BE BENEFICIAL TO THE ASSOCIATION AND IN PARTICULAR TO SUBSCRIBE TO, FINANCE, GIVE OR LEND MONEY TO, AND GUARANTEE THE C ONTRACTS OF THE BOARD OF CONTROL FOR CRICKET IN INDIA OR ANY OTH ER BODY FOR THE TIME BEING CONTROLLING THE GAME IN INDIA OR ANY PART THEREOF AND ANY STATE OR REGIONAL ASSOCIATION RECOG NIZED BY SUCH BODY. (I) TO CREATE, FOSTER AND MAINTAIN FRIENDLY RELATIO NS WITH AND AMONG THE POPULATION OF THE AREA UNDER ITS CONTROL THROUGH SPORTS, TOURNAMENTS AND COMPETITIONS CONNECTED THER EWITH, TO CREATE, DEVELOP AND FOSTER A HEALTHY SPIRIT OF SPOR TSMANSHIP AND A BROAD AND GENEROUS OUTLOOK DEVOID OF ALL PREJ UDICES AND 7 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 TO MOULD THE CHARACTER OF CITIZEN THROUGH THE MEDIU M OF SPORTS IN GENERAL AND CRICKET IN PARTICULAR. (J) TO IMPART PHYSICAL EDUCATION THROUGH THE MEDIUM OF CRICKET AND TAKE ALL STEPS TO ASSIST THE CITIZENS TO DEVELO P THEIR PHYSIQUE AND HAVE A HEALTHY MIND AND HEALTHY BODY. (K) TO SPREAD THE IDEALS OF CRICKET AND ALL THAT IT STANDS FOR THROUGHOUT THE LENGTH AND BREADTH OF ITS AREA BY AR RANGING SCHOOLS FOR COACHING, LECTURES, TOURNAMENTS AND RUN INTERNATIONAL MATCHES BETWEEN INDIA AND OTHER LEADI NG FOREIGN COUNTRIES SO AS TO DEVELOP MUTUAL GOODWILL AND BETT ER UNDERSTANDING BETWEEN INDIA AND OTHER COUNTRIES. (L) . . .. .. .. .. .. .. .. . TIME TO RUN SUCH MATCHES FOR THE ACHIEVEMENT OF THE OBJECTS OF THE ASSOCIATION AND TO UTILIZE THE NET PROCEEDS THEREOF TOWARDS THE IMPLEMENTATION OF THE OBJECTS SET OUT H EREIN AND TO EDUCAT THE PUBLIC, THE SCHOOL BOYS, COLLEGE STUD ENTS, CLUBS AND CRICKETERS, IN CRICKET AND ALL THE IDEALS IT ST ANDS FOR. (M) TO HAVE AS MANY CLASSES OF MEMBERS WITH SUCH RI GHTS AS THE GENERAL BODY DECIDE. (N) TO INSTILL KEENNESS FOR THE GAME AND TO FOSTER THE SPIRIT OF SPORTSMANSHIP IN PROMISING STUDENTS OF SCHOOLS AND COLLEGES AND MEMBERS OF AFFILIATED CLUBS / DISTRICT ASSOCIAT IONS AND INSTITUTIONS AND THUS ENABLE THEM TO DEVELOP A GOOD PHYSIQUE AND A GOOD STANDARD OF THE GAME AND TO AFFORD FACIL ITIES TO THE POORER CLASSES OF CITIZENS TO ATTAIN EFFICIENCY IN THE GAME. (O) TO REGULATE AND CONTROL SPORTS IN GENERAL AND T HE GAME OF CRICKET IN PARTICULAR. (P) TO GIVE DECISIONS ON THE RELEVANT MATTERS REFER RD TO THE ASSOCIATION BY AFFILIATED CLUBS/DISTRICT ASSOCIATIO NS AND INSTITUTIONS AND, IF NECESSARY, TO FINANCE AND COND UCT MATCHES AND TOURS OF REPRESENTATIVE TEAMS VISITING ITS AREA ON 8 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 INVITATION AND TO REGULATE AND CONTROL THE VISITS O F THE STATES REPRESENTATIVE TEAMS GOING OUT OF TAMIL NADU. (Q) TO ENCOURAGE THE FORMATION OF ZONES IN THE CITY OF MADRAS AND DISTRICT OR REGIONAL CLUBS IN EVERY DISTRICT OR PART OF A DISTRICT AND PLAYING FACILITIES IN ALL SUCH CENTRES . (R) TO SELECT TEAMS TO REPRESENT THE ASSOCIATION IN TOURNAMENTS, CHAMPIONSHIPS OR FIXTURES, LOCAL OR OTH ERWISE. (S) TO ACQUIRE BY ALL LAWFUL MEANS OF MOVABLE AND I MMOVABLE PROPERTY ON BEHALF OF THE ASSOCIATION AND TO SELL, MANAGE, MORTGAGE LEASE AND EXCHANGE, DISPOSE OFF OR OTHERWIS E DEAL WITH ALL OR ANY OF ITS PROPERTIES AND/OR ANY INCOME THEREFROM. (T) TO PROMOTE AND TO CONTRIBUTE TO ANY ENTERPRISE CONDUCTED BY INDIVIDUALS OR ASSOCIATIONS IN CONFORMITY WITH T HE OBJECTS OF THE ASSOCIATION. (U) TO ORGANIZE A PROPER COACHING SCHEME FOR THE BE NEFIT OF CRICKETERS IN THE CITY AND IN THE DISTRICTS UNDER T HE SUPERVISION OF COACHES FROM INDIA AND ABROAD. (V) TO COLLECT FUNDS AND WHENEVER NECESSARY BORROW WITH OR WITHOUT SECURITY FOR PURPOSES OF THE ASSOCIATION AN D IN PARTICULAR BY THE ISSUE OF DEBENTURES OR DEBENTURE STOCK PERPETUAL OR OTHERWISE CHARGED UPON ALL OR ANY OF T HE ASSOCIATIONS PROPERTY BOTH OR FUTURE AND TO PURCHA SE, REDEEM OR PAYOFF ANY SUCH SECURITIES AND TO UTILIZE SUCH F UNDS IN SUCH MANNER AS THE GENERAL BODY MAY CONSIDER DESIRABLE FO R THE FULFILLMENT OF THE OBJECTS OF THE ASSOCIATION. (W) TO INVEST MONIES AND FUNDS OF THE ASSOCIATION A S PER SECTION 11(5) OF THE INCOME-TAX ACT, 1961 AND TO RECON VERT IN SUCH MANNER AS MAY BE DECIDED UPON BY THE GENERAL BO DY OF THE MEMBERS OF THE ASSOCIATION FROM TIME TO TIME. 9 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 (X) TO CARRY OUT ANY OTHER BUSINESS OR ACTIVITY WHIC H MAY SEEM TO THE COMMITTEE CAPABLE OF BEING CONVENIENTLY CARR IED OUT IN CONNECTION WITH AND IN CONFORMITY TO THE OBJECTS OF THE ASSOCIATION AND WHICH IS CONNECTED DIRECTLY OR INDI RECTLY TO ENHANCE THE VALUE OF OR RENDER MORE PROFITABLE ANY OF THE OBJECTS, RIGHTS OR PROPERTIES OF THE ASSOCIATION. (Y) TO MAINTAIN A PANEL OF APPROVED CRICKET UMPIRES AND TO DO SUCH ACTS AS MAY BE NECESSARY FOR THIS PURPOSE INCL UDING HOLDING OF PRESCRIBED PERIODICAL TESTS WITH A VIEW TO ENABLE THEM TO QUALIFY THEMSELVES AS FIRST CLASS UMPIRES. (Z) TO ADD, DELETE, ALTER, MAINTAIN AND ENFORCE RUL ES AND REGULATIONS FOR THE CONTROL AND GOVERNANCE OF THE G AME IN THE STATE OF TAMIL NADU AND THE UNION TERRITORY OF POND ICHERRY AND TO MAINTAIN DISCIPLINE AMONGST PLAYERS, OFFICIA LS, CLUBS AND AFFILIATED INSTITUTIONS. THE OBJECT OF THE ASSESSEE-SOCIETY IS TO CONTROL GA ME OF CRICKET IN THE STATE OF TAMIL NADU AND IN THE UNION TERRITORY OF PUDUCHERRY AND ALSO TO ORGANIZE TOURNAMENTS, INC LUDING INTER-UNIVERSITY, INTER-SCHOOL AND INTER-ASSOCIATIO N MATCHES, TO EDUCATE YOUNG SPORTSMEN IN THE GAME GENERALLY AND A LSO IN THE FIELD OF PHYSICAL CULTURE AND THE SPIRIT OF SPORTSM ANSHIP. THEREFORE, THE SOLE OBJECT OF THE ASSESSEE-SOCIETY IS TO PROMOTE SPORT OF CRICKET IN THE STATE OF TAMIL NADU AND IN THE UNION TERRITORY OF PUDUCHERRY. 15. NOW, LETS EXAMINE WHETHER THE ACTIVITY OF CONDUC TING ONE-DAY MATCHES, T-20 MATCHES AND INDIAN PREMIER LEAG UE MATCHES WOULD AMOUNT TO DOING BUSINESS OR TRADE. I T IS THE CASE OF THE REVENUE THAT THE ASSESSEE-SOCIETY IS CO NDUCTING OR ORGANIZING T-20, ONE-DAY MATCHES OR INDIAN PREMIER LE AGUE MATCHES. IN FACT, BCCI, THE PARENT ORGANIZATION WHI CH IS A NATIONAL BODY IN INDIA, IS ORGANIZING AND CONDUCTIN G THE MATCHES. THE ASSESSEE-SOCIETY, BEING A MEMBER OF BC CI, HOSTS THE MATCHES WHICH ARE CONDUCTED BY BCCI. FOR THE PURPOSE OF MEETING ITS EXPENDITURE, THE BCCI ALLOCATE S FUNDS 10 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 FROM THE REVENUE IT COLLECTED FROM ADVERTISEMENT AN D OTHER SOURCES. THE ASSESSEE-SOCIETY IS ALLOWED TO SELL T ICKETS TO THE CRICKET VIEWERS. NO DOUBT, THE PLAYERS OF INDIAN P REMIER LEAGUE ARE SOLD IN PUBLIC AUCTION FOR VERY HUGE AMO UNT. BUT THE QUESTION IS WHO IS CONDUCTING AND WHO IS AUCTIO NING, WHETHER THE ASSESSEE-SOCIETY OR BCCI? IN FACT, BCCI CONDUCTS THE PUBLIC AUCTION FOR SELLING PREMIER PLA YERS AT A HUGE PREMIUM RATE. IN FACT, THE BCCI COLLECTS THE M ONEY. THE ROLE OF THE ASSESSEE-SOCIETY IS ONLY TO PROVIDE STA DIUM FOR CONDUCTING MATCHES. OTHER THAN THAT, THE ASSESSEE- SOCIETY HAS NO ROLE IN CONDUCTING THE INTERNATIONAL MATCHES AND INDIAN PREMIER LEAGUE MATCHES. 16. THE OTHER ACTIVITY OF THE ASSESSEE-SOCIETY IS TO CONDUCT TRAINING PROGRAMMES, COACHING CLASSES FOR C OLLEGE STUDENTS AT DISTRICT LEVEL IN THE STATE OF TAMIL NA DU AND IN THE UNION TERRITORY OF PUDUCHERRY. THE ASSESSEE IS ALS O CONDUCTING INTER-UNIVERSITY, INTER-SCHOOL AND INTER -ASSOCIATION MATCHES. EXPENDITURES INVOLVED IN SUCH ACTIVITIES W ERE MET OUT OF SURPLUS FUNDS REMAINING WITH THE ASSESSEE-SO CIETY. THE ASSESSING OFFICER GOT CONFUSED HIMSELF WITH THE ACT IVITY CARRIED ON BY THE BCCI AS THAT OF THE ACTIVITY CARRI ED ON BY THE ASSESSEE-SOCIETY. THE MATERIAL AVAILABLE ON RE CORD SHOWS THAT ONE-DAY MATCHES, T-20 MATCHES AND INDIAN PREMIER LEAGUE MATCHES ARE ALL CONDUCTED BY THE BCCI AND THE ASSESSEE, BEING THE HOST IN THE STATE OF TAMIL NADU , IS ONLY PROVIDING ITS STADIUM. THE ASSESSEE HAS ALSO RECEI VED FUNDS FROM BCCI FOR MEETING THE EXPENDITURE, BEING THE HOST . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT AT ANY STRETCH OF IMAGINATION, IT CANNOT BE SAID THAT THE ASSESSEE IS CONDUCTING ANY BUSINESS ACTIVITY. THE ASSESSEE IS ALSO NOT PROVIDING ANY SERVICE TO ANY TRADE, COMMERCE OR IND USTRY. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT PROVISO TO SECTION 2(15) OF THE ACT IS NOT APPLI CABLE TO THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. ACCORDINGLY , THE ORDERS OF THE LOWER AUTHORITIES FOR ASSESSMENT YEAR S 2009-10 11 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 AND 2010-11ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO GRANT EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER IS ALSO DIRECTED TO GRANT EXEMPTIO N UNDER SECTION 11 OF THE ACT FOR THE ASSESSMENT YEAR 2008-09 AL SO. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT. ACCORDINGLY, THE ORDERS OF THE LOWER A UTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO GRAN T EXEMPTION UNDER SECTION 11 OF THE ACT. 6. NOW COMING TO THE CROSS-OBJECTIONS OF THE ASSESS EE, THE ONLY ISSUE RAISED BY THE ASSESSEE IS DEPRECIATION I N RESPECT OF THE ASSETS, THE COST OF WHICH WAS ALREADY ALLOWED AS AP PLICATION OF INCOME UNDER SECTION 11 OF THE ACT. 7. WE HAVE HEARD SHRI V. RAVICHANDRAN, THE LD. REPR ESENTATIVE FOR THE ASSESSEE AND DR. MILIND MADHUKAR BHUSARI, T HE LD. DEPARTMENTAL REPRESENTATIVE. THIS ISSUE WAS EXAMIN ED BY THIS TRIBUNAL FOR ASSESSMENT YEARS 2008-09 TO 2010-11 AN D THIS TRIBUNAL FOUND THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEPRECI ATION UNDER SECTION 35 OF THE ACT. IN FACT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS:- 12 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. LETS FIRST TAKE ASSESSMENT YEAR 2008-09. THE ASSESSEE IS CLAIMING DEPRECIATION UNDER SECTION 32 OF THE ACT. F OR THE PURPOSE OF CONVENIENCE, WE ARE REPRODUCING SECTION 32 HEREUNDER:- 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 RIGHTS OF SIMIL AR NATURE, BEING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY THE ASSESSEE AND USED F OR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWING DEDUCTI ONS SHALL BE ALLOWED-- (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTA GE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED. (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 T HIS CLAUSE 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 FOR T OURISTS; 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 AN AGREEM ENT ENTERED INTO BY THE CENTRAL GOVERNMENT UNDER SECTION 42: PROVIDED FURTHER THAT WHERE ANY ASSET REFERRED TO I N CLAUSE (I) 6OR CLAUSE (II) OR 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 DAYS IN THAT PREVIOUS YEAR, THE DEDUCTION UN DER THIS SUB- SECTION IN RESPECT OF SUCH ASSET SHALL BE RESTRICTE D TO FIFTY PER CENT. OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIB ED FOR AN ASSET UNDER CLAUSE (I) 6OR CLAUSE (II) OR CLAUSE (IIA), A S THE CASE MAY BE: PROVIDED ALSO THAT WHERE AN ASSET BEING COMMERCIAL VEHICLE IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, 1998, BUT BEFORE THE 1ST DAY OF APRIL, 1999, AND IS PUT T O USE BEFORE THE 1ST DAY OF APRIL, 1999, FOR THE PURPOSES OF BUSINES S OR PROFESSION, THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE ALL OWED ON SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED. 13 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 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', 'TRACTOR' AND 'ROAD-ROLLER' ; (B) THE EXPRESSIONS 'HEAVY GOODS VEHICLE', 'HEAVY P ASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHI CLE', 'MEDIUM PASSENGER MOTOR VEHICLE', 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD-ROLLER' SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES 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 APRIL, 1991, THE DEDUCTION IN RELATION TO ANY BLOCK OF ASSETS UNDER THIS CLAUSE SHALL, IN THE CASE OF A COMPANY, BE RESTRICTED TO SEVENTY- FIVE PER CENT. OF THE AMOUNT CALCULATED AT THE PERCENTAGE, ON THE WRI TTEN DOWN VALUE OF SUCH ASSETS, PRESCRIBED UNDER THIS ACT IMMEDIATE LY BEFORE THE COMMENCEMENT OF THE TAXATION LAWS (AMENDMENT) ACT, 1991. PROVIDED ALSO THAT THE AGGREGATE DEDUCTION, IN RESP ECT 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 SUCCESSION REFERRE D TO IN CLAUSE (XIII), CLAUSE (XIIIB) AND CLAUSE (XIV) OF SECTION 47 OR SECTION 170 OR TO THE AMALGAMATING COMPANY AND THE AMALGAMATED COM PANY IN THE CASE OF AMALGAMATION, OR TO THE DEMERGED COMPAN Y AND THE RESULTING COMPANY IN THE CASE OF DEMERGER, AS THE C ASE MAY BE, SHALL NOT EXCEED IN ANY PREVIOUS YEAR THE DEDUCTION CALCULATED AT THE PRESCRIBED RATES AS IF THE SUCCESSION OR THE AMALGA MATION OR THE DEMERGER, AS THE CASE MAY BE, HAD NOT TAKEN PLACE, AND SUCH DEDUCTION SHALL BE APPORTIONED BETWEEN THE PREDECES SOR AND THE SUCCESSOR, OR THE AMALGAMATING COMPANY AND THE AMAL GAMATED COMPANY, OR THE DEMERGED COMPANY AND THE 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 HIM BUT IN RESPECT OF WHICH THE ASSESSEE HOLDS A LEASE OR OTHER RIGHT OF OCCUPA NCY AND ANY CAPITAL EXPENDITURE IS INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION ON THE CONSTRUCTION OF A NY 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 BUILDING OWNED BY THE ASSESSEE. EXPLANATION 2. FOR THE PURPOSES OF THIS SUB-SECTION 'WRITTEN DO WN VALUE OF THE BLOCK OF ASSETS' SHALL HAVE THE SAME M EANING AS IN CLAUSE (C) OF SUB-SECTION (6) OF SECTION 43; 14 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 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 OTHER SOUR CES OF MINERAL DEPOSITS (INCLUDING SEARCHING FOR DISCOVERY OR TEST ING OF DEPOSITS FOR THE WINNING OF ACCESS THERETO) ; EXPLANATION 5. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DE PRECIATION 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 B USINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, A FURTHER SUM EQUAL TO TWENTY PER CENT. OF THE ACTUAL COST OF SUC H MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (I I) : PROVIDED THAT NO DEDUCTION SHALL BE ALLOWED IN RESP ECT OF-(A) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLATION B Y THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHE R PERSON ; OR(B) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PREM ISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATURE OF A GUEST-HOUSE ; OR(C) ANY OFFICE APPLIANCES OR R OAD TRANSPORT VEHICLES ; OR(D) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL COST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERWISE) IN COMPUTING THE INCOME CHARGEABLE UN DER 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 TH E WRITTEN DOWN VALUE THEREOF : PROVIDED THAT SUCH DEFICIENCY IS ACTUALLY WRITTEN O FF IN THE 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 15 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 (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 BEARS TO THE AMOUNT FOR WHICH THE MOTOR CAR IS SOLD OR, AS THE CASE MAY BE, THE AMOUNT OF ANY INSURANCE, SALVAGE OR COMPENSATION MONEYS PAYAB LE IN RESPECT THEREOF (INCLUDING THE AMOUNT OF SCRAP VALUE, IF AN Y) THE SAME PROPORTION AS THE AMOUNT OF TWENTY-FIVE THOUSAND RU PEES BEARS TO THE ACTUAL COST OF THE MOTOR CAR TO THE ASSESSEE AS IT WOULD HAVE BEEN COMPUTED BEFORE APPLYING 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 TO I N CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 O F 1949), WITH A BANKING INSTITUTION AS REFERRED TO IN SUB-SECTION ( 15) OF SECTION 45 OF THE SAID ACT, SANCTIONED AND BROUGHT INTO FORCE BY THE CENTRAL GOVERNMENT UNDER SUB-SECTION (7) OF SECTION 45 OF T HAT ACT, OF ANY ASSET BY THE BANKING COMPANY TO THE BANKING INSTITU TION. (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 CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE B EING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-S ECTION (2) OF SECTION 72 AND SUB-SECTION (3) OF SECTION 73, THE A LLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWAN CE FOR DEPRECIATION FOR THE FOLLOWING PREVIOUS YEAR AND DE EMED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIO US YEAR, AND SO ON FOR THE SUCCEEDING PREVIOUS YEARS. IN VIEW OF SECTION 32 OF THE ACT, DEPRECIATION HAS TO BE ALLOWED ONLY IN RESPECT OF AN ASSET OWNED BY THE AS SESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN THIS CASE, IT IS NOT A CASE OF THE ASSESSEE THAT THEY ARE NOT DOING ANY BUSINESS OR PROFESSION. THE ASSESSEE IS CATEGORICA LLY MAKING A STATEMENT THAT THEY ARE CHARITABLE ORGANIZATION E NGAGED ITSELF IN PUBLIC UTILITY SERVICE. ONCE THE ASSESSE E CLAIMS THAT IT IS A CHARITABLE ORGANIZATION AND NOT ENGAGED IN BUSINESS OR PROFESSION, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THE 16 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 PROVISIONS OF SECTION 32 HAVE NO APPLICATION AT ALL. THE PROVISIONS OF SECTION 32 IN FACT WERE NOT BROUGHT TO THE NOTICE OF THIS TRIBUNAL WHILE DECIDING THE ASSESSEE 'S OWN CASE FOR ASSESSMENT YEAR 2007-08 AND ALSO THE DECISION OF SRI MARIAMMAN EDUCATIONAL HEALTH AND CHARITABLE TRUST ( SUPRA). IN FACT, THIS TRIBUNAL EXAMINED THE ISSUE ELABORATEL Y IN THE ANJUMAN-E-HIMAYATH-E-ISLAM V. ADIT IN I.T.A. NO.2271/MDS/2014 BY ORDER DATED 2 ND JULY, 2015 AND FOUND THAT WHEN THE ASSESSEE IS ELIGIBLE FOR EXEMPTION UND ER SECTION 11 OF THE ACT, IT IS NOT ELIGIBLE FOR DEPRE CIATION UNDER SECTION 32 OF THE ACT. FOR THE PURPOSE OF CONVENIENC E, WE ARE REPRODUCING THE DECISION TAKEN BY THE CO-ORDINA TE BENCH OF THIS TRIBUNAL IN THE ANJUMAN-E-HIMAYATH-E-ISLAM (SUPRA):- 5.2 WE FIND THIS ISSUE IS ELABORATELY DISCUSSED IN T HE CASE OF LISSIE MEDICAL INSTITUTION VS. CIT REPORTED IN [2012] 348 ITR 344(KER.) AND HELD THE ISSUE AGAINST THE ASSESSEE. WHILE DOI NG SO, THE HONBLE KERALA HIGH COURT HAD CONSIDERED THE CIRCULAR NO.5P(LLX-6) DATED 19.06.1968 WHICH HAS NOT BEEN CONSIDERED BY THE OTHER DECISIONS. THE CIRCULAR NO. 5P(LLX-6) IS RE PRODUCED HEREIN BELOW FOR REFERENCE:- 1. CIRCULAR NO. 5-P (LXX-6) OF 1968, DATED 19-6-196 8. SUBJECT : SECTION 11CHARITABLE TRUSTSINCOME REQUI RED TO BE APPLIED FOR CHARITABLE PURPOSEINSTRUCTIONS REGARDI NG. IN BOARD'S CIRCULAR NO. 2-P(LXX-5) OF 1963, DATED T HE 15TH MAY, 1963, IT WAS EXPLAINED THAT A RELIGIOUS OR CHARITAB LE TRUST CLAIMING EXEMPTION UNDER SECTION 11(1) OF THE INCOME- TAX AC T, 1961, MUST SPEND AT LEAST 75 PER CENT OF ITS TOTAL INCOME, FOR RELIGIOUS OR CHARITABLE PURPOSES. IN OTHER WORDS, IT WAS NOT PER MITTED TO ACCUMULATE MORE THAN 25 PER CENT OF ITS TOTAL INCOM E. THE QUESTION HAS BEEN RECONSIDERED BY THE BOARD AND THE CORRECT LEGAL POSITION IS EXPLAINED BELOW. 17 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 2. SECTION 11(1) PROVIDES THAT SUBJECT TO THE PROVI SIONS OF SECTIONS 60 TO 63 'THE FOLLOWING INCOME SHALL NOT BE INCLUDED I N THE TOTAL INCOME OF THE PREVIOUS YEAR . . . '. THE REFERENCE IN SUB- SECTION (A) IS INVARIABLY TO 'INCOME' AND NOT TO 'TOTAL INCOME'. THE EXPRESSION 'TOTAL INCOME' HAS BEEN SPECIFICALLY DEFINED IN SECTION 2(45) OF THE ACT AS 'THE TOTAL AMOUNT OF INCOME . . . COMPUTED I N THE MANNER LAID DOWN IN THIS ACT'. IT WOULD ACCORDINGLY BE INCORRECT TO ASSIGN TO THE WORD 'INCOME' USED IN SECTION 11(1)(A), THE SAM E MEANING AS HAS BEEN SPECIFICALLY ASSIGNED TO THE EXPRESSION 'TOTAL INCOME' VIDE SECTION 2(45). 3. IN THE CASE OF A BUSINESS UNDERTAKING HELD UNDER TRUST, ITS 'INCOME' WILL BE THE INCOME AS SHOWN IN THE ACCOUNT S OF THE UNDERTAKING. UNDER SECTION 11(4), ANY INCOME OF THE BUSINESS UNDERTAKING DETERMINED BY THE INCOME-TAX OFFICER IN ACCORDANCE WITH THE PROVISIONS OF THE ACT, WHICH IS IN EXCESS OF TH E INCOME AS SHOWN IN ITS ACCOUNTS, IS TO BE DEEMED TO HAVE BEEN APPLI ED TO PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS, AND HENCE IT WI LL BE CHARGED TO TAX UNDER SUB-SECTION (3). AS ONLY THE INCOME DISCLOSED BY THE ACCOUNT WILL BE ELIGIBLE FOR EXEMPTION UNDER SECTION 11(1), THE PERMITTED ACCUMULATION OF 25 PER CENT WILL ALSO BE CALCULATED WITH REFERENCE TO THIS INCOME. 4. WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPER TY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WO RD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME , AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THER EOF TOWARDS THE PURPOSES OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR TH E PURPOSES OF THE TRUST OR OTHERWISE. IT SHOULD BE NOTED, IN THIS CON NECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX UNDER SECTION 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS F OR PURPOSES OTHER 18 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLI ED FOR THE PURPOSES OF THE TRUST FROM OUT OF THE INCOME COMPUT ED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER CE NT OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTI ON UNDER SECTION 11(1). 5. TO SUM UP, THE BUSINESS INCOME OF THE TRUST AS DISC LOSED BY THE ACCOUNTS PLUS ITS OTHER INCOME COMPUTED ABOVE, WILL BE THE 'INCOME' OF THE TRUST FOR PURPOSES OF SECTION 11(1) . FURTHER, THE TRUST MUST SPEND AT LEAST 75 PER CENT OF THIS INCOM E AND NOT ACCUMULATE MORE THAN 25 PER CENT THEREOF. THE EXCES S ACCUMULATION, IF ANY, WILL BECOME TAXABLE UNDER SEC TION 11(1). AFTER CONSIDERING THE CIRCULAR, THE HONBLE KERALA HIGH COURT HELD AS FOLLOWS:- HELD, THAT AFTER WRITING OFF THE FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES AND WHEN THE ASSESSEE AGAIN CLAIMED THE SAME AMOUNT IN THE F ORM OF DEPRECIATION, SUCH NOTIONAL CLAIM BECAME A CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH WAS OUTSIDE THE BOOKS OF ACCOUNT OF THE TRUST UNLESS IT WAS WRITTEN BACK WHICH WAS NOT DONE BY THE ASSESSEE. IT WAS NOT PERMISSIBLE FO R A CHARITABLE INSTITUTION TO GENERATE INCOME OUTSIDE THE BOOKS IN THIS FASHION A ND THERE WOULD BE VIOLATION OF SECTION 11(1)(A). IT WAS FOR THE ASSESSEE TO WRITE BACK THE DEPRECIATION AND IF THAT WAS DONE, THE ASSESSING OFFICER WOULD MODIFY T HE ASSESSMENT DETERMINING HIGHER INCOME AND ALLOW RECOMPUTED INCOME WITH THE DEPRECIATION WRITTEN BACK BY THE ASSESSEE TO BE CARRIED FORWARD FOR SUBSEQUEN T YEARS FOR APPLICATION FOR CHARITABLE PURPOSES. FURTHER HONBLE CALCUTTA HIGH COURT HAS HELD IN THE CASE DCIT VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST REPORTED IN [1993] 199 ITR 15(CAL.) THAT THE INCOME CONTEMPLATED BY THE PROVISIONS OF SECTION 11 IS THE REAL INCOME AND NOT THE INCOME A S ASSESSED OR ASSESSABLE. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBL E KERALA HIGH COURT AND TAKING CUE FROM THE DECISION OF THE HONBLE CALCUTTA HIGH COURT, WE DO NOT FIND ANY HESITATION TO CONFIRM THE ORDER OF THE LD. CIT(A) AND ALSO THE VIEWS EXPRESSED BY HIM IN HIS ORDER. ACCORDINGLY THIS APPEAL IS HELD IN FAVOUR OF THE REVENUE . 19 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 12. APART FROM THAT, WHEN THE ASSESSEE CLAIMS THE CO ST OF THE CAPITAL EXPENDITURE AS EXEMPTION UNDER SECTION 11 OF THE ACT, THEN THE COST OF THE CAPITAL ASSET BECOMES NIL. ADMITTE DLY, DEPRECIATION UNDER SECTION 32 OF THE ACT HAS TO BE AL LOWED ONLY ON WRITTEN DOWN VALUE OF THE ASSET. WHEN THE WRITTEN DOWN VALUE OF THE ASSET BECOMES NIL SINCE THE ENTIRE COST WAS ALL OWED AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY FURTHER CLAIM FOR DEDUCTION UNDER SECTION 32 OF THE ACT. IN VIEW O F THE ABOVE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 32 OF THE ACT TO WARDS DEPRECIATION. HOWEVER, IT IS MADE CLEAR THAT THE A SSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT F OR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. 8. APART FROM THIS, THIS TRIBUNAL IN THE CASE OF MU SIC ACADEMY MADRAS V. DDIT(E) IN I.T.A. NO. 1098/MDS/2015 DATED 22/4/2016 EXAMINED THIS ISSUE AND FOUND THAT DEPRECIATION UND ER SECTION 32 OF THE ACT FALLS UNDER CHAPTER IV OF THE ACT WHICH PRO VIDES FOR COMPUTATION OF TOTAL INCOME. SECTION 11 OF THE ACT FALLS UNDER CHAPTER III OF THE ACT WHICH DEALS WITH INCOME WHIC H DOES NOT FORM PART OF TOTAL INCOME. THEREFORE, THIS TRIBUNAL FOU ND THAT PROVISIONS OF SECTION 32 OF THE ACT CANNOT OVERRIDE THE PROVIS IONS OF SECTION 11 OF THE ACT. IN OTHER WORDS, THE PROVISIONS OF SECT ION 11 WHICH FALLS UNDER CHAPTER III WOULD OVERRIDE THE PROVISIONS OF SECTION 32 OF THE ACT WHICH PROVIDES FOR DEPRECIATION WHICH FALLS UND ER CHAPTER IV OF 20 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 THE ACT. IN FACT, THIS TRIBUNAL OBSERVED IN MUSIC ACADEMY MADRAS (SUPRA) AS FOLLOWS:- 9. INCOME-TAX ACT PROVIDES FOR PROCEDURE AND METHOD FOR COMPUTING INCOME UNDER DIFFERENT HEADS. DEPREC IATION IS PROVIDED UNDER SECTION 32 OF THE ACT WHEN COMPUTIN G INCOME UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. IN RESPECT OF OTHER HEADS, NO DEPRECI ATION IS PROVIDED UNDER THE SCHEME OF THE ACT. THE INCOME O F THE TRUST IS EXEMPTED ON APPLICATION AND ACCUMULATION AS PROVIDED UNDER THE ACT. IF ANY VIOLATION, THE INCO ME OF THE TRUST IS LIABLE FOR TAXATION, IN SUCH A CASE, IF THE INCOME IS ASSESSED AS INCOME FROM BUSINESS OR PROFESSION, 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 UNDER THE SCHEME OF INCOME-TAX ACT IS ON A DIFFERENT FOOTING. THE ENTIRE INCOME OF THE ASSESSEE-TRUST FROM THE PROPER TY HELD UNDER TRUST DO NOT FORM PART OF TOTAL INCOME UNDER SECTION 11 OF THE ACT PROVIDED THE SAME IS APPLIED FOR CHAR ITABLE OBJECT. SECTION 11 OF THE ACT ALSO PROVIDES FOR AC CUMULATION OF 15% OF INCOME FOR FUTURE APPLICATION FOR THE OBJE CT OF THE TRUST. THEREFORE, THE BUSINESS AND CHARITABLE INSTITUTION ARE TWO DIFFERENT CATEGORIES IN THE SCH EME OF INCOME-TAX ACT. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CUSTOMARY WAY OF COMPUTING INCOME OR THE COMMERCIAL PRINCIPLE OF COMPUTING INCOME CANNOT OVE RRIDE THE SPECIFIC PROVISION OF INCOME-TAX ACT. THE INCOM E-TAX ACT DOES NOT PROVIDE FOR ALLOWING DEPRECIATION OTHE R THAN THE ASSET WHICH WAS USED FOR BUSINESS OR PROFESSION . THERE IS NO OTHER PROVISION IN THE INCOME-TAX ACT OTHER TH AN SECTION 32 OF THE ACT FOR ALLOWING DEPRECIATION. THE REFORE, THE CLAIM OF THE ASSESSEE THAT THE DEPRECIATION HAS TO BE ALLOWED ON COMMERCIAL PRINCIPLE OR CUSTOMARY PRINCI PLE OF 21 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 COMPUTATION OF INCOME IS CONTRARY TO THE SPECIFIC P ROVISION, NAMELY, SECTION 32 OF THE ACT. 10. THE NEXT QUESTION ARISES FOR CONSIDERATION IS WH EN THERE IS A CONFLICT BETWEEN CUSTOMARY PRACTICE, COM MERCIAL PRINCIPLE AND PROVISIONS OF SECTION 32, WHICH ONE WIL L PREVAIL? THE OBVIOUS ANSWER TO THIS QUESTION IS TH E STATUTORY PROVISION, NAMELY, SECTION 32 OF THE ACT WI LL PREVAIL OVER THE CUSTOMARY PRACTICE AND COMMERCIAL PRINCIPLE. THEREFORE, EVEN ON CUSTOMARY PRACTICE O R COMMERCIAL PRINCIPLE WHEREBY THE ASSESSEE CLAIMS DEPRECIATION WHILE COMPUTING THE INCOME, SECTION 32 O F THE ACT IS A SPECIFIC PROVISION UNDER INCOME-TAX ACT, WH ICH IS CONTRARY TO COMMERCIAL PRINCIPLE OR CUSTOMARY PRACT ICE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT SECTION 32 WILL PREVAIL OVER THE CUSTOMARY PRACTICE O R COMMERCIAL PRINCIPLE. HENCE, THE ASSESSEE IS NOT E LIGIBLE FOR DEPRECIATION IN RESPECT OF BUILDING, PLANT, MACHINE RY, ETC. WHICH ARE NOT USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. 11. EVEN ASSUMING FOR ARGUMENT SAKE THAT THE ASSES SEE WAS DOING BUSINESS, THEN THE ASSESSEE IS NOT ELIGIB LE FOR EXEMPTION UNDER SECTION 11 OF THE ACT AND AS RIGHTLY SUBMITTED BY THE LD. DEPARTMENTAL REPRESENTATIVE, T HE 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 EXEMPTION UNDER SE CTION 11 OF THE ACT IF IT IS CARRYING ON ANY BUSINESS ACTIVI TY. 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 TH E ACT, IF THE PROPERTY HELD UNDER TRUST IS A BUSINESS UNDE RTAKING, THEN THE INCOME OF THE BUSINESS UNDERTAKING, WHICH WAS SO HELD AS PROPERTY HELD UNDER TRUST, HAS TO BE COMPUT ED BY APPLYING THE PROVISIONS OF INCOME-TAX ACT UNDER CHAP TER IV. 22 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 WHILE COMPUTING INCOME OF THE BUSINESS UNDERTAKING, ALL EXPENDITURE, INCLUDING DEPRECIATION, HAS TO BE ALLOW ED AND THE INCOME OF SUCH BUSINESS UNDERTAKING WHICH WAS H ELD UNDER TRUST HAS TO BE ALLOWED AS EXEMPTION UNDER SEC TION 11 ON APPLICATION AND ACCUMULATION. 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 DEPRECIATION IN RESP ECT OF ASSET WHICH WAS USED AS TOOL FOR CARRYING OUT CHARI TABLE OBJECT OF THE INSTITUTION. WHEN THE ASSET WAS USED AS TOOL FOR CARRYING OUT THE OBJECT OF THE CHARITABLE INSTI TUTION, 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. 9. IN VIEW OF THE ABOVE, THE ASSESSEE IS NOT ELIGIB LE FOR DEPRECIATION IN RESPECT OF THE ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 OF THE ACT. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 10. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AS WELL AS THE CROSS-OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 31 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( ! . . # $% ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 31 ST MAY, 2017. 23 I.T.A. NOS.2556 & 2557/MDS/16 C.O. NOS.158 & 159/MDS/16 KRI. 0 24$9 :9,4 /COPY TO: 1. ./ /APPELLANT 2. 23./ /RESPONDENT 3. # ;4 () /CIT(A)-17, CHENNAI-34 4. # ;4 /CIT (EXEMPTIONS), CHENNAI 5. 9< 24 /DR 6. !+ = /GF.