M/s. Lakshmi Ammal Memorial Trust, CHENNAI V. ITO, Tiruppur

ITA 2852/CHNY/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4089 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 03-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V SREENIVASAN JICIT D R
• Assessee Lawyers: V JAGADISAN
• Keywords: Business income; Depreciation; Charitable institution; Right to appeal
• Section: 32; 10; 11

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A.NO.2852 /MDS./2016 ( ASSESSMENT YEAR : 2011-12) M/S.LAKSHMI AMMAL MEMORIAL TRUST , 47,NEHRU STREET, TIRUPPUR 641 601. VS. INCOME TAX OFFICER, WARD I(6), TIRUPPUR. PAN AAATL 1344 C ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MR.V.JAGADISAN, C.A / RESPONDENT BY : MR.V.SREENIVASAN, JICIT, D.R ! ' / DATE OF HEARING : 20.06.2017 #$%& ! ' /DATE OF PRONOUNCEMENT : 05.07.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE , AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-2, COIMBA TORE DATED 30.06.2016 PERTAINING TO ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR ADJUDUCIATION. ITA NO.2852/MDS/2016 2 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ASSESSMENT ORDER, THOUGH PARTIALLY. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT ASSESSEE TRUST IS CARRYING ON BUSINESS AND HEN CE NOT ENTITLED TO EXEMPTION UNDER SECTION 11 TO 13 OF INCOME TAX ACT BY INVOKING 1ST PROVISO TO SECTION 2 (15) AND SECTION 11 (4 A) OF T HE INCOME TAX ACT. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THAT THE 1ST PROVISO TO SECTION 2 (15) IS NOT APPLICABLE TO THE OBJECTS OF THE ASSESSEE TRUST AS THE TRUST IS NOT CARRYING ON OBJ ECTS OF GENERAL PUBLIC UTILITY. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT INCOME FROM IS NOT AN ACTIVITY RELATING TO E DUCATION IGNORING THAT EVEN AS PER JUDGMENT OF SUPREME COURT A CHARITY CAN HAVE INCOME GENERATING ASSET. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT PROVISIONS OF SECTION 11(4) ARE APPLICABLE AS IF A BUSINESS ACTIVITY IS CARRIED ON BY THE ASSESSEE. 6. IN ANY EVENT, THE REASONING OF COMMISSIONER OF I NCOME TAX (APPEALS) FOR HOLDING THAT ASSESSEE IS NOT ENTITLED TO EXEMPT ION OF ITS INCOME UNDER SECTION 11 TO 13 ARE AGAINST THE FACTS OF THE CASE AND THE LAW APPLICABLE THERETO. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN HOLDING THAT CAR MAINTENANCE RS.2,80,426/- AND DEPR ECIATION ON CAR ITA NO.2852/MDS/2016 3 RS.2,13,926/- ARE NOT TO BE DEDUCTED IN COMPUTING T AXABLE INCOME BEFORE APPLICATION OF INCOME FOR CHARITABLE PURPOSE S. 8. FOR THESE GROUNDS AND FOR SUCH OTHER GROUNDS THA T MAY BE ADDUCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) BE CANCELLED. 3. THE FACTS OF THE CASE ARE THAT THE ISSUE IN DI SPUTE IS THE AOS ACTION OF CHARGING INCOME OF THE TRUST FROM A KALYA NA MANDAPAM TO TAX. THE BACKGROUND FACTS ARE THAT THE APPELLANT IS A REGISTERED CHARITABLE TRUST U/S 12A, RUNNING A KALYANA MANDAPA M AT NEHRU STREET TIRUPPUR AND IN THE RETURN FILED FOR THIS YE AR, INCOME DERIVED THEREFROM WAS ALSO CLAIMED EXEMPT U/S 11 ALONG WITH OTHER INCOMES. THE RETURN WAS PROCESSED U/S 143(1) AND THEREAFTER TAKEN UP FOR SCRITINY. DURING THE ASSESSMENT PROCEEDINGS, THE A C OBSERVED THAT EXEMPTION IN RESPECT OF INCOME FROM KALYANA MANDAPA M WAS WRONGLY CLAIMED AS IT WAS RUN ON COMMERCIAL LINES A ND THEREFORE HIT BY PROVISO TO SECTION 2(15), BEING AN ACTIVITY NOT FALLING WITHIN THE MEANING OF CHARITABLE PURPOSE. WHEN CONFRONTED W ITH THIS OBSERVATION AND ASKED TO FILE SUBMISSIONS ON WHY EX EMPTION SHOULD NOT BE DENIED FOR THE INCOME FROM , THERE WAS NO EX PLANATION OR OBJECTION ON THIS ISSUE. THE AO TOOK A STRONG VIEW THAT RUNNING OF THE ITA NO.2852/MDS/2016 4 KALYANA MANDAPAM IS A SEPARATE BUSINESS ACTIVITY AN D IT DOES NOT FIT IN TO ANY ACTIVITY INCIDENTAL TO PROVIDING EDUCATIO N, MEDICAL RELIEF OR ANY RELIEF TO THE POOR. ON THE OTHER HAND, THE APPE LLANT HAD NOT CREATED ANY INSTITUTION OF THE ABOVE NATURE DURING ITS EXISTENCE IN THE PAST FEW DECADES, THE ONLY ACTIVITY CONSTITUTES OF SOME SCHOLARSHIP PAYMENTS. ON THAT VIEW, THE AO PROCEEDED TO TREAT T HE INCOME DERIVED FROM THE KALYANA MANDAPAM AS BUSINESS INCOM E. THEREAFTER THE AO CONSIDERED CERTAIN EXPENSES VIZ., CAR MAINTE NANCE, LOSS OR SALE OF CAR, DEPRECIATION OF CAR AND DONATION AGGRE GATING TO RS.5,37,744/- AND HELD THAT THESE EXPENSES NEED NOT HAVE BEEN INCURRED FOR RUNNING A MARRIAGE HALL AND DISALLOWED THE EXPENSES. AGGRIEVED BY THE ORDER OF LD. ASSESSING OFFICER, TH E ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD. CIT(A) FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF CHENNAI TRIBUN AL IN THE CASE OF M/S.SNR SONS CHARITABLE TRUST VIDE ORDER IN ITA NO. 2630/MDS./2014 DATED 12.06.2015 WHEREIN HELD THAT INCOME DERIVED F ROM KALYANA MANDAPAM DOES NOT QUALIFY FOR EXEMPTION U/S.11 AS T HIS ACTIVITY IS COVERED UNDER THE PROVISO TO SEC.2(15) OF THE ACT A ND THEREFORE DOES NOT FALL UNDER THE PURVIEW OF CHARITABLE PURPOSE, O BSERVED THAT THE AO ITA NO.2852/MDS/2016 5 IS JUSTIFIED IN DENYING EXEMPTION U/S.11 OF THE ACT . AGAINST THE ORDER OF LD.CIT(A), NOW THE REVENUE IS IN APPEAL BEFORE U S. 4. BEFORE US, LD.A.R RELIED ON VARIOUS CASE LAWS S TATING THAT THE DEDUCTION U/S.11 OF THE ACT TO BE ALLOWED. WE CAREF ULLY GONE THROUGH THE ARGUMENT OF THE LD.A.R AND WE HAVE ALSO GONE TH ROUGH THE INCOME AND EXPENDITURE ACCOUNT FILED BY THE ASSES SEE IN THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE E ARNED TOTAL GROSS RECEIPT OF ` 51,26,337/-. HOWEVER, IT HAS SPENT ONLY AN AMOUNT OF ` 40,000/- TOWARDS DONATION AND THE ASSESSEE HAS NOT CARRIED ON ANY CHARITABLE ACTIVITIES UNDER CONSIDERATION. THE MAIN PLEA OF THE ASSESSEE IS THAT IT CAN ACCUMULATE THE INCOME FOR T HE APPLICATION IN SUBSEQUENT ASSESSMENT YEARS. IN OUR OPINION, THE M AIN ISSUE IN THIS APPEAL WHETHER THE ASSESSEE HIT BY EXPLANATION TO S ECTION 2(15) OF THE ACT. 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD AND ALSO VARIOUS CASE LAWS RELIED BY LD. A.R, WHICH WERE KEPT ON RECORD. THE ISSUE BEFORE US IS WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE TERMS OF THE TRUST DEED, IT CAN BE SAID THAT THE ACTIVITIES CARR IED ON BY THE ITA NO.2852/MDS/2016 6 ASSESSEE IN THE FORM OF RUNNING OF KALYANA MANDAPAM WAS ITSELF HELD UNDER THE TRUST. THE OBJECTS FOR WHICH THE SOCIETY ESTABLISHED ARE :- A. TO ESTABLISH, BUILD, MAINTAIN AND RUN AND TO AI D IN THE ESTABLISHMENT, BUILDING MAINTENANCE AND RUNNING OF COMMUNITY CENTRES FOR THE CELEBRATION OF MARRIAGES AND OTHER FUNCTIONS AND FOR CONDUCTING PERFORMANCES OF ART. B. TO ESTABLISH, BUILD, MAINTAIN AND RUN AND TO AI D IN THE ESTABLISHMENT, BUILDING MAINTENANCE AND RUNNING OF HOSPITALS, NURSING HOMES AND DISPENSARIES TO PROVIDE MEDICAL A ID AND TO RENDER FINANCIAL ASSISTANCE TO ANY SUCH INSTITUTION S. C. TO ESTABLISH, BUILD, MAINTAIN AND RUN AND TO AI D IN THE ESTABLISHMENT, BUILDING MAINTENANCE AND RUNNING OF HOMES FOR OLD AND DESTITUTE PERSONS AND TO RENDER FINANCIAL A SSISTANCE TO ANY SUCH INSTITUTIONS. D. TO ESTABLISH, MAINTAIN AND RUN, DEVELOP, IMPROVE , EXTEND, GRANT DONATIONS FOR, AND TO AID AND ASSIST IN THE ESTABLI SHMENT, MAINTENANCE, RUNNING, DEVELOPMENT, IMPROVEMENT AND EXTENSION OF NURSERY SCHOOLS, ELEMENTARY SCHOOLS, S ECONDARY SCHOOLS, HIGH SCHOOLS, COLLEGES, INDUSTRIAL, TECHNI CAL, VOCATIONAL ITA NO.2852/MDS/2016 7 AND OTHER ART, CRAFT AND SCIENCE SCHOOLS AND COLLEG ES AND INSTITUTIONS OF ENGLISH, TAMIL, HINDI, GUJARATHI, P ARSI, TELUGU, CANARESE OR SANSKRIT LEARNING, HOSTELS FOR THE BENE FIT OF STUDENTS, AND GENERALLY ALL KINDS OF EDUCATIONAL IN STITUTIONS, WHETHER GENERAL, TECHNICAL, VOCATIONAL, PROFESSIONA L OR OF ANY OTHER DESCRIPTION WHATSOEVER, FOR THE WELFARE AND U PLIFT OF THE GENERAL PUBLIC IN INDIA AND TO INSTITUTE AND AWARD SCHOLARSHIPS FOR STUDY, RESEARCH AND APPRENTICESHIP FOR ALL OR A NY OF THE SAID PURPOSES. E. TO ESTABLISH, MAINTAIN AND RUN, DEVELOP, IMPROV E, EXTEND, GRANT DONATIONS FOR, AND TO AID AND ASSIST IN THE ESTABLI SHMENT, MAINTENANCE, RUNNING, DEVELOPMENT, IMPROVEMENT AND EXTENSION OF LIBRARIES, READING ROOMS, RECREATION C ENTRES AND ALL OTHER FACILITIES AS ARE CALCULATED TO BE OF USE IN IMPARTING EDUCATION TO THE PUBLIC IN INDIA. F. TO CONDUCT, INSTITUTE, AND CARRY ON, DISCOURSES , LECTURES AND CLASSES FOR PROPAGATION OF ADULT EDUCATION IN INDIA . G. TO TAKE OVER ANY EXISTING EDUCATIONAL INSTITUTIO N IN INDIA AND TO CONDUCT, RUN, MAINTAIN, DEVELOP AND IMPROVE THE SAM E. ITA NO.2852/MDS/2016 8 6. IT IS TO BE NOTED THAT SECTION 11(1) OF THE ACT GRANTS EXEMPTION TO THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUS T WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. THERE IS NO EXHA USTIVE DEFINITION OF THE WORDS PROPERTY HELD UNDER TRUST IN THE ACT; H OWEVER, SUB-SECTION (4) SAYS THAT FOR THE PURPOSES OF SECTION 11, THE W ORDS PROPERTY HELD UNDER TRUST INCLUDES A BUSINESS UNDERTAKING SO HE LD. SUBSECTION (4A) AS IT STANDS AMENDED BY THE FINANCE (NO. 2) AC T, 1991, WITH EFFECT FROM APRIL 1, 1992, IS IN THE FOLLOWING TERM S: (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUBSECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUT ION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS THE CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. 7. THUS, IF A PROPERTY IS HELD UNDER TRUST, AND SU CH PROPERTY IS A BUSINESS, THE CASE WOULD FALL U/S. 11(4) AND NOT U/ S. 11(4A) OF THE ACT. SECTION 11(4A) OF THE ACT WOULD APPLY ONLY TO A CAS E WHERE THE BUSINESS IS NOT HELD UNDER TRUST. THUS, THERE IS DI FFERENCE BETWEEN ITA NO.2852/MDS/2016 9 PROPERTY OR BUSINESS HELD UNDER TRUST AND BUSINESS CARRIED ON BY OR ON BEHALF OF THE TRUST. 8. THIS DISTINCTION WAS RECOGNIZED BY THE SUPREME COURT IN THE CASE OF ADDL. CIT VS. SURAT ART SILK CLOTH MANUFACT URERS ASSOCIATION (1980) 121 ITR 1 WHEREIN IT WAS OBSERVED THAT IF A BUSINESS UNDERTAKING IS HELD UNDER TRUST FOR A CHARITABLE PU RPOSE, THE INCOME THEREFROM WOULD BE ENTITLED TO THE EXEMPTION U/S. 1 1(1) OF THE ACT. IN THE PRESENT CASE, THE RUNNING OF KALYANA MANDAPAM W AS NOT HELD UNDER TRUST, BUT IT WAS BUSINESS COMMENCED/CARRIED ON BY THE SOCIETY, SUBSEQUENT TO THE FORMATION OF TRUST. THOU GH THE BUSINESS WAS COMMENCED BY THE SOCIETY AND IT WAS CARRIED ON BY THE SOCIETY AFTER ITS FORMATION, IT CANNOT BE SAID TO CONSTITUT E PROPERTY HELD UNDER TRUST. U/S. 11(4), IT IS ONLY THE BUSINESS WHICH IS HELD UNDER THE TRUST THAT WOULD ENJOY EXEMPTION IN RESPECT OF ITS INCOME U/S. 11(1) OF THE I.T. ACT AND THERE IS A DISTINCTION BETWEEN THE OBJ ECTS OF A TRUST AND THE POWERS GIVEN TO THE TRUSTEES TO EFFECTUATE THE PURPOSE OF THE TRUST. THOUGH THE OBJECTS OF THE TRUST WERE CHARITABLE, TH EY WERE MERE POWERS CONFERRED UPON THE TRUSTEES TO CARRY ON THE BUSINESS AND THE PROFITS FROM SUCH BUSINESS WOULD BENEFIT THE CHARIT ABLE OBJECTS. THE ITA NO.2852/MDS/2016 10 EXEMPTION U/S. 11 CANNOT BE GRANTED ON THE REASON T HAT THE BUSINESS ITSELF WAS NOT IN EXISTENCE AT THE TIME OF FORMATIO N OF THE TRUST AND THE PROPERTY HELD UNDER TRUST AT THE TIME OF FORMATION OF THE TRUST WAS NOT SPELT OUT IN THE MEMORANDUM OF ASSOCIATION OF THE A SSESSEE. THE RUNNING OF KALYANA MANDAPAM WAS NOT AT ALL IN EXIST ENCE AT THE TIME OF FORMATION OF THE TRUST SO AS TO SAY THAT THE BUS INESS IS PROPERTY HELD UNDER TRUST AND, THEREFORE, COULD NOT HAVE BEEN SET TLED UPON TRUST. THE BUSINESS CARRIED ON BEHALF OF A TRUST RATHER IN DICATES A BUSINESS WHICH IS NOT HELD IN TRUST, THAN A BUSINESS OF THE TRUST RUN BY THE ASSESSEE. IN THIS CASE, THE ACTIVITIES KALYANA MAND APAM WAS CARRIED ON BY THE ASSESSEE FOR AND ON BEHALF OF THE TRUST A ND IT WAS NOT BUSINESS HELD UNDER TRUST. SECTION 11(1) OF THE ACT CONFERS EXEMPTION FROM TAX ONLY WHERE THE PROPERTY IS ITSELF HELD UND ER TRUST OR OTHER LEGAL OBLIGATION; IT DOES NOT APPLY TO CASES WHERE A TRUST OR LEGAL OBLIGATION IS NOT CREATED ON ANY PROPERTY BUT ONLY THE INCOME DERIVED FOR A CHARITABLE OR RELIGIOUS PURPOSE. SURPLUS FUND S OF A TRUST, WHICH WAS CLAIMED TO BE EXEMPT ON THE FOOTING THAT IT WAS PROPERTY HELD UNDER TRUST WITHIN THE MEANING OF SEC. 11(1) OF THE ACT, WAS NOT PROPERTY HELD UNDER TRUST SINCE THE PROPERTY FROM W HICH THE SURPLUS ITA NO.2852/MDS/2016 11 WAS GENERATED WAS ITSELF NOT HELD UNDER TRUST. IN O THER WORDS, MERELY CARRYING ON BUSINESS FOR AND ON BEHALF OF THE TRUST AND APPLYING THE PROFITS OF THE SAME FOR THE OBJECT OF THE TRUST DOE S NOT ENTITLE FOR EXEMPTION U/S. 11(4) OF THE ACT UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST. 9. WE NOW PROCEED TO CONSIDER THE QUESTION WHETHER THE SAID ACTIVITIES CARRIED ON BY THE ASSESSEE WERE INCIDENT AL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST. WE FAIL TO SEE ANY CON NECTION BETWEEN THE ACTIVITIES RELATING TO RUNNING OF KALYANA MANDAPAM WAS CARRIED ON AND THE ATTAINMENT OF THE OBJECTS OF THE TRUST. THE MERE FACT THAT WHOLE OR SOME PART OF THE INCOME FROM RUNNING OF KA LYANA MANDAPAM WAS USED FOR CHARITABLE PURPOSES WOULD NOT RENDER THE BUSINESS ITSELF BEING CONSIDERED AS INCIDENTAL TO T HE ATTAINMENT OF THE OBJECTS. WE ARE IN AGREEMENT WITH THE DEPARTMENT TH AT THE APPLICATION OF INCOME GENERATED BY THE BUSINESS IS NOT RELEVANT CONSIDERATION AND WHAT IS RELEVANT IS WHETHER THE A CTIVITY IS SO INEXTRICABLY CONNECTED OR LINKED WITH THE OBJECTS O F THE TRUST THAT IT COULD BE CONSIDERED AS INCIDENTAL TO THOSE OBJECTIV ES. ITA NO.2852/MDS/2016 12 10. IT WAS CONTENDED BY THE LD. AR THAT THE SURPLU S FUNDS GENERATED FROM THE RUNNING OF KALYANA MANDAPAM WAS SPENT TOWARDS CHARITABLE ACTIVITIES AND THEREFORE, THE AS SESSEE IS ENTITLED FOR EXEMPTION U/S. 11(4) OF THE I.T. ACT, OR IT WAS ACC UMULATED FOR FUTURE APPLICATION. WE ARE UNABLE TO ACCEPT THIS CONTENTIO N. INITIALLY, THE ASSESSEE CARRIED ON THE BUSINESS ITSELF WHICH IS NO T AT ALL PROPERTY HELD UNDER TRUST. THIS ACTIVITY IS A BUSINESS ACTIV ITY AND THE PROVISIONS OF SECTION 11(4A) OF THE ACT IS APPLICABLE. 11. IT WAS CONTENDED THAT IF THE PROFITS OF THE BU SINESS CARRIED ON BY THE TRUST ARE UTILIZED BY THE TRUST FOR THE PURP OSES OF ACHIEVING THE OBJECTIVES OF THE TRUST, THEN THE BUSINESS SHOULD B E CONSIDERED TO BE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AS OBSERVED BY THE SUPREME COURT IN THE CASE OF ACIT VS. THANTHI T RUST (2001) 247 ITR 785 WHICH IS AS UNDER: AS IT STANDS, ALL THAT IT REQUIRES FOR THE BUSINES S INCOME OF A TRUST OR INSTITUTION TO BE EXEMPT IS TH AT THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMENT OF OBJECTIVES OF THE TRUST OR INSTITUTION. A BUSINESS WHOSE INCOME IS UTILIZED BY THE TRUST OR THE INSTITUTION FOR THE PURPOSES OF ACHIEVING THE OBJECTIVES OF THE TRUST ..IN ANY EVENT, IF THERE BE ANY AMBIGUITY IN THE LANGUAGE EMPLOYED, THE PROVISION MUST BE CONSTRUED IN A MANNER THAT BENEFITS THE ASSESSEE. ITA NO.2852/MDS/2016 13 12. PRIMA FACIE THE ABOVE OBSERVATION WOULD APPEAR TO SUPPORT THE ASSESSEES CASE IN THE SENSE THAT EVEN IF RUNNING O F KALYANAMANDAPAM IS HELD NOT TO CONSTITUTE A BUSINES S HELD UNDER TRUST, BUT ONLY AS A BUSINESS CARRIED ON BY OR ON B EHALF OF THE TRUST, SO LONG AS THE PROFITS GENERATED BY IT ARE APPLIED FOR THE CHARITABLE OBJECTS OF THE TRUST, THE CONDITION IMPOSED U/S. 11 (4A) OF THE ACT SHOULD BE HELD TO BE SATISFIED, ENTITLING THE TRUST TO THE TAX EXEMPTION. 13. IN OUR OPINION, THESE OBSERVATIONS HAVE TO BE UNDERSTOOD IN THE LIGHT OF THE FACTS BEFORE THE SUPREME COURT IN THE CASE OF THANTHI TRUST (SUPRA), WHEREIN THE TRUST CARRIED ON THE BUS INESS OF A NEWSPAPER AND THAT BUSINESS ITSELF WAS HELD UNDER T RUST. THE CHARITABLE OBJECT OF THE TRUST WAS THE IMPARTING OF EDUCATION WHICH FALLS U/S. 2(15) OF THE ACT. THE NEWSPAPER BUSINESS WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST, NAMELY T HAT OF IMPARTING EDUCATION AND THE PROFITS OF THE NEWSPAPER BUSINESS ARE UTILIZED BY THE TRUST FOR ACHIEVING THE OBJECT OF IMPARTING EDU CATION. IN THIS CASE, THERE IS NO SUCH NEXUS BETWEEN THE ACTIVITIES CARRI ED ON AND THE OBJECTS OF THE ASSESSEE THAT CAN CONSTITUTE AN ACTI VITY INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS, NAMELY, TO PROMOTE CAUSE OF CHARITY, ITA NO.2852/MDS/2016 14 MISSION ACTIVITIES, WELFARE, EMPLOYMENT, DIFFUSION OF USEFUL KNOWLEDGE, UPLIFTMENT AND EDUCATION AND TO CREATE A N AWARENESS OF SELF-RELIANCE AMONG THE MEMBERS OF THE PUBLIC ETC. I AM, THEREFORE, OF THE OPINION THAT THE OBSERVATIONS OF THE SUPREME CO URT MUST BE UNDERSTOOD AND APPRECIATED IN THE BACKGROUND OF THE FACT IN THAT CASE AND SHOULD NOT BE EXTENDED INDISCRIMINATELY TO ALL CASES. BEING SO, I AM INCLINED TO HOLD THAT THE ASSESSEE IS NOT ENTIT LED FOR ANY EXEMPTION U/S. 11 OF THE I.T. ACT. 14. FURTHER, THE ASSESSEE IS NOT ENTITLED FOR DEPRE CIATION ON THE OPENING BALANCE OF WRITTEN DOWN VALUE OF THE ASSETS IN THE ASST. YEAR UNDER CONSIDERATION, WHICH WERE PURCHASED IN EARLIE R YEARS AND THE COST OF THOSE ASSETS HAVE ALREADY CONSIDERED AS APP LICATION OF INCOME IN EARLIER ASST. YEAR WHILE GRANTING EXEMPTI ON U/S.11 OF THE ACT. IN OUR OPINION, THIS ISSUE IS SQUARELY COVERE D BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. KONGUNADU ARTS & S CIENCE COLLEGE COUBNCIL IN ITA NO.2097/MDS/2014 DATED 26.6.2015, WHEREIN IT WAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE A LSO GONE THROUGH THE PROVISIONS OF SECTION 32 OF THE ACT WHICH PROVI DES FOR DEPRECIATION. DEPRECIATION HAS TO BE ALLOWED ON THE COST OF THE A SSET. IN THIS CASE, ITA NO.2852/MDS/2016 15 THE COST OF THE ASSET WAS ALLOWED U/S 11 OF THE ACT AS APPLICATION INCOME SINCE THE ASSESSEE IS A CHARITABLE INSTITUTI ON ENTITLED FOR EXEMPTION U/S 11. THEREFORE, THE COST OF THE ASSET BECOMES NIL. WHEN THE COST OF THE ASSET BECOMES NIL, THERE IS NO QUESTION OF ALLOWING ANY DEPRECIATION. IF THE DEPRECIATION IS A LLOWED THEN IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE INCOME OF THE CHARI TABLE INSTITUTION HAS TO BE COMPUTED ON COMMERCIAL PRINCIPLE IN CASE THE ASSESSEE IS NOT CLAIMING EXEMPTION U/S 11 OF THE ACT. THE ASSES SEE CAN ALSO CLAIM DEPRECIATION IN CASE THE EXEMPTION U/S 11 WAS DENIE D BY THE ASSESSING OFFICER. WHATEVER MAY BE THE REASONS, SIN CE THE COST OF THE ASSET IS NIL AS THE COST WAS ALREADY ALLOWED AS APP LICATION OF INCOME, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT TH E ASSESSEE IS NOT ENTITLED FOR DEPRECIATION. SECTION 32 OF THE ACT FA LLS IN CHAPTER IV UNDER COMPUTATION OF BUSINESS INCOME, HOWEVER, SECTION 11 FALLS IN CHAPTER III WHICH PROVIDES FOR INCOMES WHICH DO NOT FORM PA RT OF THE TOTAL INCOME. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDER ED PINION THAT PROVISIONS OF SECTION 11 OF THE ACT WILL OVERRIDE S ECTION 32. IN OTHER WORDS, IF THE ASSESSEE CLAIMS EXEMPTION U/S 11 UNDE R CHAPTER III OF THE ACT, IT CANNOT CLAIM DEPRECIATION U/S 32 OF THE ACT. THEREFORE, WE ARE UNABLE TO UPHOLD THE ORDER OF THE CIT(A). ACCOR DINGLY, THE ORDER OF THE CIT(A) IS SET ASIDE AND THAT OF THE ASSESSING O FFICER IS RESTORED. 15. REGARDING DISALLOWANCE OF CAR MAINTENANCE EXPE NSES, THE ASSESSEE ITSELF AGREED FOR DISALLOWANCE BEFORE THE LEARNED ASSESSING OFFICER, NOW IT CANNOT HAVE ANY GRIEVANCE FOR SUCH DISALLOWANCE. THE JURISDICTIONAL HIGH COURT IN THE CASE OF RAMANLAL KAMDAR VS. LEARNED COMMISSIONER OF INCOME TAX REPOR TED IN [1977] 108 ITR 73 (MAD) WHEREIN HELD THAT:- WE HAVE ALREADY REFERRED TO THE FACT THAT ONE OF THE PARTNERS OF THE ASSESSEE, VIZ., SHRI CHANDULAL KAMDAR, APPEARED BEFORE THE INCOME-TAX OFFICER ON OCTOBER 27, 1967, AND STATED THAT THE ASSESSEE HAD NO OBJECTION TO THE PROPOSED REVISION. ONCE THE ASSESSEE HAD STATED THAT IT HAD NO OBJECTION TO THE PROPOSED REVISION AND THE INCOME-TAX OFFICER HAD ALSO REVISE D THE ORIGINAL ASSESSMENT AS PROPOSED BY HIM, THE ASSESSEE COULD N OT BE SAID TO HAVE BEEN AGGRIEVED BY THE ORDER OF THE INCOME-T AX OFFICER. ITA NO.2852/MDS/2016 16 ONLY IF THE ASSESSEE WAS AGGRIEVED BY THE ORDER OF THE INCOME-TAX OFFICER, HE HAD THE RIGHT TO FILE AN APPEAL BEFORE THE APPELLATE ASSISTANT COMMISSIONER AND ONCE THE ASSESSEE COULD NOT HAVE HAD ANY GRIEVANCE IN VIEW OF THE STATEMENT MADE BY THE PARTNER, THE APPEAL TO THE APPELLATE ASSISTANT COMMISSIONER WAS INCOMPETENT AND EQUALLY THE APPEAL TO THE TRIBUNAL WAS INCOMPETENT. IF SO, THE REFERENCE TO THIS COURT OF THE TWO QUESTIONS SAID TO ARISE OUT OF THE ORDER OF THE TRIBUNAL IS A LSO INCOMPETENT. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IS ALSO DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH JULY , 2017. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 05 TH JULY, 2017 . K S SUNDARAM. ' ( )!*+ ,+%! / COPY TO: 1 . / APPELLANT 3. ' ' -! () / CIT(A) 5. +0 1 )!)23 / DR 2. / RESPONDENT 4. ' ' -! / CIT 6. 1 45 6 / GF