M/s Pratham Books (Trust), Bangalore V. DDIT, Bangalore

ITA 356/BANG/2015

• Counselvise Citation: 35621114 RSA 2015
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-10-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KORRA MEGHANATH CHOWHAN
• Keywords: Capital asset; Depreciation; Charitable institution; Cost of acquisition; Benefit of exemption; Capital expenditure
• Section: 12A; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.356/BANG/2015 ASSESSMENT YEAR : 2011-12 M/S. PRATHAM BOOKS (TRUST), NO.621, 2 ND FLOOR, 5 TH MAIN, OMBR LAYOUT, BANASWADI, BANGALORE 560 043. PAN: AAATP 7221N VS. THE DEPUTY DIRECTOR OF INCOME-TAX (EXEMPTION), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI BHARATH L., CA RESPONDENT BY : SHRI KORRA MEGHANATH CHOWHAN, ADDL.CIT(DR) DATE OF HEARING : 07.10.2015 DATE OF PRONOUNCEMENT : 28.10.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 30.10.2014 OF THE CIT(APPEALS), LTU, BANGALORE FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A PUBLIC CHARITABLE TRUST REGIS TERED UNDER SECTION 12A OF THE INCOME-TAX ACT, 1961. IT IS ENGAGED IN C HARITABLE ACTIVITIES IN THE ITA NO.356/BANG/2015 PAGE 2 OF 12 NATURE OF PUBLISHING AND DISTRIBUTING HIGH QUALITY LOW COST BOOKS. FOR THE AY 2011-12, THE ASSESSEE HAD GROSS RECEIPTS OF RS. 3.2 2 CRORES. IT SPENT RS. 3.07 CRORES TOWARDS THE OBJECTIVES OF THE TRUST. I T FILED THE RETURN OF INCOME ON 29.09.2011 FOR AY 2011-12 DECLARING TOTAL INCOME AT NIL. 3. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OF FICER HELD ACCUMULATION OF INCOME U/S 11(1)(A) AT THE RATE OF 15% AND MADE DISALLOWANCE OF DEPRECIATION CLAIMED AS APPLICATION . 4. BEFORE THE CIT(APPEALS), THE LD. AR FOR THE ASSE SSEE SUBMITTED THAT THE AO DISALLOWED THE DEPRECIATION CLAIM TO THE EXT ENT OF RS. 3,69,987/- ON A PRESUMPTION THAT THE ASSESSEE HAS CLAIMED CAPITAL EXPENDITURE TOWARDS APPLICATION OF INCOME AND IN FACT, THE ASSESSEE HAS NOT CLAIMED CAPITAL EXPENDITURE TOWARDS APPLICATION OF INCOME EITHER IN CURRENT YEAR OR EARLIER YEARS. HENCE THE QUESTION OF CLAIM OF DOUBLE BENEFI T OF DEDUCTION DOES NOT ARISE. THE LD. AR FOR THE ASSESSEE RELIED ON THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF THE SISTERS OF ST. ANNE (146 ITR 28) , THE HONBLE BOMBAY HIGH COURT DECISION IN THE CAS E OF CIT V. MUNISUVRAT JAIN (1994) TAX LR 1084 , THE HONBLE PUNJAB AND HARYANA HIGH COURT DECISION IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI (330 ITR 16) AND THE JURISDICTIONAL BANGALORE BENCH OF THE ITAT IN THE CASE OF SRI ADICHUNCHANAGIRI SHIKSHANA TRUST V. ACIT (ITA N O.775/BANG/2009) . 5. IT WAS FURTHER SUBMITTED THAT THE AO ALSO CALCUL ATED THE ACCUMULATION OF INCOME @ 15% OF NET INCOME AFTER RE DUCING REVENUE ITA NO.356/BANG/2015 PAGE 3 OF 12 EXPENDITURE. IN SUPPORT OF ITS CONTENTION, THE ASS ESSEE RELIED ON THE FOLLOWING DECISIONS OF THE HONBLE SUPREME COURT WH EREIN IT HAS BEEN HELD THAT ACCUMULATION OF 15% OF THE INCOME DERIVED FROM THE PROPERTY / VOLUNTARY CONTRIBUTION HAS TO BE CALCULATED ON THE INCOME DERIVED BY THE CHARITABLE TRUST AND NOT ON AMOUNT REMAINED AFTER E XPENDING MONEY ON CHARITABLE PURPOSES : A. CIT V. PROGRAM FOR COMMUNITY ORGANIZATION (248 I TR 1); B. CIT V. P. KRISHNA WARRIAR (53 ITR 176). 6. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE SPECIAL BENCH OF MUMBAI ITAT IN THE CASE OF BAI SONABAI HIRJI AGIARY TRUST V. ITO, 93 ITD 70 , WHEREIN THE RULING OF THE HONBLE SUPREME COURT I N THE CASE OF CIT V. PROGRAM FOR COMMUNITY ORGANIZATION (SUPRA) WAS FOLLOWED. 7. THE CIT(APPEALS) HELD THAT THE IMPUGNED EXPENSES IN THE ASSESSEES CASE ARE NOT IN THE SHAPE OF APPLICATION SINCE THEY ARE IN THE SHAPE OF EXPENSES NECESSARY FOR EARNING THE INCOME TO BE APPLIED FOR CHARITABLE PURPOSES. THE REFERENCE TO COMMERCIAL BASIS AND NOT TOTAL INCOME AS THE MEANING OF INCOME TO BE TAKEN INT O ACCOUNT FOR PURPOSES OF EXEMPTION U/S 11 IS EXACTLY WHAT THE AO HAS BEEN STATING IN HIS ORDER WHEREBY HE HAS CO-RELATED THE EXPENSES NEEDED TO EA RN INCOME INSTEAD OF FOLLOWING THE CONCEPT OF TOTAL INCOME. HE ALSO REFERRED TO PARA 3.2 OF THE ASSESSEES WRITTEN SUBMISSIONS WHICH READ AS FOLLOW S:- ITA NO.356/BANG/2015 PAGE 4 OF 12 3.2 THE GROSS RECEIPTS OF THE TRUST WILL NOT BE A VAILABLE FULLY AND CANNOT BE FULLY SET APART AS THE EXPENDITURE FO R RUNNING THE ACTIVITIES OF THE TRUST ARE NECESSARY FOR EARNING S UCH INCOME. FURTHER, AFTER MEETING SUCH EXPENSES ANY SURPLUS AV AILABLE WITH THE TRUST CAN BE CONSIDERED AS INCOME OF THE TRUST. 8. IN VIEW OF THE ABOVE, THE CIT(APPEALS) CONFIRMED THE ORDER OF THE AO. 9. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US I N GROUND NO.3. 10. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HE ISSUE IS COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF JYOTHY CHARITABLE TRUST IN ITA NO.662/BANG/2015, OR DER DATED 14.08.2015 WHEREIN IT HAS BEEN HELD AS UNDER:- 15. THE ISSUE TO BE DECIDED IS THEREFORE AS TO WHE THER FOR THE PURPOSE OF COMPUTING ACCUMULATION OF INCOME OF 15% UNDER SEC.11(1)((A) OF THE ACT, ONE HAS TO TAKE THE GROSS RECEIPTS OR GROSS RECEIPTS AFTER EXPENDITURE FOR CHARITABLE PUR POSE I.E., THE NET RECEIPTS. THIS IS ISSUE IS NO LONGER RES INTEGRA A ND HAS BEEN DECIDED BY THE SPECIAL BENCH MUMBAI 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 PUBLIC 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 PREVAI LED AT THAT POINT OF TIME, THE ASSESSEE HAD TO APPLY 75 PER CENT OF I TS INCOME FOR THE OBJECTS AND PURPOSES OF THE TRUST AND THE ASSESSEE WAS PERMITTED TO ACCUMULATE OR SET APART UP TO 25 PER CENT OF ITS INCOME, WHICH WAS SUBJECT TO FULFILLMENT OF OTHER CONDITIONS. WHI LE CALCULATING THE AFORESAID 25 PER CENT, THE IMPORTANT QUESTION W HICH AROSE WAS AS TO WHETHER FOR THIS PURPOSE, THE GROSS INCOME EA RNED BY THE ASSESSEE IS RELEVANT OR THE INCOME AS COMPUTED IN A CCORDANCE WITH THE PROVISIONS OF IT ACT. IN OTHER WORDS, WHET HER OUTGOINGS FROM OUT OF GROSS INCOME WHICH ARE IN THE NATURE OF APPLICATION OF ITA NO.356/BANG/2015 PAGE 5 OF 12 INCOME, SHOULD BE FIRST DEDUCTED FROM THE GROSS INC OME AND 25 PER CENT OF ONLY THE REMAINING AMOUNT SHOULD BE ALL OWED TO BE ACCUMULATED OR SET APART. 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. PROGRA MME FOR COMMUNITY ORGANIZATION (SUPRA). IN THE DECISION , THEIR LORDSHIPS, AFTER TAKING NOTE OF PROVISIONS OF S. 11(1)(A), HAVE HELD AS UNDER : '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 I TS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. FOR THE PRESENT PURPOSES, THE DONATIONS THE ASSESSEE RECEIVED, IN THE SUM OF RS. 2,57,376, WOULD CONSTITUTE ITS PROPERTY AND IT IS ENTITLED TO ACCUMULATE TWENTY-FIVE PER CENT THEREOUT. IT IS UNCLEAR ON WHAT BASIS THE REVENUE CONTENDED THAT IT WAS ENTITLED TO ACCUMULATE ONLY TWENTY FIVE PER CEN T OF RS. 87,010. FOR THE AFORESAID REASONS, THE CIVIL APPEAL IS DIS MISSED.' IT IS CLEAR FROM THE ABOVE THAT DEDUCTION OF TWENTY -FIVE PER CENT WAS HELD TO BE ALLOWABLE NOT ON TOTAL INCOME A S COMPUTED UNDER THE IT ACT. ANY AMOUNT OR EXPENDITUR E, WHICH WAS APPLICATION OF INCOME, IS NOT TO BE CONSI DERED FOR DETERMINING TWENTY FIVE PER CENT TO BE ACCUMULA TED. THEIR LORDSHIPS, AS NOTED EARLIER, AFFIRMED THE DEC ISION OF KERALA HIGH COURT IN (1997) 141 CTR (KER) 502 : (19 97) 228 ITR 620 (KER) (SUPRA) WHEREIN IT IS HELD AS UND ER : '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 B E WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, AND TH E INCOME IS EXPECTED TO HAVE RELATION TO THE EXTENT T O WHICH SUCH 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 OTHER WORDS, THE ITA NO.356/BANG/2015 PAGE 6 OF 12 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 PURPOSE OF S. 11(1)(A) OF THE ACT, THE INCOME I N TERMS OF RELEVANCE WOULD BE THE INCOME OF THE TRUST FROM AND OUT OF WHICH 25 PER CENT IS SET APART IN ACCORDANCE WITH THE SPIRIT OF THE STATUTORY PROVISION.' 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-FIVE PER CENT HAS TO BE UNDERSTOOD AS INCOME OF THE TRUST UNDER THE RELEVANT HEAD OF S. 11(1). IN OTHER WORDS, INCOME THAT IS NOT TO BE INCLUDED FOR THE PURPOSE O F 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 UNAMBIGUOUS LANGUAGE OF S. 11(1)(A) AND DECIDED THE MATTER ON THE BASIS OF THE SAME. IT HAS BEEN HELD T HAT AS PER THE STATUTORY LANGUAGE OF THE ABOVE SECTION THE INCOME WHICH IS TO BE TAKEN FOR PURPOSE OF ACCUMULATION IS THE INCOME DERIVED BY THE TRUST FROM PROPERTY. IF BOTH THE DECISIONS ARE CAREFULLY READ, IT BECOME S EVIDENT THAT ANY EXPENDITURE WHICH IS IN THE SHAPE OF APPLI CATION OF INCOME IS NOT TO BE TAKEN INTO ACCOUNT. HAVING F OUND THAT TRUST IS ENTITLED TO EXEMPTION UNDER S. 11(1), WE ARE TO GO TO THE STAGE OF INCOME BEFORE APPLICATION THEREO F AND TAKE INTO ACCOUNT 25 PER CENT OF SUCH INCOME. THEIR LORDSHIPS HAVE POINTED THAT THE SAME HAS TO BE TAKE N ON 'COMMERCIAL' BASIS AND NOT 'TOTAL INCOME' AS COMPUT ED UNDER THE IT ACT. THEIR LORDSHIPS IN THE DECIDED CA SE 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 LORDSHIPS OF THE SUPREME COURT, IT IS DIFFICULT TO ACCEPT THAT OUTGOINGS WHICH ARE IN THE NATURE OF APPLICATI ON OF INCOME ARE TO BE EXCLUDED. THE INCOME AVAILABLE TO THE ASSESSEE BEFORE IT WAS APPLIED IS DIRECTED TO BE TA KEN AND THE SAME IN THE PRESENT CASE IS RS. 3,42,174. TWENT Y FIVE ITA NO.356/BANG/2015 PAGE 7 OF 12 PER CENT OF THE ABOVE INCOME IS TO BE ALLOWED AS A DEDUCTION. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HONBLE MADHYA PRADESH HIGH COURT IN PARSI ZORASTRI AN ANJUMAN TRUST VS. CIT (SUPRA). NO REASON WHATSOEVER HAS BEEN GIVEN BY THE REVENUE AUTHORITIES FOR DEDUCTING RS. 2,17,126 IN THIS CASE FOR PURPOSES OF S. 11(1)(A). THE DECISION CITED ON BEHALF OF THE REVENUE DID NOT TAK E INTO ACCOUNT THE DECISION OF THE SUPREME COURT REFERRED TO ABOVE. THE CIRCULAR OF CBDT HAS ALSO BEEN CONSIDERE D BY THE HONBLE KERALA HIGH COURT IN ITS DECISION REFER RED TO ABOVE. ACCORDINGLY THE QUESTION REFERRED TO IS ANSW ERED IN THE AFFIRMATIVE AND IN FAVOUR OF THE ASSESSEE. 16. THE AFORESAID DECISION CLEARLY SUPPORTS THE PLE A OF THE ASSESSEE. FOLLOWING THE SAME, WE HOLD THAT THE ACC UMULATION U/S.11(1)(A) OF THE ACT SHOULD BE ALLOWED AS CLAIME D BY THE ASSESSEE. GROUND NO.4 RAISED BY THE ASSESSEE IS AC CORDINGLY ALLOWED. 11. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JYOTHY CHARITABLE TRUST (SUPRA) , WE ALLOW GROUND NO.3 RAISED BY THE ASSESSEE. 12. THE NEXT ISSUE IS WITH RESPECT TO DISALLOWANCE OF DEPRECIATION CLAIM OF RS.3,69,987. THE AO HELD THAT THE ASSESSEE HAS BEEN CLAIMING DOUBLE DEDUCTION BY FIRST SHOWING THE OUTLAY ON CAPITAL AS SET AS APPLICATION OF INCOME AND, THEREAFTER CLAIMING DEPRECIATION ON THE CAPITAL ASSET AS WELL RELYING ON THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF ESCORTS LTD. ARID ANR. VS UNION OF INDIA AND ORS 199 ITR 4 3 AND THE DECISION OF THE HONBLE KERALA HIGH COURT IN ITA NO.42 OF 2011 IN T HE CASE OF LISSIE MEDICAL INSTITUTION . ITA NO.356/BANG/2015 PAGE 8 OF 12 13. AGGRIEVED, BEFORE THE CIT(APPEALS), THE ASSESSE E IN SUPPORT OF ITS CLAIM RELIED ON THE HONBLE JURISDICTIONAL HIGH COU RT DECISION IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ST. ANNE, 146 ITR 28 WHICH WAS FOLLOWED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V. S. ADICHUNCHUNAGIRI SIKSHANA TRUST, 19 ITR (TRIB) 828 AND DDIT V. CUTCHI MEMOM UNION, 38 TAXMANN.COM 276 . RELIANCE WAS ALSO PLACED ON THE PUNJAB AND HARYANA HIGH COURTS DECISION IN CASE OF CIT V. MARKET COMMITTEE PIPLI, 330 ITR 16 AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. MUNISUVRAT JAM (1994) TAX LR 1084 . 14. THE CIT(APPEALS) HELD THAT THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE IN THE PRESENT CASE AND DISTINGUISHED THE SAME. RELYING ON THE HONBLE SUPREME COURTS DECIS ION IN THE CASE OF ESCORTS LTD. (SUPRA) , THE CIT(A) WAS OF THE VIEW THAT CLAIM OF DEPRECIA TION U/S. 32 OF THE ACT ALONG WITH CAPITAL EXPENDITURE O N SCIENTIFIC RESEARCH U/S. 35(1)(V) ON THE SAME ASSET WOULD AMOUNT TO DOUBLE D EDUCTION. HE CONCLUDED THAT THE CLAIM OF DEPRECIATION ALONG WITH APPLICATION OF INCOME FOR CAPITAL EXPENDITURE REPRESENTS A DOUBLE DEDUCTI ON WHICH IS NOT ENVISAGED UNDER THE I.T. ACT. HE OBSERVED THAT THE HONBLE DELHI HIGH COURT DECISION IN THE CASE OF DIT(EXEMPTION) V. CHARANJIV CHARITABLE TRUST (2014) 43 TAXMANN.COM 300 ALSO SUPPORTED THIS POSITION . HE ALSO POINTED OUT TO THE AMENDED PROVISIONS BY THE FINANCE ACT, 2 014 BY INTRODUCTION OF SUB-SECTION 6 TO SECTION 11 W.E.F. 1.4.2015. HE TH EREFORE UPHELD THE ORDER OF THE AO. ITA NO.356/BANG/2015 PAGE 9 OF 12 15. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US IN GROUND NO.2. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LOW ER AUTHORITIES ERRED IN NOT ALLOWING THE CLAIM OF DEPRECIATION, THOUGH THE ASSESSEE HAD NOT CLAIMED CAPITAL EXPENDITURE ON THE FIXED ASSETS AS APPLICATION OF INCOME. 16. WE HAVE HEARD BOTH THE PARTIES. WE FIND THAT T HIS ISSUE IS ALSO COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JYOTHY CHARITABLE TRUST (SUPRA) , WHEREIN AT PARAS 7 & 8 OF THE ORDER, IT WAS HELD AS FOLLOWS:- 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WH O RELIED ON THE ORDER OF AO. WE HAVE CONSIDERED THE ORDER O F THE AO. IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE IT AT BANGALORE BENCH IN THE 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 CAPITAL ASSET , COST OF ACQUISITION WAS CONSIDERED AS APPLICATION OF INCOME IN THE YEAR OF ITS ACQUISITION. THE AO TOOK THE VIEW THAT ALLOWIN G DEPRECIATION WOULD AMOUNT TO ALLOWING DOUBLE DEDUCTION AND PLACE D 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 REVENUE, THE TRIBUNAL HELD AS FOLLOWS :- 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTIO N FOR COMPUTING INCOME OF CHARITABLE INSTITUTIONS, THEN T HERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERI VING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR OBSOLESCEN CE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHI LE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT ITA NO.356/BANG/2015 PAGE 10 OF 12 VS. TINY TOTS EDUCATION 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 CHARITABLE INSTITUTION IN DETER MINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHAR ITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORE SAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND O F APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER CONSIDERI NG SEVERAL DECISIONS ON THAT ISSUE AND ALSO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CH ARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HA VE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SE CTION 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COU RT MADE A REFERENCE TO THE DECISION OF THE HONBLE SUP REME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A C ASE OF TWO DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE AC T, ONE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT O F EXPENDITURE OF A CAPITAL NATURE INCURRED ON SCIENTI FIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HONBLE CO URT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR), WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN TH E 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 ISSU E DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED. ITA NO.356/BANG/2015 PAGE 11 OF 12 8. WE MAY ALSO ADD THAT THE LEGAL POSITION HAS SINC E 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 THE ACT, WHICH READS AS UNDER:- (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR ACCUMULATED OR SET APART FOR APPLICAT ION, THEN, FOR SUCH PURPOSES THE INCOME SHALL BE DETERMI NED WITHOUT ANY DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICA TION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 9. AS ALREADY STATED, THE AFORESAID AMENDMENT IS P ROSPECTIVE AND WILL APPLY ONLY FROM A.Y. 2015-16. IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE VIEW THAT THE ORDER O F THE CIT(A) HAS TO BE REVERSED. CONSEQUENTLY GROUND NO.2 RAISED B Y THE ASSESSEE IS ALLOWED. 17. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH OF THIS TRIBUNAL CITED SUPRA , WE ALLOW GROUND NO.2 RAISED BY THE ASSESSEE. 18. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF OCTOBER, 2015. SD/- SD/- ( JASON P. BOAZ ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 28 TH OCTOBER, 2015. /D S/ ITA NO.356/BANG/2015 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.