M/s. Krishna Charitable Society, Ghaziabad V. Addl. CIT, Ghaziabad

ITA 4639/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4323 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 14-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Capital asset; Business income; Depreciation; Income from undisclosed sources; Charitable institution; Rule of consistency; Question of law; Condonation of delay; Revised return; Capital expenditure
• Section: 139(5); 12AA; 32; 148; 11; 139

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI I.C.SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4639/DEL/2015 (ASSESSMENT YEAR: 2011 - 12 ) KRISHNA CHARITABLE SOCIETY, 13 TH KM STONE, NH - 58, MURADNAGAR, GHAZIABAD PAN:AAATK2465P VS. ADDL. CIT, RANGE - 1, GHAZIABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHWANI TANEJA, ADV REVENUE BY: SHRI ANSHU PRAKASH, SR. DR DATE OF HEARING 06/09 / 2017 DATE OF PRONOUNCEMENT 15 / 09 / 2017 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - GHAZIABAD DATED 29.05.2015 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN CONFIRMING THE ADDITIONS MADE BY ASSESSING OFFICER TREATING HOSTEL FACILITY PROVIDED TO COLLEGE STUDENTS AS BUSINESS OF TH E APPELLANT SOCIETY CONSIDERING THE ALLEGED SURPLUS OF RS. 98,87,873/ - AS BUSINESS INCOME IN THE HAND OF APPELLANT SOCIETY. THE OBSERVATION MADE AND BASIS ADOPTED ARE ERRONEOUS, UNJUSTIFIED, UNWARRANTED, BAD IN LAW AND ARE WITHOUT SUFFICIENT MATERIAL ON RE CORDS. 2. THAT THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS GROSSLY ERRED IN CONFIRMING THE ADDITIONS MADE BY A.O. HOLDING THAT HOSTEL/ MESS FACILITY FOR STUDENTS IS SEPARATE BUSINESS ACTIVITY IN TERMS OF SECTION 11 (4A) MERELY ON IRRELEVANT CONS IDERATION LIKE SURPLUS SHOULD HAVE BEEN REIMBURSED TO STUDENTS OR USED TO REDUCE FEE OR GIVING CONTENTS OF SOME WEBSITE ABOUT FALL IN DEMAND FOR ROOMS AT MEERUT ETC, EVEN AFTER ACCEPTING THAT MAINTENANCE OF SUCH HOSTEL IS MANDATORY AS PER THE CONCERNED CON TROLLING AUTHORITY AND IT WAS AN INTEGRAL AND INALIENABLE PART OF EDUCATIONAL ACTIVITY. THUS FINDING IS PERVERSE. 3. THAT THE LEARNED ASSESSING OFFICER HAS FAILED TO APPRECIATE THE FACT THAT MAINTAINING HOSTEL/MESS FACILITY TO STUDENTS IS AN ESSENTIAL & I NTEGRAL PART OF EDUCATION U/S 2(15) OF THE ACT AND NOT A SEPARATE BUSINESS PAGE 2 OF 20 ACTIVITY COVERED UNDER SECTION 11(4A) AS ALSO ACCEPTED IN THE PAST ASSESSMENTS AND THERE IS NO CHANGE IN LAW ABOUT THE FIRST THREE LIMBS OF SECTION 2(15) EVEN AFTER 01.04.2009, , HENCE OVERALL SURPLUS OF THE SOCIETY AS WORKED OUT IN INCOME & EXPENDITURE ACCOUNT OF THE SOCIETY AND CONSEQUENTLY USED AND INVESTED IN THE FULFILLMENT OF THE MAIN OBJECTIVES OF THE SOCIETY RESULTING INTO APPLICATION OF INCOME AND AS SUCH EXEMPT UNDER THE PROVISIONS OF SECTION 11 TO 13 OF THE ACT AND LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ALSO CONFIRMED THE VIEW TAKEN BY ASSESSING OFFICER. 4. THAT THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) HAS ALSO ERRED ON FACTS AND IN LAW TO CONFIRM THE DISALLOWANCE MADE BY ASSESSING OFFICER RS. 5,70,79,339/ - BEING THE DEPRECATION AS CLAIMED BY DEBITING THE SAME TO THE INCOME & EXPENDITURE ACCOUNT OF THE SOCIETY FOR THE PURPOSES OF WORKING OUT THE SURPLUS IN THE HANDS OF THE SOCIETY. THE ASSESSING OFFICE R HAS FAILED TO BRING ANY MATERIAL ON RECORDS TO ESTABLISH THAT THE APPELLANT HAS AVAILED HUNDRED PERCENT APPLICATION OF THE VALUE OF CAPITAL EXPENDITURE IN THE YEAR OF INVESTMENT THEREBY INVITING DISALLOWANCE OF THE DEPRECIATION ON SUCH CAPITAL EXPENDITUR E QUOTING DOUBLE DEDUCTION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE SOCIETYS COUNCIL HAS SUBMITTED DETAILS OF GROSS INCOME AND ITS APPLICATION OF INCOME OF RELEVANT YEAR AND PRECEEDING FIVE YEARS TO JUSTIFY THAT ADDITION IN FIXED ASSETS COULD NOT BE UTILIZED AS APPLICATION OF INCOME IN PAST YEARS DUE TO EXCESS UTILIZATION IN PAST YEARS, HENCE THE SAME COULD NOT BE TERMED AS DOUBLE CLAIM OF DEPRECIATION. HENCE THE DISALLOWANCE OF THE DEPRECIATION IS NOT ONLY UNJUSTIFIED BUT IT IS ILLEGAL AND BAD IN THE EYES OF LAW. 3. ASSESSEE SOCIETY IS RUNNING AND ENGINEERING COLLEGE IT IS REGISTERED WITH REGISTRAR OF SOCIETIES AS WELL AS UNDER SECTION 12AA OF THE INCOME TAX ACT. ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME. ASSESSEES CASE WAS PICKED UP FOR SCRUTINY AND IT WAS NOTED BY THE LD. ASSESSING OFFICER THAT ASSESSEE IS APART FROM EDUCATIONAL ACTIVITIES ALSO PROVIDE HOSTEL AND TRANSPORT FACILITIES TO THE STUDENTS IN ITS COLLEGE. AFTER SEEKING THE EXPLANATION OF THE ASSESSEE, THE LD. AO WAS OF THE VIEW THAT GENERATING OF SURPLUS ON ACCOUNT OF TRANSPORTATION, HOSTEL RUNNING OR ANY OTHER ACTIVITY FALLS UNDER BUSINESS CATEGORY, WHICH IS INCIDENTAL TO THE BUSINESS. THEREFORE ACCORDING TO HIM THE TRANSPORTATION AND HOSTEL RUNNING ITSELF IS NOT AN EDUCAT IONAL ACTIVITY AND CAIRN AT THE MOST BE SAID TO BE INCIDENTAL TO THE OBJECT OF THE TRUST. THEREFORE, ACCORDING TO HIM THE PROVISIONS OF SUBSECTION 4A OF SECTION 11 APPLY TO THESE ACTIVITIES. HE FURTHER HELD THAT EDUCATIONAL ACTIVITY AND HOSTEL IN TRANSPORT ATION ACTIVITIES ARE SEPARABLE AND THE DUTIES OF RUNNING HOSTEL AND TRANSPORTATION ACTIVITIES AND BUSINESS, WHICH REQUIRES SEPARATE BOOKS OF ACCOUNTS TO BE MAINTAINED. HE THEREFORE RELIED ON THE DECISION OF TRUSTEES, LOKA SHIKSHAN TRUST VERSUS CIT 101 ITR 234. THAT EDUCATIONAL ACTIVITY MEANS SYSTEMATIC EDUCATION ONLY. AFTER HOLDING SO, HE PAGE 3 OF 20 EXAMINED THE INCOME AND EXPENDITURE ACCOUNT OF HOSTEL RECEIPTS AND EXPENSES AND DETERMINED THE NET SURPLUS OF THE HOSTEL ACTIVITIES AT RS. 9887973/ AND CHARGED TAX ON IT AS BUSINESS INCOME OF THE ASSESSEE. 4. IT WAS FURTHER HELD BY HIM THAT THE ASSESSEE TRUST HAS CLAIMED A DEPRECIATION OF RS. 5707 9339/ IN ITS INCOME AND EXPENDITURE ACCOUNT. THEREFORE EXPLANATION WAS ASKED FROM THE ASSESSEE THAT WHY DEPRECIATION SHOULD NOT BE DISALLOWED FOR THE REASON THAT HUNDRED PERCENT APPLICATION OF CAPITAL EXPENDITURE HAS ALREADY BEEN ALLOWED TO THE ASSESSEE IN THE YEAR OF INVESTMENT AND NOW ONCE AGAIN CLAIM OF THE DEPRECIATION ON THE SAME ASSETS AMOUNTS TO DOUBLE DEDUCTION. THEREFORE , FO LLOWING THE DECISION OF THE HONBLE SUPREME COURT IN CASE OF ESCORTS LTD AND QUERELA HIGH COURT DECISION IN CASE OF IESSI MEDICAL INSTITUTIONS. VERSUS CIT, THE DEPRECIATION OF RS. 5 707 9339/ WAS DISALLOWED. 5. CONSEQUENTLY, ASSESSMENT ORDER UNDER SECTION 14 3 (3) WAS PASSED DETERMINING TOTAL TAXABLE INCOME OF THE ASSESSEE OF RS. 9887973 V IDE ORDER DATED 28/02/2014 UNDER SECTION 143 (3) OF THE INCOME TAX ACT. 6. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER - PREFERRED APPEAL BEFORE THE L D. CIT A. LD. CIT WIDE ORDER DATED 29/05/2015 REJECTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF DEPRECIATION. WITH RESPECT TO THE RUNNING OF THE HOSTEL ACTIVITIES IS A BUSINESS ACTIVITY. HE RELYING ON THE DECISION OF THE MADRAS HIGH COURT IN CASE OF DIRE CTOR OF INCOME TAX VERSUS W A LLINGTON CHARITABLE TRUST 330 ITR 24 UPHELD THE FINDING OF THE LD. ASSESSING OFFICER. HOWEVER, HE ALLOWED RELIEF TO THE ASSESSEE WITH RESPECT TO THE EXPENDITURE OF RS. 1 204120/ - . THEREFORE, ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE LD. CIT A IS IN APPEAL BEFORE US. 7. LD. AUTHORIZED REPRESENTATIVE VEHEMENTLY SUBMITTED HOSTEL ACTIVITIES ARE SUBSERVIENT TO THE MAIN OBJECT OF THE EDUCATION CARRIED ON BY THE ASSESSEE AND THEREFORE IT CANNOT BE SAID TO BE BUSINESS INCOME. HE RELIED UPON FOLLOWING DECISIONS TO SUPPORT HIS CONTENTIONS: - A. CIT VERSUS KARNATAKA LINGAYATA EDUCATION SOCIETY ITA NO. 5, 0, 04/2012 DATED 15/10/2 014 OF KARNATAKA HIGH COURT B. DR KN MODI INSTITUTE OF PHARMACEUTICAL EDUCATIONAL AND RESEARCH TRUST VERSUS JCIT ITA NO. 4232/DEL/2015 DATED 26/04/2017 C. SURAJMAL MEMORIAL EDUCATION SOCIETY VERSUS CIT, ITA NO. 2136/DEL/2016 DATED 30/05/2016 PAGE 4 OF 20 D. DDIT (EXEMPTION) VER SUS THE YOUNG WOMAN, CHRISTIAN ASSOCIATION OF INDIA ITA NUMBER 02/04/2008/DEL/2013 DATED 29 TO 2016 E. IT (EXEMPTION) VERSUS SUHASINI CHARITABLE TRUST, SWAMI NARAYANAN AKSHARDHAM TEMPLE ITA NO. 4330/DEL/2012 DATED 17/03/2016 F. DIT (EXEMPTION) VERSUS LALA LAJP ATRAI MEMORIAL TRUST ITA NUMBER 02/03/2007/2013 DATED 13/04/2016 OF BOMBAY HIGH COURT G. HIRANADNANI FOUNDATION V ACIT ITA NO. 563/AM/2016 DATED 27/05/2016 8. WITH RESPECT TO THE CLAIM OF DEPRECIATION OF THE ASSESSEE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY SEVERAL DECISIONS AND HE CITED THEM AS UNDER: A. DIT ( EXEMPTION) VERSUS M/S INDRAPRASTHA CANCER SOCIETY ITA NO. 240/2014 DATED 18/11/2014 BY HONBLE DELHI HIGH COURT B. ACIT (EXEMPTION) VERSUS DAWAT E HADIYAH BADRI MAHAL ITA NUMBER 342 1934 TO 2/MU M/2015 DATED 30/07/2015 C. INSTITUTE OF MANAGEMENT EDUCATION IS VERSUS JCIT ITA NO. 342 TO/DEL 2015 DATED 10 TO 2017 D. RAMUN EDUCATION SOCIETY VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX ITA NO. 4641/DEL/2015. DATE OF OR DER. 15/2/2017 E. FRIENDS CHARITABLE SOCIETY VERSUS ACIT ITA NO. 4640/DEL/2015 9. IN VIEW OF THIS, THE CLAIM OF THE LD. AUTHORIZED REPRESENTATIVE V WAS BOTH THE ISSUES ARE COVERED IN FAVOUR OF THE ASSESSEE. 10. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER JUDICIAL PRONOUNCEMENT PLACED BEFORE US. IN THE GROUNDS NO. 1 3 ASSESSEE IS CONTESTING THAT ADDITION MADE BY THE LD. ASSESSING OFFICER TREATING HOSTEL PLACES PROVIDED TO COLLEGE STUDENT AS BUSINESS OF THE SOCIETY AND TEXT THE ALLEGED SURPLUS OF RS. 9887873/ AS BUSINESS INCOME OF THE APPELLANT. IT WAS NOT THE CASE OF THE REVENUE THAT ASSESSEE HAS RENTED OUT THE SE HOSTELS TO THE STUDENTS WHO ARE NOT PARTED EDUCATION IN THE ABOVE INSTITUTES. IT WAS ALSO NOT THE CASE OF REVENUE THAT ASSESSEE IS PRIMARILY ENGAGED IN THE BUSINESS OF PROVIDING HOSTEL FACILITIES TO THE STUDENTS. THE ABOVE ISSUE IS NO MORE RES INTEGRA IN VIEW OF THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN CIT VERSUS KARNATAKA LINGAYAT PAGE 5 OF 20 EDUCATION SOCIETY IN ITA NO. 5004/2012 DATED 15/10/2014 WHEREIN IT HAS BEEN HELD THAT PROVIDING HOSTEL TO THE STUDENTS/STAFF WORKING FOR THE SOCIETYS INCIDENTAL T O ACHIEVE THE OBJECT OF PROVIDING EDUCATION, NAMELY THE OBJECT OF THE SOCIETY. IN VIEW OF THIS WE ARE OF THE OPINION THAT PROVIDING OF HOSTEL FACILITIES AND TRANSPORT FACILITIES TO THE STUDENT AND STAFF MEMBER OF THE EDUCATIONAL INSTITUTE CANNOT BE CONSIDE RED AS BUSINESS ACTIVITY BUT IS SUBSERVIENT TO THE OBJECT OF EDUCATIONAL ACTIVITIES PERFORMED BY THE SOCIETY. WE ARE ALSO SUPPORTED BY OUR VIEW BY THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN IIT VERSUS STATE OF UP, (1976) 38 STC 428 (ALL) WHEREIN Q UESTION AROSE IN INDIAN INSTITUTE OF TECHNOLOGY V. STATE OF U.P . (1976) 38 STC 428 (ALL) WITH RESPECT TO THE VISITORS' HOSTEL MAINTAINED BY THE INDIAN INSTITUTE OF TECHNOLOGY WHERE LODGING AND BOARDING FAC ILITIES WERE PROVIDED TO PERSONS WHO WOULD COME TO THE INSTITUTE IN CONNECTION WITH EDUCATION AND THE ACADEMIC ACTIVITIES OF THE INSTITUTE. IT WAS OBSERVED THAT THE STATUTORY OBLIGATION OF MAINTENANCE OF THE HOSTEL, WHICH INVOLVED SUPPLY, AND SALE OF FOOD WAS AN INTEGRAL PART OF THE OBJECTS OF THE INSTITUTE N OR COULD THE RUNNING OF THE HOSTEL BE TREATED AS THE PRINCIPAL ACTIVITY OF THE INSTITUTE. THE INSTITUTE COULD NOT BE HELD TO BE DOING BUSINESS. FURTHER M EALS BEING SUPPLIED IN A HOSTEL TO THE SCHOLARS, VISITORS, GUEST FACULTY ETC. CAN NOT BE EXIGIBLE TO SALES TAX WHERE MAIN ACTIVITY IS ACADEMICS AS HELD IN SCHOLARS HOME SENIOR SECONDARY SCHOOL 42 VST 530 . FURTHER, THE RELIANCE PLACED BY THE LOWER AUTHORITI ES ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN CASE OF DCIT VERSUS WELLINGTON CHARITABLE TRUST IS ALSO MISPLACED BECAUSE IN THAT CASE, THE ONLY ACTIVITY OF THAT PARTICULAR TRUST WAS RENTING OUT OF THE PROPERTY AND NOT EDUCATION. WE ARE ALSO NOT AVE RSE TO CONSIDERING THE LATEST LEGAL DEVELOPMENTS TOO WHERE IN THE RECENTLY INTRODUCED NEW LEGISLATION OF GOODS AND SERVICE TAX IT IS PROVIDED THAT NO GST WOULD BE CHARGEABLE ON THE HOSTEL FEES ETC RECOVERED FROM THE STUDENTS , FACULTIES AND OTHER S TAFF FOR LODGING AND BOARDING AS THEY ARE ENGAGED IN EDUCATION ACTIVITIES . THEREFORE WE REVERSE THE FINDING OF THE LOWER AUTHORITIES AND HELD THAT TRANSPORT AND HOSTEL FACILITIES SURPLUS CANNOT BE CONSIDERED AS BUSINESS INCOME OF THE ASSESSEE SO CIETY WHICH IS MAINLY ENGAGED IN BUSINESS ACTIVITIES AND THESE ACTIVITIES ARE SUBSERVIENT TO THE MAIN OBJECT OF EDUCATION OF THE TRUST. IN THE RESULT 1 3 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. PAGE 6 OF 20 12. GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS AGAINST DISALLOWANCE MADE BY THE ASSESSING OFFICER OF DEPRECIATION ON THE ASSETS WHICH HAVE ALREADY BEEN CLAIMED AND ALLOWED TO THE ASSESSEE AS APPLICATION OF FUNDS. HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF DDIT VERSUS INDRAPRASTHA CANCER SOCIETY IN ITA NUMBER 240 /2014 DATED 18/11/2014 SQUARELY COVERED IS ISSUE IN FAVOUR OF THE ASSESSEE WHERE THE HONBLE DELHI HIGH COURT AFTER CONSIDERING ALL THE CASES RELIED UPON BY THE REVENUE. IN THIS PARTICULAR CASE, INCLUDING THE CASE OF HONBLE SUPREME COURT IN ES CORTS LTD VERSUS UNION OF INDIA, WAS CONSIDERED AND AFTER THAT IT WAS HELD AS UNDER 2. THE RESPONDENT - ASSESSEES ARE CHARITABLE INSTITUTIONS TO WHOM SECTIONS 11 TO 13 AND OTHER RELEVANT PROVISIONS OF THE INCOME TAX ACT, 1961 (ACT, FOR SHORT) APPLY. TH E ISSUE RAISED IN THE PRESENT APPEALS IS WHETHER A CHARITABLE INSTITUTION, WHICH HAS PURCHASED CAPITAL ASSETS AND TREATED THE AMOUNT SPENT DIRECTOR OF INCOME TAX ... VS M/S INDRAPRASTHA CANCER SOCIETY ON 18 NOVEMBER, 2014 INDIAN KANOON - HTTP://INDIANKANOO N.ORG/DOC/138934819/ 1 ON PURCHASE OF THE CAPITAL ASSET AS APPLICATION OF INCOME, IS ENTITLED TO CLAIM DEPRECIATION ON THE SAME CAPITAL ASSET UTILISED FOR BUSINESS. REVENUE SUBMITS THAT THIS WOULD AMOUNT TO DOUBLE DEDUCTION. 3. THIS HIGH COURT IN DIRECTOR OF INCOME TAX VERSUS VISHWA JAGRITI MISSION (2013) 262 CTR 558 HAS HELD THAT THE CLAIM FOR DEPRECIATION SHOULD BE ALLOWED AS PER PRINCIPLES RELATING TO COMMERCIAL ACCOUNTANCY, WHEN COMPUTING BUSINESS INCOME. RELIANCE PLACED BY THE REVENUE ON THE DECISION O F THE SUPREME COURT IN ESCORTS LIMITED VERSUS UNION OF INDIA, (1993) 199 ITR 43 (SC), WAS DISPELLED AND DISTINGUISHED. IN ESCORTS LIMITED (SUPRA) THE CLAIM FOR DEPRECIATION UNDER SECTION 32 OF THE ACT WAS DENIED AS THE ENTIRE EXPENDITURE ON THE CAPITAL ASS ET HAD BEEN ALLOWED UNDER SECTION 35(2)(IV) OF THE ACT WHILE COMPUTING BUSINESS PROFIT AND LOSS. SECONDLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST/INSTITUTION, AND THE QUESTION AS TO WHETHER INCOME UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS' SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES. DECISIONS OF OTHER HIGH COURTS IN CIT VERSUS SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST, (199 2) 198 ITR 598 (GUJ.), CIT VERSUS RAIPUR PALLOTTINE SOCIETY, (1989) 180 ITR 579 (MP), CIT VERSUS SOCIETY OF THE SISTERS OF ST. ANNE, (1984) 146 ITR 28 (KAR.), CIT VERSUS TRUSTEE OF H.E.H. THE NIZAM'S SUPPLEMENTAL RELIGIOUS ENDOWMENT TRUST, (1981) 127 ITR 3 78 (AP) AND CIT VERSUS RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES, (1982) 135 ITR 485 (MAD.) WERE REFERRED TO IN AFFIRMATION OF THE LEGAL RATIO. IT WAS, INTER ALIA, HELD: '11. .........THE ONLY QUESTION IS WHETHER THE INCOME OF THE ASSESSEE SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IN DOING SO WHETHER DEPRECIATION ON FIXED ASSETS UTILISED FOR THE CHARITABLE PAGE 7 OF 20 PURPOSES SHOULD BE ALLOWED. ON THIS ISSUE, THERE SEEMS TO BE A CONSENSUS OF JUDICIAL THINKING AS IS SEEN FROM THE AUTHORITIES RELIED UPON BY THE CIT(APPEALS) AS WELL AS THE TRIBUNAL. IN CIT VS. THE SOCIETY OF THE SISTERS OF ST. ANME (SUPRA), AN IDENTICAL QUESTION AROSE BEFORE THE KARNATAKA HIGH COURT. THERE THE SOCI ETY WAS RUNNING A SCHOOL IN BANGALORE AND WAS ALLOWED EXEMPTION UNDER SECTION 11. THE QUESTION AROSE AS TO HOW THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES SHOULD BE COMPUTED. JAGANNATHA SETTY, J. SPEAKING FOR THE DIVISION BENC H OF THE COURT HELD THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNOT BE THE 'TOTAL INCOME' AS DEFINED IN SECTION 2(45) OF THE ACT AND THAT THE WORD 'INCOME' IS A WIDER TERM THAN THE EXPRESSION 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. REFEREN CE WAS MADE TO THE NATURE OF DEPRECIATION AND IT WAS POINTED OUT THAT DEPRECIATION WAS NOTHING BUT DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE. IT WAS OBSERVED THAT DEPRECIATION, IF NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING THE INCOME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THE CIRCULAR NO.5 - P (LXX6) OF 1968, DATED JULY 19,1968 WAS REPRODUCED IN THE JUDGMENT IN WHICH THE BOARD HAS TAKEN THE VIEW THAT THE INCOME OF THE TRUST SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE. THE CIRCULAR IS AS UNDER: 'WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD INCOME SHOULD BE UNDERSTOOD IN ITS C OMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSE OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTH ERWISE. IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABLE TO TAX U/S. 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF THE TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER CENT. OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION U/S. 11(1).' 4. ACCORDINGLY, THE APPEAL WAS DISMISSED AFTER OBSERVING THAT NO C ONTRARY JUDGMENT HAS BEEN BROUGHT TO THE NOTICE OF THIS COURT. 5. THE HIGH COURT OF KERALA IN LISSIE MEDICAL INSTITUTIONS VERSUS COMMISSIONER OF INCOME TAX, (2012) 348 ITR 344 (KER) HAS TAKEN A DIFFERENT VIEW, INTER ALIA, HOLDING AS UNDER: '5. IT IS SETTLE D POSITION THROUGH SEVERAL DECISIONS OF HIGH COURTS AND SUPREME COURTS THAT WHEN BUSINESS IS HELD IN TRUST BY CHARITABLE INSTITUTIONS INCOME FROM BUSINESS HAS TO BE COMPUTED BY GRANTING DEDUCTIONS PROVIDED U/S 30 TO 43D AS PROVIDED UNDER S.29 OF THE INCOME TAX ACT. 6. SENIOR COUNSEL SRI.A.K.J.NAMBIAR APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS BEEN FILING INCOME TAX RETURNS FOR SEVERAL YEARS INCLUDING THE ASSESSMENT YEAR 2005 - 2006, AND DISALLOWANCE IS MADE ONLY FOR THIS YEAR. SINCE BUSINESS I NCOME HAS TO BE AS STATED IN S.29 BY GRANTING ALL DEDUCTIONS PROVIDED U/S 30 TO 43D WHICH INCLUDES DEPRECIATION U/S 32, ASSESSEE IS ENTITLED IS THE CASE PRESSED BEFORE US BY THE SENIOR COUNSEL APPEARING FOR THE PAGE 8 OF 2 0 ASSESSEE. WE HAVE NO DOUBT IN OUR MIND THAT B USINESS INCOME OF CHARITABLE TRUST ALSO HAS TO BE COMPUTED IN THE SAME MANNER AS PROVIDED U/S 29 OF THE INCOME TAX ACT. HOWEVER, THE ISSUE THAT REQUIRES CONSIDERATION IS WHEN THE EXPENDITURE INCURRED FOR ACQUISITION OF DEPRECIABLE ASSETS ITSELF IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES U/S 11(1)(A) OF THE ACT, SHOULD NOT THE COST OF SUCH ASSETS TO BE TREATED AS NIL FOR THE ASSESSEE AND IN THAT SITUATION DEPRECIATION TO BE GRANTED TURNS OUT TO BE NIL. HOWEVER, IF DEPRECIATION PROVIDED IS CL AIMED ON NOTIONAL COST AFTER THE ASSESSEE CLAIMS 100% OF THE COST INCURRED FOR IT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE DEPRECIATION SO CLAIMED HAS TO BE WRITTEN BACK AS INCOME AVAILABLE. IN FACT, GOING BY THE SEVERAL DECISIONS OF THE VARIO US HIGH COURTS, WE ARE SURE THAT BASED ON THESE DECISIONS ALL THE CHARITABLE INSTITUTIONS WILL BE GENERATING UNACCOUNTED INCOME EQUAL TO THE DEPRECIATION AMOUNT CLAIMED ON AN YEAR TO YEAR BASIS WHICH IS NOTHING BUT BLACK MONEY. THIS ASPECT IS NOT SEEN CONS IDERED IN ANY OF THESE DECISIONS. WE, THEREFORE, SOUGHT THE VIEWS FROM THE CENTRAL BOARD OF DIRECT TAXES. SENIOR STANDING COUNSEL SRI.P.K.R.MENON, APPEARING FOR THE REVENUE PRODUCED CLARIFICATION OBTAINED FROM THE CENTRAL BOARD WHEREIN THEY HAVE STATED AS FOLLOWS: 'THE CENTRAL BOARD OF DIRECT TAXES IS OF THE CONSIDERED VIEW THAT WHERE AN ASSESSEE HAS ACQUIRED AN ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS INCOME EXPENDITURE ACCOUNT, DEPRECIATION ON SUCH ASSET W OULD NOT BE ALLOWABLE TO THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF THE 'THE PROPERTY HELD UNDER TRUST' UNDER THE RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COM PUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME & EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE THE INCOME FOR THE PURP OSE OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT. THIS WOULD REDUCE THE POSSIBILITY OF REVENUE LEAKAGE WHICH MAY BE A CAUSE FOR GENERATION OF BLACK MONEY.' 6. NOTICING THE AFORESAID JUDGMENT AS WELL AS CIRCULAR/CLARIFICATION DATED 2ND FEB, 2012 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES, A DIVISION BENCH OF THIS COURT RE - EXAMINED THE ENTIRE ISSUE IN ITA NO. 7/2013, DIRECTOR OF INCOME TAX (EXEMPTION) VERSUS I NDIAN TRADE PROMOTION ORGANISATION, AND OTHER CONNECTED MATTERS, DECIDED ON 27TH NOVEMBER, 2013. THE SAID ORDER RECORDS THAT THE BENCH WAS INITIALLY INCLINED TO ACCEPT THE SUBMISSION MADE OF THE REVENUE, BUT FOR SEVERAL REASONS MENTIONED AND RECORDED, DECL INED TO INTERFERE AND REFER THE QUESTION/ RATIO ACCEPTED IN VISHWA JAGRITI MISSION (SUPRA), TO A LARGER BENCH. THIS COURT REFERRED TO THE FOLLOWING EXAMPLE TO EXPLAIN THE CONTROVERSY IN QUESTION: '5. ... IN ORDER TO APPRECIATE THE CONTENTION RAISED BY THE REVENUE, WE WOULD LIKE TO GIVE ONE EXAMPLE WHICH WOULD CLARIFY THE CONTENTION OR THE ISSUE RAISED BEFORE US. AN ASSESSEE, A CHARITABLE INSTITUTION, SAY HAS INCOME FROM PROPERTY HELD UNDER TRUST OF RS.1,00,000/ - . AS PER MANDATE OF CLAUSE A, 85% OF THE SAID AMOUNT I.E. RS.85,000/SHOULD BE SPENT IN THE SAID FINANCIAL YEAR. THE SAID PAGE 9 OF 20 ASSESSEE SPENDS AND ACQUIRES A CAPITAL ASSET FOR RS.50,000/ - . THE PURCHASE PRICE FOR ACQUISITION OF THE CAPITAL ASSET I.E. RS.50,000/ - IS TREATED AS APPLICATION OF INCOME FOR THE PU RPOSE OF CLAUSE A TO SECTION 11(1). ON THE CAPITAL ASSET, THE ASSESSEE ALSO CLAIMS DEPRECIATION SAY @ 20%. ACCORDINGLY, THE ASSESSEE CLAIMS THAT THE APPLICATION OF INCOME WOULD INCLUDE RS.10,000/ - WHICH IS TO BE ALLOWED AS DEPRECIATION AS TO THIS EXTENT, T HE ASSET PURCHASED HAS DEPRECIATED. IN OTHER WORDS, RS.60,000/ - IS TO BE TREATED AS APPLICATION OF MONEY FOR THE PURPOSE OF CLAUSE A TO SECTION 11(1).' THEREAFTER, REFERENCE WAS MADE TO THE FOLLOWING QUOTATION FROM THE JUDGMENT OF THE KARNATAKA HIGH COURT IN SOCIETY OF THE SISTERS OF ST. ANNE (SUPRA) : 'IT IS CLEAR FROM THE ABOVE PROVISIONS THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST CANNOT BE THE TOTAL INCOME BECAUSE S. 11(1) SAYS THAT THE FORMER SHALL NOT BE INCLUDED IN THE LATTER, OF THE PERSO N IN RECEIPT OF THE INCOME. THE EXPRESSION ' TOTAL INCOME ' HAS BEEN DEFINED UNDER S. 2(45) OF THE ACT TO MEAN ' THE TOTAL AMOUNT OF INCOME REFERRED TO IN S. 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT '. THE WORD ' INCOME ' IS DEFINED UNDER S. 2(24) OF THE ACT TO INCLUDE PROFITS AND GAINS, DIVIDENDS, VOLUNTARY PAYMENT RECEIVED BY TRUST, ETC. IT MAY BE NOTED THAT PROFITS AND GAINS ARE GENERALLY USED IN TERMS OF BUSINESS OR PROFESSION AS PROVIDED U/S. 28. THE WORD ' INCOME ', THEREFORE, IS A MUCH WIDER TE RM THAN THE EXPRESSION ',PROFITS AND GAINS OF BUSINESS OR PROFESSION '. NET RECEIPT AFTER DEDUCTING ALL THE NECESSARY EXPENDITURE OF THE TRUST (SIC). THERE IS A BROAD AGREEMENT ON THIS PROPOSITION. BUT STILL THE CONTENTION FOR THE REVENUE IS THAT THE DEPRE CIATION ALLOWANCE BEING A NOTIONAL INCOME (EXPENDITURE ?) CANNOT BE ALLOWED TO BE DEBITED TO THE EXPENDITURE ACCOUNT OF THE TRUST. THIS CONTENTION APPEARS TO PROCEED ON THE ASSUMPTION THAT THE EXPENDITURE SHOULD NECESSARILY INVOLVE ACTUAL DELIVERY OF OR PA RTING WITH THE MONEY. IT SEEMS TO US THAT IT NEED NOT NECESSARILY BE SO. THE EXPENDITURE SHOULD BE UNDERSTOOD AS NECESSARY OUTGOINGS. THE DEPRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERTY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING, ACCOUNTANCY, ETC. IN SPICER & PEGLER'S BOOK - KEEPING AND ACCOUNTS, 17TH EDN., PP. 44, 45 & 46, IT HAS BEEN NOTED AS FOLLOWS : 'DEPRECIATION IS THE EXHAUSTION OF THE EFFECTIVE LIFE OF A FIXED ASSET OWING TO ' USE ' OR OBSOLESCENCE. IT MAY BE COMPUTED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERED WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJECT OF PROVIDING FOR DEPRECIATION IS TO SPREAD THE EXPENDITURE, INCURRED IN ACQUIRING THE ASSET, OVER ITS EF FECTIVE LIFETIME; THE AMOUNT OF THE PROVISION, MADE IN RESPECT OF AN ACCOUNTING PERIOD, IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE, WHICH HAS EXPIRED DURING THAT PERIOD. ' 'AT THE END OF ITS EFFECTIVE LIFE, THE ASSETS CEASES TO EARN REVENU E, I.E., THE CAPITAL VALUE HAS EXPIRED AND THE ASSET WILL HAVE TO BE REPLACED OR A SUBSTITUTE FOUND PROVISION FOR DEPRECIATION IS THE SETTING ASIDE, OUT OF THE REVENUE OF AN ACCOUNTING PERIOD, THE ESTIMATED AMOUNT BY WHICH THE CAPITAL INVESTED IN THE ASSET HAS EXPIRED DURING THAT PERIOD. IT IS THE PROVISION MADE FOR THE LOSS OR EXPENSE INCURRED THROUGH RISING THE ASSET FOR EARNING PROFITS, AND PAGE 10 OF 20 SHOULD, THEREFORE, BE CHARGED AGAINST THOSE PROFITS AS THEY ARE EARNED. ' 'IF DEPRECIATION IS NOT PROVIDED FOR, THE BOOKS WILL NOT CONTAIN A TRUE RECORD OF REVENUE OR CAPITAL. IF THE ASSET WERE HIRED INSTEAD OF PURCHASED, THE HIRING FEE WOULD BE CHARGED AGAINST THE PROFITS; HAVING BEEN PURCHASED THE ASSET IS, IN EFFECT, THEN HIRED BY CAPITAL TO REVENUE, AND THE TRUE PR OFIT CANNOT BE ASCERTAINED UNTIL A SUITABLE CHARGE FOR THE USE OF THE ASSET HAS BEEN MADE. MOREOVER, UNLESS PROVISION IS MADE FOR DEPRECIATION, THE BALANCE - SHEET WILL NOT PRESENT A TRUE AND FAIR VIEW OF THE STATE OF AFFAIRS ; ASSETS SHOULD BE SHOWN AT A F IGURE WHICH REPRESENT THAT PART OF THEIR VALUE ON ACQUISITION, WHICH HAS NOT YET EXPIRED. ' IN CIT V INDIAN JUTE MILLS ASSOCIATION [1982] 134 ITR 68, THE CALCUTTA HIGH COURT, WHILE CONSTRUCTING THE EXPRESSION ' EXPENDITURE INCURRED ' IN S. 44A OF THE ACT, OBSERVED : 'DEPRECIATION CLAIMED SHALL INCLUDE THE EXPENDITURE INCURRED.' THERE ARE ONLY TWO RECOGNISED METHODS OF ACCOUNTING : (1) CASH BASIS, AND (II) MERCANTILE BASIS. UNDER THE CASH BASIS ONLY CASH TRANSACTIONS ARE RECORDED. IT IS ONLY CASH RECEIPTS AN D CASH PAYMENTS WHICH FIND ENTRIES IN THE BOOKS OF ACCOUNT. MERCANTILE SYSTEM OF ACCOUNTING WAS EXPLAINED BY THE SUPREME COURT IN KESHAV MILLS LTD. V. CIT [1953]23 ITR 230 AT 230 IN THE FOLLOWING WORDS : 'THE MERCANTILE SYSTEM OF ACCOUNTING OR WHAT IS OTHE RWISE KNOWN AS THE DOUBLE ENTRY SYSTEM IS OPPOSED TO THE CASH SYSTEM OF BOOK KEEPING UNDER WHICH A RECORD IS KEPT OF ACTUAL CASH RECEIPTS AND ACTUAL CASH PAYMENTS, ENTRIES BEING MADE ONLY WHEN MONEY IS ACTUALLY COLLECTED OR DISBURSED. THAT SYSTEM BRINGS IN TO CREDIT WHAT IS DUE, IMMEDIATELY IT BECOMES LEGALLY DUE AND BEFORE IT, IS ACTUALLY RECEIVED AND IT BRINGS INTO DEBIT EXPENDITURE THE AMOUNT FOR WHICH A LEGAL LIABILITY HAS BEEN INCURRED BEFORE IT IS ACTUALLY DISBURSED. IT IS NOT IN DISPUTE THAT IF THE ME RCANTILE SYSTEM IS FOLLOWED, THE DEPRECIATION ALLOWANCE IN RESPECT OF THE TRUST PROPERTY SHOULD BE ALLOWED. XXXXXXXXXXXXXXXX THE DEPRECIATION IF IT IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING THE INCOME FROM THE CHARITABLE INSTITUTIONS, THEN THER E IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THE BOARD ALSO APPEARS TO HAVE UNDERSTOOD THE ' INCOME ' U/S. 11(1) IN ITS COMMERCIAL SENSE. THE RELEVANT PORTION OF THE CIRCULAR NO. 5 - P (LXX - 6) OF 1968, DATED JULY 19, 1968, READS: 'WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WORD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE, I.E., BOOK INCOME, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TO WARDS THE PURPOSE OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF THE TRUST OR OTHERWISE.IT SHOULD BE NOTED, IN THIS CONNECTION, THAT THE AMOUNTS SO ADDED BACK WILL BECOME CHARGEABL E TO TAX U/S. 11(3) TO THE EXTENT THAT THEY REPRESENT OUTGOINGS FOR PURPOSES OTHER THAN THOSE OF THE TRUST. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF THE TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PER C ENT. OF THE LATTER, IF THE TRUST IS TO GET THE FULL BENEFIT OF THE EXEMPTION U/S. 11(1). ' PAGE 11 OF 20 THIS COURT THEREAFTER REFERRED TO THE CIRCULAR/CLARIFICATION DATED 2ND FEBRUARY, 2012 BY THE CBDT, ISSUED AFTER DECISION OF KERALA HIGH COURT IN LISSE MEDICAL ( SUPR A) AND HAS EXPOUNDED AS UNDER: '9. AFTER THE DECISION OF THE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTION VS. CIT (SUPRA), THE BOARD ISSUED A FRESH CIRCULAR OR CLARIFICATION DATED 02.02.2012 AND HAS OBSERVED: 'THE VIEW OF THE CBDT TO BE CONVEYED TO THE COURT IN THIS REGARD IS AS UNDER: THE CENTRAL BOARD OF DIRECT TAXES IS OF THE CONSIDERED VIEW THAT WHERE AN ASSESSEE HAS ACQUIRED AN ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS INCOME EXPENDITURE ACCOUNT, DEPR ECIATION ON SUCH ASSET WOULD NOT BE ALLOWABLE TO THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION, IF CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME OF 'THE PROPERTY HELD UNDER TRUST' UNDER THE RELEVANT HEAD OF INCOME, IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE INCOME FOR THE PURPOSE OF APPLICATION IN THE INCOME EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE T HE INCOME FOR THE PURPOSE OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT. THIS WOULD REDUCE THE POSSIBILITY OF REVENUE LEAKAGE WHICH MAY BE A CAUSE FOR GENERATION OF BLACK MONEY.' 10. WE ALSO NOTE THAT THE KERALA HIGH COURT, IN FACT, HAS NOTED THE C LARIFICATIONS WHICH WERE EARLIER ISSUED BY THE BOARD IN RESPECT OF 1968 CIRCULAR. IT IS CLEAR FROM THE REASONING GIVEN BY THE KERALA HIGH COURT THAT THEY HAVE NOT GONE BY THE EXPRESS LANGUAGE OF SECTION 11(A) AND HAVE PURPOSIVELY INTERPRETED THE PROVISION. ' 7. REFERENCE WAS ONCE AGAIN MADE TO THE DECISION OF THE SUPREME COURT IN ESCORTS LIMITED (SUPRA) AND PROVISIONS OF SECTION 35(2B)(C) WERE QUOTED AND IT WAS OBSERVED THAT THE LANGUAGE OF THE SUB - CLAUSE (C) WAS CLEAR AND LUCID BUT CONSPICUOUSLY DIFFERENT F ROM SECTION 11(1) OF THE ACT. IT HAS BEEN OBSERVED IN INDIAN TRADE PROMOTION ORGANISATION (SUPRA) : 11. CLAUSE A OF SECTION 11(1) STIPULATES THAT INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES IS TO BE APPLIED FOR SUCH PURPOSES IN INDIA AND WHERE SUCH INCOME IS SET ASIDE OR ACCUMULATED, IT SHOULD NOT BE IN EXCESS OF 15% OF THE INCOME FROM SUCH PROPERTY. THUS, THERE IS AN EMBARGO AND PROBATION FROM ACCUMULATING OR SETTING APART INCOME DERIVED FROM PROPERTY HELD UNDE R TRUST BEYOND 15% OF INCOME FROM SUCH PROPERTY. IF THERE IS A VIOLATION OF THE SAID PROVISION, PROPORTIONATE INCOME IS DEEMED TO BE TAXABLE AND NOT EXEMPT UNDER SECTION 11(1). THE LANGUAGE OF THE SECTION IS PECULIAR AND PROCEEDS ON ITS OWN WORDING. THIS A SPECT HAS BEEN HIGHLIGHTED AND POINTED OUT IN THE JUDGMENT OF COMMISSIONER OF INCOME TAX VS. SOCIETY OF THE SISTERS OF ST. ANNE (SUPRA). DECISION IN THE CASE OF ESCORTS LTD. (SUPRA) WAS CONSIDERED BY THE DELHI HIGH COURT IN DIT VS. VISHWA JAGRITI MISSION ( SUPRA) DECIDED ON 29TH MARCH, 2012 AND WAS DISTINGUISHED FOR THE FOLLOWING REASONS. '13. THE JUDGMENT OF THE SUPREME COURT IN ESCORTS LIMITED VS. UNION OF INDIA (SUPRA) HAS BEEN RIGHTLY HELD TO BE INAPPLICABLE TO THE PAGE 12 OF 20 PRESENT CASE. THERE ARE TWO REASONS AS TO WHY THE JUDGMENT CANNOT BE APPLIED TO THE PRESENT CASE. FIRSTLY, THE SUPREME COURT WAS NOT CONCERNED WITH THE CASE OF A CHARITABLE TRUST/INSTITUTION INVOLVING THE QUESTION AS TO WHETHER ITS INCOME SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES IN ORDER TO DETERMINE THE AMOUNT OF INCOME AVAILABLE FOR APPLICATION TO CHARITABLE PURPOSES. IT WAS A CASE WHERE THE ASSESSEE WAS CARRYING ON BUSINESS AND THE STATUTORY COMPUTATION PROVISIONS OF CHAPTER IV - D OF THE ACT WERE APPLICABLE. IN THE PRESENT CASE, WE ARE NOT CONCERNED WITH THE APPLICABILITY OF THESE PROVISIONS. WE ARE CONCERNED ONLY WITH THE CONCEPT OF COMMERCIAL INCOME AS UNDERSTOOD FROM THE ACCOUNTING POINT OF VIEW. EVEN UNDER NORMAL COMMERCIAL ACCOUNTING PRINCIPLES, THERE IS AUTHORITY FOR THE PROPOSITION TH AT DEPRECIATION IS A NECESSARY CHARGE IN COMPUTING THE NET INCOME. SECONDLY, THE SUPREME COURT WAS CONCERNED WITH THE CASE WHERE THE ASSESSEE HAD CLAIMED DEDUCTION OF THE COST OF THE ASSET UNDER SECTION 35(1) OF THE ACT, WHICH ALLOWED DEDUCTION FOR CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. THE QUESTION WAS WHETHER AFTER CLAIMING DEDUCTION IN RESPECT OF THE COST OF THE ASSET UNDER SECTION 35(1), CAN THE ASSESSEE AGAIN CLAIM DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESPECT OF THE SAME ASSET. THE SUP REME COURT RULED THAT, UNDER GENERAL PRINCIPLES OF TAXATION, DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING IS NOT INTENDED UNLESS CLEARLY EXPRESSED. THE PRESENT CASE IS NOT ONE OF THIS TYPE, AS RIGHTLY DISTINGUISHED BY THE CIT(APPEALS).' 12. WE WOULD LIKE TO REPRODUCE SECTION 35 (2B)(C). 'SECTION 35(2B)(A) .................................. (B)......................................................... (C) WHERE A DEDUCTION ALLOWED FOR ANY PREVIOUS YEAR UNDER THIS SUB - SECTION IN RESPECT OF EXPENDIT URE REPRESENTED WHOLLY OR PARTLY BY AN ASSET, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF THAT ASSET UNDER [CLAUSE (II) OF SUB - SECTION (1)] OF SECTION 32 FOR THE SAME OR ANY SUBSEQUENT PREVIOUS YEAR.' 13. THE LANGUAGE OF THE SUB - CLAUSE C TO SECTION 35(2B) IS CONSPICUOUS AND ENTIRELY DIFFERENT AND WORDINGS ARE CLEAR AND LUCID. THE LANGUAGE OF SECTION 11(1), AS NOTICED ABOVE, IS DISTINGUISHED AND NOT WORDED IN A SIMILAR MANNER. IN ESCORTS LTD. (SUPRA), THE SUPREME COURT WAS CONSIDERING THE SAID SPECIFIC PROV ISION AND THE WORDINGS THEREIN. WHILE DEALING WITH THE TERM 'EXPENDITURE' AND NOTICING THE LANGUAGE IT WAS HELD THAT NO DUPLICATION OR DOUBLE DEDUCTION SHOULD BE ALLOWED TOWARDS DEPRECIATION IN THE SAME OR SUBSEQUENT YEAR. THUS, THE ISSUE WAS DECIDED AGAIN ST THE ASSESSEE. LANGUAGE OF EXPLANATION 1 TO SECTION 43(1) CAN ALSO BE REFERRED TO AND WE NOTICE THAT THE LANGUAGE OF THE SAID EXPLANATION IS ABSOLUTELY DIFFERENT FROM THE LANGUAGE USED IN CLAUSE (A) TO SECTION 11(1). SECTION 11(1)(A) IS A PECULIAR PROVIS ION WHICH POSTULATES APPLICATION OF INCOME AND IT IS NOT DEALING WITH EXPENDITURE AS SUCH. THE LEGISLATIVE DESIRE IS THAT MONEY SHOULD BE APPLIED FOR THE PURPOSE OF CHARITY. IN ESCORTS LTD.(SUPRA), THE SUPREME COURT HAD OBSERVED THAT THEY WERE CONCERNED WI TH EXPENDITURE AND SINCE THE ENTIRE COSTS OF THE CAPITAL ASSETS HAD BEEN ALLOWED AND HAD BEEN SET OFF AGAINST THE BUSINESS PROFIT IN PAGE 13 OF 20 FIVE YEARS OR IN ONE PREVIOUS YEAR, IT WAS UNCONCEIVABLE THAT THE DEPRECIATION SHOULD BE ALLOWED AGAIN ON THE SAME ASSET.' 8. DECISIONS OF OTHER HIGH COURTS IN COMMISSIONER OF INCOME TAX VERSUS TINY TOTS EDUCATION SOCIETY, (2011) 330 ITR 21 (P&H) AND COMMISSIONER OF INCOME TAX VERSUS INSTITUTE OF BANKING, (2003) 264 ITR 110 (BOM.) IN WHICH THE RATIO AS EXPOUNDED IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) WAS ACCEPTED AND AFFIRMED, WERE NOTICED. REFERRING TO THE DECISION OF THE KERALA HIGH COURT IN LISSIE MEDICAL INSTITUTIONS (SUPRA) IT WAS OBSERVED: 15. 'KERALA HIGH COURT WAS ALSO CONSCIOUS OF THE SAID DECISIONS AND THE FACT THAT SECTION 11(1)(A) HAD BEEN INTERPRETED IN A DIFFERENT MANNER. IT WAS IN THESE CIRCUMSTANCES THAT THE KERALA HIGH COURT IN THE LAST PORTION OF PARAGRAPH 6, AS QUOTED ABOVE, HAS STATED THAT THE ASSESSEE WOULD BE ENTITLED TO WRITE BACK DEPRECIATION AND I F DONE, THE ASSESSING OFFICER WOULD MODIFY THE ASSESSMENT DETERMINING THE HIGHER INCOME AND ALLOW RECOMPUTATION OF DEPRECIATION WRITTEN BACK FOR THE PURPOSE OF APPLICATION OF INCOME FOR CHARITABLE PURPOSES IN FUTURE OR SUBSEQUENT YEARS. THIS MAY LEAD TO IT S OWN DIFFICULTIES AND PROBLEMS AS SUDDENLY THE ENTIRE DEPRECIATION WRITTEN OFF WOULD HAVE TO BE ADDED FIRST AND THEN IN ONE YEAR SUBSTANTIAL APPLICATION OF INCOME WOULD BE REQUIRED. THIS MAY BE IMPRACTICAL AND WOULD DISTURB THE WORKING OF MANY A CHARITABL E INSTITUTIONS. THE LEGAL INTERPRETATION WHICH HAS CONTINUED SINCE 1984, IF DISTURBED AND IMPLEMENTED, WOULD NOT APPROPRIATELY RESOLVED. CONSISTENCY AND CERTAINTY IS MORE APPROPRIATE. 16. THE EQUALLY PLAUSIBLE AND CONSISTENT INTERPRETATION OF CLAUSE (A) OF SECTION 11(1) OF THE ACT IS THAT INCOME DERIVED FROM PROPERTY MUST BE CALCULATED AS PER THE PRINCIPLES OF THE ACT. THE SAID CLAUSE IS NOT A COMPUTATION PROVISION AND DOES NOT DISTURB THE 'INCOME' EARNED OR AVAILABLE BUT POSTULATES THAT THE 'INCOME' AS COM PUTED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT TO THE EXTENT OF 86% MUST BE APPLIED. APPLICATION OF INCOME MAY INCLUDE PURCHASE OF A CAPITAL ASSET. THE SAID PURCHASE IS VALID AND TAKEN INTO CONSIDERATION FOR THE PURPOSE OF ENSURING COMPLIANCE, I.E., AP PLICATION OF MONEY OR FUNDS AND IS NOT A FACTOR WHICH DETERMINES AND DECIDES THE QUANTUM OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST. COMPUTATION OF INCOME IS SEPARATE AND DISTINCT AND HAS TO BE MADE ON COMMERCIAL BASIS BY APPLYING PROVISIONS OF THE A CT.' 9. TO OUR MIND, THEREFORE, THE ISSUE HAS BEEN EXAMINED IN DEPTH AND DETAIL TWICE AND THUS THERE IS NO ERROR IN THE IMPUGNED ORDERS PASSED BY THE TRIBUNAL. HOWEVER, LEARNED COUNSEL FOR THE REVENUE HAS DRAWN OUR ATTENTION TO THE DECISION DATED 18TH MARC H, 2014 IN ITA NO. 322 - 323/2013 TITLED DIRECTOR OF INCOME TAX (EXEMPTION) VERSUS CHARANJIV CHARITABLE TRUST, WHEREIN IT HAS BEEN HELD: '30. SO FAR AS THE CLAIM OF DEPRECIATION IS CONCERNED THE DECISION OF THE TRIBUNAL CANNOT BE COUNTENANCED. THE TRIBUNAL H AS OVERLOOKED THAT THE COST OF THE ASSETS HAS ALREADY BEEN ALLOWED AS A DEDUCTION AS APPLICATION OF INCOME, AS HELD BY THE CIT (APPEALS) AS WELL AS THE ASSESSING OFFICER. IT WAS THEIR VIEW THAT ALLOWING DEPRECIATION IN RESPECT OF ASSETS, THE COST OF WHICH WAS EARLIER ALLOWED AS DEDUCTION AS APPLICATION OF INCOME OF THE TRUST, WOULD ACTUALLY AMOUNT TO DOUBLE DEDUCTION ON THE BASIS OF THE RULING OF THE SUPREME COURT IN ESCORTS LTD. VS. UOI (SUPRA). IN RESPECT OF THE PAGE 14 OF 20 ADDITIONS TO THE FIXED ASSETS MADE DURING T HE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2006 - 07, THE CIT (APPEALS) HELD THAT SINCE THE COST OF THE ASSETS WAS NOT ALLOWED AS A DEDUCTION BY WAY OF APPLICATION OF INCOME, DEPRECIATION SHOULD BE ALLOW. THE CIT (APPEALS) HAS THUS MADE A DISTINCTION B ETWEEN ASSETS THE COST OF WHICH WAS ALLOWED AS DEDUCTION AS APPLICATION OF INCOME AND ASSETS, THE COST OF WHICH WAS NOT SO ALLOWED. THE TRIBUNAL HAS NOT KEPT THIS DISTINCTION IN VIEW, BUT HAS PROCEEDED TO RELY UPON A JUDGMENT OF THIS COURT IN DIT VS. VISHW A JAGRATI MISSION (SUPRA). IN THE JUDGMENT OF THIS COURT THE QUESTION WAS WHETHER THE INCOME OF THE ASSESSEE, WHICH WAS A CHARITABLE TRUST, SHOULD BE COMPUTED ON COMMERCIAL PRINCIPLES AND IF SO, WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURP OSES SHOULD BE ALLOWED AS A DEDUCTION. THIS COURT NOTICED THAT THERE WAS A CONSENSUS OF JUDICIAL OPINION ON THIS ASPECT AND HELD, AFTER REFERRING TO THOSE AUTHORITIES AS WELL AS A CIRCULAR OF THE CBDT ISSUED ON 19.07.1968, THAT WHILE COMPUTING THE INCOME O F THE TRUST AVAILABLE FOR APPLICATION FOR CHARITABLE PURPOSES, DEPRECIATION ON ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED. THE POINT TO BE NOTICED IS THAT IN THIS JUDGMENT, THIS COURT REFERRED TO AND DISTINGUISHED THE JUDGMENT OF THE SUPREME COU RT IN ESCORTS LTD. (SUPRA) ON THE GROUND THAT IN ESCORTS (SUPRA), THE SUPREME COURT WAS CONCERNED WITH A CASE WHERE THE DEDUCTION OF THE COST OF THE ASSET WAS ALLOWED UNDER SECTION 35(1) AS CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH AND, THEREFORE , NO DEDUCTION FOR DEPRECIATION ON THE VERY SAME ASSETS WAS HELD ALLOWABLE UNDER GENERAL PRINCIPLES OF TAXATION, AS IT WOULD AMOUNT TO DOUBLE DEDUCTION. THE JUDGMENT OF THIS COURT IN DIT VS. VISHWA JAGRATI MISSION REINFORCES THE PRINCIPLE THAT IF THE COST OF THE ASSET HAS BEEN ALLOWED AS DEDUCTION BY WAY OF APPLICATION OF INCOME THEN DEPRECIATION ON THE SAME ASSET CANNOT BE ALLOWED IN THE COMPUTATION OF THE INCOME OF THE TRUST. THE DISTINCTION HAS NOT BEEN KEPT IN VIEW BY THE TRIBUNAL WHICH SEEMS TO HAVE ER RONEOUSLY RELIED ON THE JUDGMENT OF THIS COURT TO DIRECT ALLOWANCE OF DEPRECIATION EVEN IN RESPECT OF ASSETS, THE COST OF WHICH HAS ALREADY BEEN ALLOWED AS APPLICATION OF INCOME. WE ACCORDINGLY HOLD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN DIRECTING THE ALLO WANCE OF DEPRECIATION IN RESPECT OF SUCH ASSETS.' 10. THE AFORESAID PARAGRAPH REFERS TO THE DECISION IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA) BUT RATIO WAS DISTINGUISHED ON THE GROUND THAT IN THE SAID CASE THE COURT WAS CONCERNED WITH COMPUTATION OF I NCOME OF A CHARITABLE TRUST/INSTITUTION ON COMMERCIAL PRINCIPLES AND IF SO WHETHER DEPRECIATION ON FIXED ASSETS USED FOR CHARITABLE PURPOSES SHOULD BE ALLOWED AS A DEDUCTION. THE CONSENSUS OF JUDICIAL OPINION ON THE SAID ASPECT WAS REFERRED TO. IT IS NOTIC EABLE THAT IN CHARANJIV CHARITABLE TRUST (SUPRA) IT STANDS OBSERVED THAT THE TRIBUNAL OVERLOOKED THE FACT THAT THE COST OF ASSET HAD BEEN ALLOWED AS A 'DEDUCTION' AND THEREAFTER DEPRECIATION WAS BEING CLAIMED. THE SAID CASE, THEREFORE, APPEARS TO BE A PECU LIAR ONE WHEREIN DEDUCTION AS EXPENDITURE AND DEPRECIATION WAS BEING CLAIMED SIMULTANEOUSLY, WHILE COMPUTING THE TAXABLE INCOME UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS'. THE SAID DECISION DATED 18TH MARCH, 2014 DOES NOT REFER TO THE DECISION IN IND IAN TRADE PROMOTION ORGANISATION (SUPRA) PAGE 15 OF 20 WHICH WAS DECIDED ON 27TH NOVEMBER, 2013. THE JUDGMENT IN THE CASE OF INDIAN TRADE PROMOTION ORGANISATION (SUPRA) WAS NOT CITED AND REFERRED TO. THE JUDGMENT IN THE CASE OF CHARANJIV CHARITABLE TRUST (SUPRA) IS AUTH ORED BY THE SAME JUDGE, WHO HAS ALSO AUTHORED THE DECISION IN THE CASE OF VISHWA JAGRITI MISSION (SUPRA). IT IS OBVIOUS THAT IN CHARANJIV CHARITABLE TRUST (SUPRA), THE DIVISION BENCH COULD NOT HAVE TAKEN A DIFFERENT VIEW ON THE LEGAL RATIO AS INTERPRETED I N VISHWA JAGRITI MISSION (SUPRA). FURTHER, THE DECISIONS IN THE CASE OF VISHWA JAGRITI MISSION AND INDIAN TRADE PROMOTION ORGANISATION (SUPRA) BEING PRIOR IN POINT OF TIME WOULD ACT AS BINDING PRECEDENTS AND COULD NOT HAVE BEEN OVERRULED OR DISSENTED FROM BY A COORDINATE DIVISION BENCH. 11. BY FINANCE (NO. 2) ACT OF 2014, SUB - SECTION (6) TO SECTION 11 STANDS INSERTED WITH EFFECT FROM 1ST APRIL, 2015 TO THE EFFECT THAT WHERE ANY INCOME IS REQUIRED TO BE APPLIED, 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 AN ASSET, THE ACQUISITION OF WHICH HAS BEEN CLAIMED AS APPLICATION OF INCOME UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. THE LEGAL POSITION, THEREFORE, WOULD UNDERGO A CHANGE IN TERMS OF SECTION 11(6), WHICH HAS BEEN INSERTED AND APPLICABLE WITH EFFECT FROM 1ST APRIL, 2015 AND NOT TO THE ASSESSMENT YEARS IN QUESTION. THE NEWLY ENACTED SUB - SECTION RELATES TO A PPLICATION OF INCOME. 12. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE APPEALS IN THE CASE OF INDRAPRASTHA CANCER SOCIETY, ABUL KALAM AZAD ISLAMIC AWAKENING AND IN THE CASE OF M/S SANSKRITI EDUCATIONAL SOCIETY (ITA NO. 348/2014). SIMILARLY, WE D O NOT THINK IT IS NECESSARY AND REQUIRED THAT WE SHOULD ISSUE NOTICE IN THE APPLICATION FOR CONDONATION OF DELAY FILED IN THE CASE OF M/S SANSKRITI EDUCATIONAL SOCIETY (ITA NOS. 463 AND 464/2014) AS ON MERITS THE REVENUE IS NOT ENTITLED TO SUCCEED. IN THES E APPEALS, THE APPLICATIONS FOR CONDONATION OF DELAY SHALL BE TREATED AS DISMISSED AND AS A SEQUITUR THE APPEALS WILL BE TREATED AS DISMISSED. 13. ON THIS ISSUE , HON MADRAS HIGH COURT RECENTLY IN DIT V M/S MEDICAL TRUST OF THE SEVENTH DAY ADVENTISTS [ 2017 - TIOL - 1665 - HC - MAD - IT ] HAS HELD AS UNDER : - 2. IN SO FAR AS THE ISSUE IS COMMON ACROSS APPEALS, WE SET OUT BELOW THE QUESTION OF LAW IN T.C.A.NO.475 TO 478 OF 2011 AS REPRESENTATIVE OF THE ISSUE INVOLVED IN ALL APPEALS: - '(A) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN ALLOWING DOUBLE DEDUCTION WITHOUT CONSIDERING THE PRINCIPLES LAID DOWN IN 199 ITR 43(SC) ?' 3. THE ISSUE BEFORE US RELATES TO THE GRANT OF DEPRECIATION TO AN ENTITY SEEKING EXEMPTION IN TERMS OF SECTION 1 1 OF THE INCOME TAX ACT. (IN SHORT 'ACT) WHICH DEALS WITH THE ASSESSMENT OF INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. THE RELEVANT PARTS OF SECTION 11 READ AS FOLLOWS: - 1. (1) SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLO WING INCOME SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME - (A) INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE 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 APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY ; ....... ....... PAGE 16 OF 20 (4) FOR THE PURPOSES OF THIS SECTION 'PROPERTY HELD UNDER TRUST' INCLUDES A BUSINESS UNDERTAKING SO HELD, AND WHERE A CLAIM IS MADE THAT THE INCOME OF ANY SUCH UNDERTAKING SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PERSONS IN RECEIPT THEREOF, THE ASSESSING OFFICER SHALL HAVE POWER TO DETERMINE THE INCOME OF SUCH UNDERTAKING IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT RELATING TO ASSESSMENT; AND WHERE ANY INCOME SO DETERMINED IS IN EXCESS OF THE INCOME AS SHOWN IN THE ACCOUNTS OF THE UNDERTAKING, SUCH EXCESS SHALL BE DEEMED TO BE APPLIED TO PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS PURPOSES. (4A) SUB - SECTION (1) OR SUB - SECTION (2) OR SUB - SECTION (3) OR SUB - SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR A N INSTITUTION, 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. (5) THE FORMS AND MODES OF INVESTING OR DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB - SECTION (2) SHALL BE THE FOLLOWING, NAMELY : - (I)...... (II)...... ....... (6) IN THIS SECTION WHERE ANY INCOME IS REQUIRED TO BE APPLIED OR A CCUMULATED 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 INCOM E UNDER THIS SECTION IN THE SAME OR ANY OTHER PREVIOUS YEAR. 4. THE VARIOUS SUB - SECTIONS OF SECTION 11 STIPULATE THE METHODOLOGY FOR COMPUTING THE INCOME APPLIED TO CHARITABLE AND RELIGIOUS PURPOSES AND THE 15% THAT MAY BE ACCUMULATED OR SET APART. THE SEC TION ALSO ENVISAGES THE INCLUSION OF A BUSINESS UNDERTAKING IN THE PROPERTY HELD UNDER TRUST AND THE DETERMINATION OF INCOME THEREFROM. SUB SECTION 5 SETS OUT THE ACCEPTABLE FORMS AND MODES OF INVESTMENT FOR THE PURPOSES OF PROPER APPLICATION. SUB - SECTION 6, INSERTED BY FINANCE II ACT, 2014 WITH EFFECT FROM 1.4.2015, STATES THAT THE INCOME TO BE DETERMINED FOR THE PURPOSES OF APPLICATION OR ACCUMULATION SHALL NOT INCLUDE A DEDUCTION OR ALLOWANCE BY WAY OF DEPRECIATION OR OTHERWISE IN RESPECT OF ANY ASSET, T HE ACQUISITION OF WHICH HAS BEEN CLAIMED AS AN APPLICATION OF AN INCOME UNDER THE PROVISIONS OF SECTION 11 IN THE SAME OR ANY OTHER PREVIOUS YEAR. THE APPLICATION OF THIS SUB - SECTION RETROSPECTIVELY IN REGARD TO ASSESSMENT YEARS PRIOR TO 01.04.2015 IS THE SUBJECT MATTER OF CHALLENGE IN TCA.NO.949 OF 2015 TO WHICH WE SHALL ADVERT PRESENTLY. 5. SECTION 11 WAS INSERTED IN THE INCOME TAX ACT 1961 PROVIDING FOR AN EXEMPTION IN RESPECT OF INCOME FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE AND RELIGIOUS P URPOSES. 'CHARITABLE PURPOSES IS DEFINED IN TERMS OF SECTION 2(15) OF THE ACT TO MEAN RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE CLAUSE HAS BEEN MODIFIED OVER THE YEARS SUCH THAT IN ITS PRESENT FORM, IT INCLUDES WITHIN ITS AMBIT YOGA AND THE PRESERVATION OF ENVIRONMENT, MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST. THE OBJECT OF SECTION 11 IS THUS LAUDABLE AND SEEKS TO EXTEND A BENEFIT TO ENTITIES ENGAGING IN ACTIV ITY OF A SPECIFIED NATURE. IN THE PRESENT BATCH OF APPEALS THERE IS NO DISPUTE IN THIS REGARD. 6. WE HAVE HEARD MR.J.NARAYANASWAMY APPEARING ON BEHALF OF THE REVENUE AND SEVERAL COUNSELS APPEARING ON BEHALF OF THE ASSESSES AND SET OUT IN BRIEF THE SUBMISSI ONS ADVANCED. 7. MR. J.NARAYANASWAMY WOULD CONTEND THAT THE PROVISIONS OF SECTION 32 GRANTING DEPRECIATION HAVE NOT BEEN MADE SPECIFICALLY APPLICABLE TO SECTION 11. ACCORDING TO HIM, THE PROVISIONS OF SECTION 11 EXTEND A BENEFIT TO AN ASSESSEE BY WAY OF EX EMPTION AND GRANTING DEPRECIATION IN ADDITION WOULD AMOUNT TO A DOUBLE BENEFIT THAT HAS TO BE SPECIFICALLY CONFERRED. HE WOULD RELY ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS LIMITED AND ANOTHER VS. UNION OF INDIA AND OTHERS (SC) (1999 ITR 43) WHICH DEALS WITH THE GRANT OF DEPRECIATION TO AN ASSESSEE ALSO CLAIMING WEIGHTED DEDUCTION UNDER SECTION 35(1) OF THE ACT IN RESPECT OF EXPENDITURE INCURRED ON SCIENTIFIC RESEARCH. 8. THE PROVISION, AS IT ORIGINALLY STOOD, PLACED NO RESTRICTION ON THE CLAIM OF WEIGHTED DEDUCTION SIMULTANEOUS WITH THE CLAIM OF DEPRECIATION. WHILE THIS IS SO, IT WAS FELT THAT SUCH DOUBLE CLAIM WAS NOT THE INTENTION OF LEGISLATURE AND THE PROVISIONS OF SECTION 35(2) (IV) WERE AMENDED TO PROVIDE THAT WHERE A DEDUCTION WAS ALLOWED FOR ANY PREVIOUS YEAR IN TERMS OF SECTION 35(1), NO DEPRECIATION WAS LIABLE TO BE ALLOWED FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET. 10.THE AMENDMENT WAS MADE TO OPERATE RETROSPECTIVELY WITH EFFECT FROM 1.4.1962 AND THE SUPRE ME COURT, WHILE UPHOLDING THE RETROSPECTIVE APPLICATION OF THE PROVISION STATES THUS: - 'WE THINK THAT ALL MISCONCEPTION WILL VANISH AND ALL THE PROVISIONS WILL FALL INTO PLACE, IF WE BEAR IN MIND A FUNDAMENTAL, THOUGH UNWRITTEN, AXIOM THAT NO LEGISLATURE C OULD HAVE AT ALL INTENDED A DOUBLE DEDUCTION IN REGARD TO THE SAME BUSINESS OUTGOING; AND IF IT IS INTENDED IT WILL BE CLEARLY EXPRESSED. IN OTHER WORDS, IN THE ABSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY, THE STATUTE SHOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS BOTH UNDER S.10(2)(VI) AND S.10(2)(XIV) UNDER THE 1922 ACT OR UNDER S.32(1)(II) AND 35(2)(IV) OF THE 1922 ACT QUA THE SAME EXPENDITURE.' ...... ..... '15.FOR THE REASONS DISCUSSED ABOVE, WE ARE OF THE VIEW THAT, EVEN B EFORE THE 1980 - AMENDMENT, THE ACT DID NOT PERMIT A DEDUCTION FOR DEPRECIATION IN RESPECT OF THE COST OF A CAPITAL ASSET ACQUIRED FOR PURPOSES OF SCIENTIFIC RESEARCH TO THE EXTENT SUCH COST HAS BEEN WRITTEN OFF UNDER S.10(2) (XIV)/35 (1) & (2). PRIOR TO 196 8, SUCH ASSETS QUALIFIED FOR AN ALLOWANCE OF ONE - FIFTH OF THE COST OF THE ASSET IN FIVE PREVIOUS YEARS STARTING WITH THAT OF ITS ACQUISITION AND DURING THESE YEARS THE ASSESSEE COULD NOT GET ANY DEPRECIATION IN RELATION THERETO. IN RESPECT OF ASSETS ACQUIR ED IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1968 - 69 AND THEREAFTER, THEIR COST WAS WRITTEN OFF IN THE PREVIOUS YEAR OF ACQUISITION AND NO DEPRECIATION COULD BE ALLOWED IN THAT YEAR. THIS IS CLEAR FROM THE STATUTE. EQUALLY, IT IS NOT ENVISAGED, AND INDE ED, IT WOULD BE MEANINGLESS TO SAY, THAT DEPRECIATION COULD BE ALLOWED ON THEM THEREAFTER WITH A FURTHER ABSURDITY THAT IT COULD BE ALLOWED STARTING WITH THE ORIGINAL COST OF THE ASSET DESPITE ITS USER FOR SCIENTIFIC RESEARCH AND THE ALLOWANCES MADE UNDER THE 'SCIENTIFIC RESEARCH' CLAUSE. IN OUR VIEW, THERE WAS NO DIFFICULTY AT ALL IN THE INTERPRETATION OF THE PROVISIONS. THE MERE FACT THAT A BASELESS CLAIM WAS RAISED BY SOME OVER - ENTHUSIASTIC ASSESSEES WHO SOUGHT A DOUBLE ALLOWANCE OR THAT SUCH CLAIM MAY P ERHAPS HAVE BEEN ACCEPTED BY SOME AUTHORITIES IS NOT SUFFICIENT TO ATTRIBUTE ANY AMBIGUITY OR DOUBT AS TO THE TRUE SCOPE OF THE PROVISIONS AS THEY STOOD EARLIER.' 10. RELIANCE WAS PLACED BY MR. NARAYANASWAMY ON PARAGRAPH 7 OF THE JUDGMENT THAT READS AS FOL LOWS: - PAGE 17 OF 20 'I FIND IT DIFFICULT TO AGREE WITH THE REASONING OF THE ASSESSEES. ACCEDING TO IT WOULD AMOUNT TO PLACING AN UNREASONABLE INTERPRETATION UPON THE RELEVANT PROVISIONS AND TO NEGATING THE INTENTION OF PARLIAMENT. I FIND IT DIFFICULT TO AGREE THAT TH E INDIAN LEGISLATURE - AS ALSO THE PARLIAMENT MADE A CONSCIOUS DEPARTURE FROM THE ENGLISH AMENDMENT WITH THE IDEA OF PROVIDING AN ADDITIONAL BENEFIT TO INDUCE THE INDIAN ASSESSEES TO INVEST MORE IN SCIENTIFIC RESEARCH. I FIND THE ARGUMENT RATHER CONVOLUTED. IF THE INTENTION OF THE LEGISLATURE/PARLIAMENT WAS TO PROVIDE MORE THAN 100% DEDUCTION, THEY WOULD HAVE SAID SO, AS THEY HAVE DONE IN CASES WHERE THEY PROVIDED FOR WHAT IS CALLED WEIGHTED DEDUCTION'. (FOR EXAMPLE, SEE SECTION 35(B) OF 1961 ACT). A DOUBLE D EDUCTION CANNOT BE A MATTER OF INFERENCE, IT MUST BE PROVIDED FOR IN CLEAR AND EXPRESS LANGUAGE REGARD HAVING TO ITS UNUSUAL NATURE AND ITS SERIOUS IMPACT ON THE REVENUES OF THE STATE. ........ ........ 'THAT THE PARLIAMENT NEVER INTENDED TO PROVIDE FOR A DOUBLE DEDUCTION IS ALSO THE OPINION OF THE DIRECT TAX LAW COMMITTEE. IN ITS INTERIM REPORT, (DECEMBER, 1977) THE COMMITTEE (POPULARLY KNOWN AS 'CHOKSI COMMITTEE') HAD THIS TO SAY IN PARA 3.29 OF ITS REPORT: '3.29. - OUR ATTENTION HAS ALSO BEEN DRAWN TO CE RTAIN ANOMALOUS SITUATIONS IN THE MATTER OF ALLOWANCE OF DEPRECIATION. IN CERTAIN CASES WHERE A FULL DEDUCTION HAS BEEN ALLOWED IN RELATION TO A CAPITAL ASSET UNDER OTHER SECTIONS (AS FOR EXAMPLE, SECTION 35 WHICH PERMITS A DEDUCTION IN RESPECT OF CAPITAL EXPENDITURE FOR SCIENTIFIC RESEARCH), THE TAX PAYERS HAVE CONTENDED THAT SUCH DEDUCTION IS INDEPENDENT OF THE ALLOWANCE BY WAY OF DEPRECIATION. IN OUR VIEW, THE INTENTION OF THE LEGISLATURE IS NOT TO ALLOW A DOUBLE DEDUCTION (OF 20%) IN RESPECT OF THE SAME ASSET, ONCE UNDER SECTION 35 AND, AGAIN, BY WAY OF DEPRECIATION UNDER SECTION 35. IF AND TO THE EXTENT THAT THERE IS ANY ANOMALY OR CONTRARY VIEW POSSIBLE ON A CONSTRUCTION OF SECTION 35, WE RECOMMEND THAT THE LAW SHOULD BE CLARIFIED TO PROVIDE THAT NO DE PRECIATION UNDER SECTION 35 SHALL BE ALLOWABLE IN RESPECT OF CAPITAL EXPENDITURE FOR SCIENTIFIC RESEARCH QUALIFYING FOR DEDUCTION UNDER SECTION 35. 11. HE WOULD ARGUE THAT THAT GRANTING DEPRECIATION SIMULTANEOUS WITH EXEMPTION UNDER SECTION 11 WOULD RESULT IN A RELIEF OVER AND ABOVE 100 % OF THE INCOME WHICH WAS NOT PERMISSIBLE UNDER STATUTE. 12. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS. COMMISSIONER OF INCOME TAX, KOCHI, (348 ITR 3 44) = 2012 - TIOL - 303 - HC - KERALA - IT WHICH HAD CONCLUDED THE ISSUE IN FAVOUR OF THE REVENUE. THE KERALA HIGH COURT HAD THIS TO SAY; 'IN FACT THE NET EFFECT IS THAT AFTER WRITING OFF FULL VALUE OF THE CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APPLICATI ON OF INCOME FOR CHARITABLE PURPOSES AND WHEN THE ASSESSEE AGAIN CLAIMS THE SAME AMOUNT IN THE FORM OF DEPRECIATIO N, SUCH NOTIONAL CLAIM BECOMES CASH SURPLUS AVAILABLE WITH THE ASSESSEE, WHICH GOES OUTSIDE THE BOOKS OF ACCOUNTS OF THE TRUST UNLESS IT IS WRITTEN BACK WHICH IS NOT DONE.' ......... ........... 'WE HAVE NO DOUBT IN OUR MIND THAT BUSINESS INCOME OF CHARITA BLE TRUST ALSO HAS TO BE COMPUTED IN THE SAME MANNER AS PROVIDED U/S 29 OF THE INCOME TAX ACT. HOWEVER, THE ISSUE THAT REQUIRES CONSIDERATION IS WHEN THE EXPENDITURE INCURRED FOR ACQUISITION OF DEPRECIABLE ASSETS ITSELF IS TREATED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES U/S 11(1)(A) OF THE ACT, SHOULD NOT THE COST OF SUCH ASSETS TO BE TREATED AS NIL FOR THE ASSESSEE AND IN THAT SITUATION DEPRECIATION TO BE GRANTED TURNS OUT TO BE NIL. HOWEVER, IF DEPRECIATION PROVIDED IS CLAIMED ON NOTIONAL COST AF TER THE ASSESSEE CLAIMS 100% OF THE COST INCURRED FOR IT AS APPLICATION OF INCOME FOR CHARITABLE PURPOSES, THE DEPRECIATION SO CLAIMED HAS TO BE WRITTEN BACK AS INCOME AVAILABLE. IN FACT, GOING BY THE SEVERAL DECISIONS OF THE VARIOUS HIGH COURTS, WE ARE SU RE THAT BASED ON THESE DECISIONS ALL THE CHARITABLE INSTITUTIONS WILL BE GENERATING UNACCOUNTED INCOME EQUAL TO THE DEPRECIATION AMOUNT CLAIMED ON AN YEAR TO YEAR BASIS WHICH IS NOTHING BUT BLACK MONEY. THIS ASPECT IS NOT SEEN CONSIDERED IN ANY OF THESE DE CISIONS.' 13. THE CONTENTIONS OF THE LEARNED COUNSELS FOR THE ASSESSEES ARE AS FOLLOWS: (I) MR. SRIDHAR WOULD STATE THAT IN COMPUTING THE INCOME OF AN ENTITY ATTRACTING THE PROVISIONS OF SECTION 11, THE PRINCIPLES OF COMMERCIAL ACCOUNTING WERE LIABLE TO BE FOLLOWED. HE WOULD RELY ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN COMMISSIONER OF INCOME TAX VS. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (1982) (135 ITR 485) = 2003 - TIOL - 984 - HC - MAD - IT AND BOMBAY HIGH COURT IN COMMISSIONER OF INCOME TAX VS. INSTITUTE OF BANKING PERSONNEL SELECTION (2003) (264 ITR 110) . A DISTINCTION WAS SOUGHT TO BE MADE BETWEEN COMPUTATION IN TERMS OF SECTION 2(45) DEFINING 'TOTAL INCOM E, AND COMPUTATION OF 'INCOME IN TERMS OF SECTION 11 OF THE ACT. REFERRING TO THE SCHEME OF SECTION 11, HE WOULD CONTEND THAT THE PROVISIONS THEREOF CONSTITUTED A COMPLETE CODE WHICH TOOK INTO ACCOUNT THE APPLICATION OF DEPRECIATION AS A COMMERCIAL PRINC IPLE AND NOT NECESSARILY ONE OF ACCOUNTANCY. 14. MR. J. BALACHANDER WOULD REFER TO THE DECISIONS OF THE KERALA HIGH COURT IN CATHOLIC DIOCESE OF TIRUVALLA V. STATE OF KERALA (209 ITR 596) AND ANDHRA PRADESH HIGH COURT IN CIT V.TRUSTEE OF H.E.H.NIZAMM'S SUP PLEMENTAL RELIGIOUS ENDOWMENT TRUST (127 ITR 378) , IN SUPPORT OF HIS SUBMISSION THAT COMMERCIAL PRINCIPLES OF ACCOUNTING ARE TO BE APPLIED IN COMPUTING INCOME FOR THE PURPOSES OF SECTION 11. HE WOULD REFER TO THE ACCOUNTING STANDARDS ISSUED BY THE INSTITUT E OF CHARTERED ACCOUNTANTS OF INDIA (IN SHORT ICAI) TO THE EFFECT THAT DEPRECIATION WAS A MANDATORY CHARGE IN THE COMPUTATION OF INCOME OF A TRUST. 15. MR.N. DEVANATHAN WOULD DISTINGUISH THE FACTS OF ESCORTS (SUPRA) FROM THE PRESENT CASE ON THE GROUND THAT BY VIRTUE OF GRANTING WEIGHTED DEDUCTION UNDER SECTION 35, THE ASSET ITSELF WAS EFFACED WHICH IS NOT THE CASE IN AN ASSESSMENT UNDER SECTION 11 OF THE ACT. HE WOULD ALSO POINT OUT THAT THE DEPARTMENT HAD FILED PETITIONS FOR SPECIAL LEAVE CHALLENGING THE D ECISIONS OF THE PUNJAB AND HARYANA HIGH COURT FAVOURING THE ASSESSEE THAT HAD BEEN DISMISSED WHEREAS, THE SPECIAL LEAVE PETITIONS FILED BY THE ASSESSEE CHALLENGING THE DECISION OF THE KERALA HIGH COURT AND OTHER CASES FOLLOWING THE DECISION OF THE KERALA H IGH COURT IN LISSIE MEDICAL INSTITUTIONS (SUPRA) HAD BEEN ADMITTED BY THE SUPREME COURT. THUS ACCORDING TO HIM, THE SUPREME COURT HAD CLEARLY RECOGNIZED THE ERROR IN THE DECISION OF THE KERALA HIGH COURT. 16. MR. R. KUMAR, APPEARING FOR THE ASSESSEE/RESPON DENT IN TCA.NO.993 OF 2015 WOULD POINT OUT THAT THE ORDERS OF THE INCOME TAX APPELLATE TRIBUNAL IN THE SAME ASSESSEE'S CASE FOR THE PREVIOUS YEARS ON THE IDENTICAL ISSUE, HAD CONSIDERED THE JUDGMENT OF THE SUPREME COURT IN ESCORTS AND HAD DISTINGUISHED THE SAME. THE AFORESAID ORDERS OF THE TRIBUNAL DATED 25.03.2011 HAVE ATTAINED FINALITY. THUS, WHILE ADOPTING THE ARGUMENTS OF OTHER COUNSELS, HE WOULD ADD THAT THE PRINCIPLE OF CONSISTENCY STOOD VIOLATED IN HIS CASE. 17. MR.N.V.BALAJI, WOULD ADDRESS US SPECIF ICALLY ON ACCOUNTING STANDARD 6 DEALING WITH DEPRECIATION ACCOUNTING ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND MADE MANDATORY ON OR AFTER 1.4.1995 IN THE FOLLOWING TERMS: PAGE 18 OF 20 'THE REFERENCE TO COMMERCIAL, INDUSTRIAL OR BUSINESS ENTERPRISES IN THE AFORESAID PARAGRAPH IS IN THE CONTEXT OF THE NATURE OF ACTIVITIES CARRIED ON BY THE ENTERPRISE RATHER THAN WITH REFERENCE TO ITS OBJECTS. IT IS QUITE POSSIBLE THAT AN ENTERPRISE HAS CHARITABLE OBJECTS BUT IT CARRIES ON, EITHER WHOLLY OR IN PART, ACT IVITIES OF A COMMERCIAL, INDUSTRIAL OR BUSINESS NATURE IN FURTHERANCE OF ITS OBJECTS. THE BOARD BELIEVES THAT ACCOUNTING STANDARDS APPLY IN RESPECT OF COMMERCIAL, INDUSTRIAL OR BUSINESS ACTIVITIES OF ANY ENTERPRISE, IRRESPECTIVE OF WHETHER IT IS PROFIT ORI ENTED OR IS ESTABLISHED FOR CHARITABLE OR RELIGIOUS PURPOSES. ACCOUNTING STANDARDS WILL NOT, HOWEVER, APPLY TO THOSE ACTIVITIES WHICH ARE NOT OF COMMERCIAL, INDUSTRIAL OR BUSINESS NATURE, (E.G., AN ACTIVITY OF COLLECTING DONATIONS AND GIVING THEM TO FLOOD AFFECTED PEOPLE.) IT IS ALSO CLARIFIED THAT EXCLUSION OF AN ENTITY FROM THE APPLICABILITY OF THE ACCOUNTING STANDARDS WOULD BE PERMISSIBLE ONLY IF NO PART OF THE ACTIVITY OF SUCH ENTITY WAS COMMERCIAL, INDUSTRIAL OR BUSINESS IN NATURE. FOR THE REMOVAL OF D OUBTS, IT IS CLARIFIED THAT EVEN IF A VERY SMALL PROPORTION OF THE ACTIVITIES OF AN ENTITY WAS CONSIDERED TO BE COMMERCIAL, INDUSTRIAL OR BUSINESS IN NATURE, THEN IT COULD NOT CLAIM EXEMPTION FROM THE APPLICATION OF ACCOUNTING STANDARDS. THE ACCOUNTING STA NDARDS WOULD APPLY TO ALL ITS ACTIVITIES INCLUDING THOSE WHICH WERE NOT COMMERCIAL, INDUSTRIAL OR BUSINESS IN NATURE.' 18. THIS WAS CLARIFIED BY THE 'TECHNICAL GUIDE ON INTERNAL AUDIT FOR NOT - FORPROFIT ORGANIZATIONS ISSUED BY THE INTERNAL AUDIT STANDARDS BOARD OF THE ICAI RECOMMENDING THAT THE ACCOUNTING STANDARDS SETTING OUT WHOLESOME PRINCIPLES OF ACCOUNTING INCLUDING DEPRECIATION SHOULD BE FOLLOWED BY ALL NON - PROFIT ORGANISATIONS IRRESPECTIVE OF WHETHER ANY PART OF THEIR ACTIVITY MIGHT BE COMMERCIAL, I NDUSTRIAL OR BUSINESS IN NATURE. 19. WE HAVE HEARD THE ARGUMENTS IN DETAIL AND CAREFULLY PERUSED THE DOCUMENTS RELIED UPON AS WELL AS CASE LAW CITED. 20. DEPRECIATION, AS DEFINED IN SPICER AND PEGLER'S BOOK - KEEPING AND ACCOUNTS IS THE MEASURE OF THE EXHAUS TION OF THE EFFECTIVE LIFE OF A FIXED ASSET OWING TO USE OR OBSOLESCENCE DURING A GIVEN PERIOD. IT MAY BE REGARDED AS THAT PART OF THE COST OF THE ASSET WHICH WILL NOT BE RECOVERABLE WHEN THE ASSET IS FINALLY PUT OUT OF USE. THE OBJECT OF PROVIDING FOR DEP RECIATION IS TO SPREAD THE EXPENDITURE INCURRED IN ACQUIRING THE ASSET OVER ITS EFFECTIVE LIFETIME, AND THE AMOUNT OF PROVISION MADE IN RESPECT OF AN ACCOUNTING PERIOD IS EXTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE WHICH HAS EXPIRED DURING THA T PERIOD. 21. THE NECESSITY OF PROVIDING FOR DEPRECIATION EMANATES FROM THE FACT THAT ONCE AN ASSET CEASES TO BE EFFECTIVE, IT WILL HAVE TO BE REPLACED. PROVIDING FOR DEPRECIATION WOULD ENSURE SETTING ASIDE OUT OF THE REVENUE OF AN ACCOUNTING PERIOD, THE E STIMATED AMOUNT BY WHICH THE CAPITAL INVESTMENT HAS EXPIRED DURING THAT PERIOD. THIS PROVISION, INCURRED FOR THE USE OF THAT ASSET FOR THE PURPOSE OF EARNED PROFIT SHOULD BE CHARGED AGAINST THOSE PROFITS AS AND WHEN EARNED. SPICER, AND PEGLER, AT PAGE 45, STATES AS FOLLOWS: - 'IF DEPRECIATION IS NOT PROVIDED FOR, THE BOOKS WILL NOT CONTAIN A TRUE RECORD OF REVENUE OR CAPITAL. IF THE ASSET WERE HIRED INSTEAD OF PURCHASED, THE HIRING FEE WOULD BE CHARGED AGAINST THE PROFITS; HAVING BEEN PURCHASED, THE ASSET IS , IN EFFECT, THEN HIRED BY CAPITAL TO REVENUE, AND THE TRUE PROFIT CANNOT BE ASCERTAINED UNTIL AN ANALOGOUS CHARGE FOR THE USE OF THE ASSET HAS BEEN MADE. MOREOVER, UNLESS PROVISION IS MADE FOR DEPRECIATION, THE BALANCE SHEET WILL NOT PRESENT A TRUE AND FA IR VIEW OF THE STATE OF AFFAIRS, SINCE THE ASSETS WILL BE SHOWN AT AN AMOUNT WHICH IS IN EXCESS OF THE TRUE AMOUNT OF THE UNEXPIRED EXPENDITURE INCURRED ON THEIR ACQUISITION.' 22. THE CLAIM OF DEPRECIATION IS THUS PART OF STANDARD ACCOUNTING PRACTICE WHICH IS REQUIRED FOR FAIR PRESENTATION OF A COMPANY'S FINANCIALS. THE COMPUTATION OF INCOME IN THE CASE OF AN ENTITY TO WHICH SECTION 11 IS APPLICABLE WOULD BE IN TWO STAGES. FIRSTLY, THE DETERMINATION OF THE PROFIT ARRIVED AT, WHICH WOULD BE THE TOTAL RECEIPT S NET OF EXPENDITURE AND DEPRECIATION INCURRED IN EARNING THE RECEIPTS, AND SECONDLY THE STAGE OF APPLICATION TO CHARITABLE/RELIGIOUS OBJECTS. THE TWO STAGES ARE DISTINCT AND ARE REQUIRED TO BE COMPLIED WITH CONSECUTIVELY IN ORDER TO DETERMINE THE CORRECT INCOME AND ITS APPLICATION. 23. THE QUESTION BEFORE THE SUPREME COURT IN THE MATTER OF ESCORTS RELATED TO DUEL CLAIMS UNDER SECTION 35 OF THE ACT IN RELATION TO THE SAME ASSET THE FIRST, WEIGHTED DEDUCTION AND THE SECOND, DEPRECIATION. THUS, TWO BENEFITS WERE EXTENDED IN RESPECT OF THE VERY SAME ASSET. WE ARE FACED WITH AN ENTIRELY DIFFERENT AND DISTINCT POSITION IN THE PRESENT BATCH OF APPEALS ONE THAT INVOLVES A CLAIM FOR EXEMPTION IN RESPECT OF INCOME EARNED FROM PROPERTY HELD FOR CHARITABLE OR RELIG IOUS PURPOSES. WE SEE NO DOUBLE BENEFIT THAT IS EXTENDED TO THE ASSESSEE IN THIS REGARD. 24. TRUTH TO TELL, THIS COURT IN THE MATTER OF CALAVALA CUNNAN CHARITIES, HAS DECIDED THE QUESTION NOW UNDER CONSIDERATION IN FAVOUR OF THE ASSESSEE AND WE COULD WELL HAVE DECIDED THIS BATCH OF APPEALS SIMPLY ON THE STRENGTH OF THE AFORESAID DECISION. WE ARE HOWEVER PERSUADED TO PROCEED FURTHER WITH THE DISCUSSION SINCE A CONFLICTING VIEW HAS BEEN EXPRESSED BY THE KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUT IONS (SUPRA). THOUGH THE ATTENTION OF THE DIVISION BENCH OF THE KERALA HIGH COURT WAS DRAWN TO THE DECISION IN RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES (SUPRA) AND SEVERAL DECISIONS ALONG SIMILAR LINES, THE COURT WAS PERSUADED TO TAKE A CONTRARY VIEW P REFERRING TO FOLLOW THE RATIONALE OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ESCORTS (SUPRA). 25. AS NOTED BY US EARLIER, THE JUDGMENT OF THE SUPREME COURT IN ESCORTS TURNS ON AN ENTIRELY DIFFERENT POSITION OF LAW AND WOULD NOT IMPACT THE ISSUE BE ING DISCUSSED IN THE PRESENT CASE. 26. WE ARE SUPPORTED IN OUR VIEW BY A PLETHORA OF DECISIONS OF VARIOUS HIGH COURTS - THE BOMBAY HIGH COURT IN THE CASE OF CIT V. MUNISUVRAT JAIN (1994 TAX LAW REPORTER 1084) AND DIT (EXEM) VS. FRAMJEE CAWASJEE INSTITUTE ( 109 CTR 463); KARNATAKA HIGH COURT IN CIT VS. SOCIETY OF THE SISTERS OF ST.ANNE (146 ITR 28); MADHYAPRADESH HIGH COURT IN CIT VS. RAIPUR PALLOTTINE SOCIETY (180 ITR 579); GUJARATH HIGH COURT IN CIT VS. SHETH MANILAL RACHHNODDAS VISHRAM BHAVAN TRUST 198 ITR 598 = 2003 - TIOL - 944 - HC - AHM - IT ; PUNJAB AND HARYANA HIGH COURT IN CIT VS. MARKET COMMITTEE PIPLI (330 ITR 16) AND C IT VS. TINY TOTS EDUCATION SOCIETY (330 ITR 21) = 2010 - TIOL - 550 - HC - P&H - IT ; MADHYAPRADESH HIGH COURT IN CIT VS. DEVI SAKUNTALA THARAL CHARITABLE FOUNDATION (358 ITR 452 ) AND T HE CALCUTTA HIGH COURT IN CIT VS. SILLUGURI REGULATED MARKET COMMITTEE (366 ITR 51). IN ADDITION, THE DELHI HIGH COURT IN DIT VS. VISHWA JAGRITI MISSION 262 CTR 558 = 2012 - TIOL - 271 - HC - DEL - IT AND THE KARNNATAKA HIGH COURT IN DIT (EXEM) VS AL - AMEEN CHARITABLE FUND TRUST (2016) 67 TAXMANN.COM 160 = 2016 - TIOL - 463 - HC - KAR - IT HAVE ACCEPTED THE CLAIM OF THE ASSESSEE DISTINGUISHING BOTH THE JUDGMENT OF THE SUPREME COURT IN ESCORTS AS WELL AS THAT OF THE KERALA HIGH COURT. 27.IN VIEW OF THE DISCUSSION ABOVE, THE QUESTION OF LAW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. TCA.NO.949 OF 2015 28. T.C.A.NO.949 OF 2015 HAS BEEN FILED BY THE ASSESSEE RAISING THE FOLLOWING TWO SUBSTANTIAL QUESTIONS OF LAW. '1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN DISALLOWING THE CLAIM OF DEPRECIATION ON ASSETS ACQUIRED BY WAY OF APPLICATION OF FUNDS IN THE EARLIER YEARS, CONTRARY TO JUDGMENTS OF SEVERAL HIGH COURTS? PAGE 19 OF 20 2. WHETHER ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT THE EXCESS APPLICATION OF THE EARLIER YEAR COULD NOT BE SET OFF AGAINST THE INCOME OF THE CURRENT YEAR CONTRARY TO THE JUDGMENT OF THIS HONOURABLE COURT IN THE CASE OF MATRISEVA TRUST (2000) 242 ITR 20(MAD)? 29. LEARNED SENIOR COUNSEL APPEARING FOR M/S.ST. THOMAS ORTHODOX SYRIAN CATHEDRAL PARISH TRUST, THE ASSESSEE, MRS. PUSHYA SITARAMAN WOULD CONTEND THAT THE EXCESS APPLICATION OF EARLIER YEARS WAS LIABLE TO SET OFF AGAINST THE INCOME OF THE CURRENT YEAR AND RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MATRISEVA TRUST (242 ITR 20) . WHILE SRI.J.NARAYANASWAMY, LEARNED COUNSEL APPEARING FOR THE DEPARTMENT DOES NOT SERIOUSLY OB JECT TO THE ARGUMENT ADVANCED ON MERITS, HE WOULD RAISE A TECHNICAL OBJECTION TO THE EFFECT THAT IN THE PRESENT CASE, THE CLAIM WAS MADE UNDER A REVISED RETURN. THE ORIGINAL RETURN OF INCOME WAS FILED ONLY ON 31.10.2007 BEYOND 31.10.2006 WHEN IT WAS DUE AN D AS SUCH WOULD DEBAR THE CONSIDERATION OF THE CLAIM MADE IN THE REVISED RETURN. 30. RECORDS REVEAL THAT THE ORIGINAL RETURN WAS FILED ON 31.10.2007 AND A REVISED RETURN WAS FILED ON 19.2.2008. NOTICE UNDER SECTION 148 WAS ISSUED ON 13.9.2010, IN RESPONSE TO WHICH, THE ASSESSEE FILED THE ORIGINAL RETURN DATED 31.10.2007. IN THE COURSE OF RE - ASSESSMENT, THE ASSESSING AUTHORITY REJECTS THE REVISED RETURN ON THE GROUND THAT IT IS INADMISSIBLE IN VIEW OF THE PROVISIONS OF SECTION 139(5) REQUIRING THE ORIGINAL R ETURN TO HAVE BEEN FILED WITHIN TIME. HE THUS, DOES NOT TAKE COGNIZANCE OF THE REVISED RETURN AND PROCEEDS ON THE BASIS OF THE ORIGINAL RETURN WHICH HAD OMITTED TO TAKE INTO ACCOUNT THE EXCESS APPLICATION OF PREVIOUS YEARS AS APPLICATION FOR THE PRESENT YE AR AND THE ASSESSMENT WAS COMPLETED ON THE BASIS OF THE ORIGINAL RETURN ALONE. THE COMMISSIONER OF INCOME TAX (APPEALS), ADJUDICATED THE ISSUE ON MERITS, DECIDING THE SAME AGAINST THE ASSESSEE WHICH ORDER WAS CONFIRMED BY THE INCOME TAX APPELLATE TRIBUNAL. 31. A RECENT AMENDMENT TO SECTION 139(5) READS THUS; 'FOLLOWING SUB - SECTION (5) SHALL BE SUBSTITUTED FOR THE EXISTING SUBSECTION( 5) OF SECTION 139 BY THE FINANCE ACT, 2016 W.E.F. 1.4.2017. (5) IF ANY PERSON, HAVING FURNISHED A RETURN UNDER SUB - SECTION (1 ) OR SUB - SECTION (4), DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN, HE MAY FURNISH A REVISED RETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FORM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EAR LIER.' 32. THE IMPORT OF THE ABOVE AMENDMENT IS THAT A RETURN MAY BE REVISED BOTH IN CASES OF ORIGINAL RETURNS FILED UNDER SUB SECTION (1) OR UNDER SUB SECTION (4) WITHIN THE EXTENDED PERIOD OF ONE YEAR FROM THE END OF THE RELEVANT ASSESSMENT YEAR OR BEFOR E COMPLETION OF ASSESSMENT, WHICHEVER IS EARLIER. THE AMENDMENT IS INTENDED TO CONFER A BENEFIT ON AN ASSESSEE AND THE RETROSPECTIVE APPLICATION THEREOF HAS TO BE EXAMINED BY THE ASSESSING AUTHORITY. WE REMAND THIS ISSUE TO THE FILE OF THE ASSESSING AUTHOR ITY FOR THE LIMITED PURPOSE OF EXAMINING THE APPLICABILITY OF THE AMENDMENT EXTRACTED ABOVE. IF THE AMENDMENT IS FOUND APPLICABLE TO THE ASSESSEE, THE RATIONALE OF THE DECISION OF THIS COURT IN MATRISEVA (SUPRA) SHALL BE APPLIED ON MERITS. 33. ADVERTING TO QUESTION NO.1, THE TRIBUNAL HAS, IN DENYING THE BENEFIT OF DEPRECIATION TO THE ASSESSEE, APPLIED THE PROVISIONS OF SUB SECTION 6 OF SECTION 11 READING AS FOLLOWS; '(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 SAME OR ANY OTHER PREVIOUS YEAR. .... 34.THE SHORT POINT THAT ARISES FOR DECISION IS WHETHER THE PROVISIONS OF SECTION 11(6) INSERTED BY FINANCE (NO.2) ACT, 2014 W.E.F. 1.4.2015, OPERATE PROSPECTIVELY WITH EFFECT FROM ASSESSMENT YEAR 2015 - 16 OR RETROS PECTIVELY WITH RESPECT TO EARLIER YEARS AS WELL. IN THIS REGARD, M/S.PUSHYA SITARAMAN, LEARNED SENIOR COUNSEL AND OTHER LEARNED COUNSELS APPEARING FOR THE ASSESSES REFER TO THE PROVISIONS OF CIRCULAR 1 OF 2015 DATED 21.1.2015 (371 ITR (ST) 0022) CONTAINING EXPLANATORY NOTES TO THE PROVISIONS OF FINANCE (NO.2) ACT, 2014. THE RELEVANT PORTION OF THE CIRCULAR READS AS FOLLOWS; '7.3 SEVERAL ISSUES HAD ARISEN IN RESPECT OF THE APPLICATION OF EXEMPTION REGIME TO TRUSTS OR INSTITUTIONS IN RESPECT OF WHICH CLARITY IN LAW WAS REQUIRED. 7.4 THE FIRST ISSUE WAS REGARDING THE INTERPLAY OF THE GENERAL PROVISION OF EXEMPTIONS WHICH ARE CONTAINED IN SECTION 10 OF THE INCOME - TAX ACT VI S - - VIS THE SPECIFIC AND SPECIAL EXEMPTION REGIME PROVIDED IN SECTIONS 11 TO 13 OF THE SAID ACT. AS INDICATED ABOVE, THE PRIMARY OBJECTIVE OF PROVIDING EXEMPTION IN CASE OF CHARITABLE INSTITUTION IS THAT INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST SH OULD BE APPLIED AND UTILIZED FOR THE OBJECT OR PURPOSE FOR WHICH THE INSTITUTION OR TRUST HAS BEEN ESTABLISHED. IN MANY CASES IT HAD BEEN NOTED THAT TRUSTS OR INSTITUTIONS WHICH ARE REGISTERED AND HAVE BEEN AVAILING BENEFITS OF THE EXEMPTION REGIME TO NOT APPLY THEIR INCOME, WHICH IS DERIVED FROM PROPERTY HELD UNDER TRUST, FOR CHARITABLE PURPOSES. IN SUCH CIRCUMSTANCES, WHEN THE INCOME BECOMES TAXABLE, A CLAIM OF EXEMPTION UNDER GENERAL PROVISIONS OF SECTION 10 IN RESPECT OF SUCH INCOME IS PREFERRED AND TAX ON SUCH INCOME IS AVOIDED. THIS DEFEATS THE VERY OBJECTIVE AND PURPOSE OF PLACING THE CONDITIONS OF APPLICATION OF INCOME, ETC., IN RESPECT OF INCOME DERIVED FROM PROPERTY HELD UNDER TRUST IN THE FIRST PLACE. 7.4.1 SECTIONS 11, 12 AND 13OF THE INCOME - TAX ACT ARE SPECIAL PROVISIONS GOVERNING INSTITUTIONS WHICH ARE BEING GIVEN BENEFIT OF TAX EXEMPTION. IT IS THEREFORE IMPERATIVE THAT ONCE A PERSON VOLUNTARILY OPTS FOR THE SPECIAL DISPENSATION IT SHOULD BE GOVERNED BY THESE SPECIFIC PROVISIONS AND SHOULD NOT BE ALLOWED FLEXIBILITY OF BEING GOVERNED BY OTHER GENERAL PROVISIONS OR SPECIFIC PROVISIONS AT WILL. ALLOWING SUCH FLEXIBILITY HAS UNDESIRABLE EFFECTS ON THE OBJECTS OF THE REGULATIONS AND LEADS TO LITIGATION. . .. 7.6 APPLICABILITY. - THESE AMENDMENTS T AKE EFFECT FROM 1ST APRIL, 2015 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2015 - 2016 AND SUBSEQUENT ASSESSMENT YEARS. 35. PARA 7.6 OF THE CIRCULAR STATES THAT THE AMENDMENT WOULD APPLY TO ASSESSMENT YEAR 2015 - 16 AND SUBSEQUENT ASSESSME NT YEARS. RELIANCE WAS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN CIT VS. ALOM EXTRUSIONS LTD (2009) AND CIT VS VATIKA TOWNSHIP (367 ITR 466) = 2014 - TIOL - 78 - SC - IT - CB FOR THE PROPOSITION THAT AN AMENDMENT THAT INCREASES THE LIABILITY OF AN ASSESSEE IS LIABLE TO BE APPLIED ONLY PROSPECTIVELY. MR. NARAYANASWAMY WOULD OBJECT STATING THAT THE AMENDMENT HAD BEEN INSERTED TO A CORRECT AN EXISTING ANOMALY AND THUS WAS CLEA RLY CLARIFICATORY, AND CONSEQUENTLY RETROSPECTIVE IN OPERATION. 36. WE DO NOT AGREE WITH THE REVENUE. THE AMENDMENT, INSERTED SPECIFICALLY WITH EFFECT FROM ASSESSMENT YEAR 2015 - 2016 SEEKS TO DISTURB A VESTED RIGHT THAT HAS ACCRUED TO THE ASSESEE. THE AMEND MENT DOES NOT PURPORT TO BE PAGE 20 OF 20 CLARIFICATORY, ON THE OTHER HAND THE EXPLANATORY MEMORANDUM MAKES IT APPLICABLE ONLY W.E.F. A Y 2015 - 16 AND APPLICATION OF THE AMENDMENT RETROSPECTIVELY WOULD CERTAINLY LEAD TO A GREAT DEAL OF HARDSHIP TO THE ASSESSEE. WE ARE TH US OF THE VIEW THAT THE PROVISIONS OF SECTION 11(6) OF THE ACT INSERTED WITH EFFECT FROM 1.4.2015 SHALL OPERATE PROSPECTIVELY WITH RESPECT TO ASSESSMENT YEAR 2015 - 2016 ONLY. 14. THEREFORE IN VIEW OF THE ABO VE T W O DECISION S OF THE HONBLE HIGH COURTS , WE REVERSE THE FINDING OF THE LOWER AUTHORITY AND DIRECT THE LD. ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF THESE 5707 9339/ BEING THE AMOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON THE ASSETS ON WHICH DEDUCTION IS APPLICATION OF INCOME HAS ALREADY B EEN GRANTED. IN THE RESULT GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN COURT ON 1 5 / 0 9 / 2017 . - S D / - - S D / - ( I.C.SUDHIR ) (PRASHANT MAHARISHI) JUDIC IAL MEMBER ACCOUNTANT MEMBER DATED: 1 5 / 0 9 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI