THE ACIT, 1(2), Bhopal V. M/S. M.P.CONGRESS COMMITTEE (I) TRUST, Bhopal

ITA 677/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5877 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: A K JAIN
• Keywords: Depreciation; Charitable institution; Capital expenditure
• Section: 143(3); 12A; 12AA; 32; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 677/IND/2014 A.Y. : 2010-11. ACIT, M.P.CONGRESS 1(2), VS. COMMITTEE (I) BHOPAL TRUST, BHOPAL APPELLANT RESPONDENT PAN NO. AAATM8806C A PPELLANT S BY : SHRI R.A.VERMA, DR RESPONDENT BY : SHRI A.K.JAIN, C. A. O R D E R PER GARASIA, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-I, BHOPAL, DATED 13.08.2014 FOR THE ASSES SMENT YEAR 2010-11. DATE OF HEARING : 23.11 .2015 . DATE OF PRONOUNCEMENT : 05.01.2016 ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 2 2 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUND OF APPEA L :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWA NCE OF RS. 19,58,155/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE WHEN THE ENTIRE EXPENDITURE INCURRED TOWARDS PURCHASE OF FIXED ASSETS IS FULLY ALLOWED AS APPLICATION OF INCOME YEAR AFTER YEAR. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CHARITABLE TRUST REGISTERED WITH REGISTRAR OF PUBLI C TRUST, BHOPAL, ON 12.07.1988. THE ASSESSEE TRUST IS ALSO R EGISTERED U/S 12AA OF THE ACT VIDE REGISTRATION NO.80 DATED 2 8.03.2003. THE ASSESSEE HAD FILED ITS RETURN OF INCOME OF RAY 2010-11 ON 21.09.2010 SHOWING A DEFICIT OF RS. 18,040/-. THE C ASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE INCOME-TAX ACT, 1961, AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 15.11.2012 AT AN INCOME OF RS. 19,40,1 15/-, AFTER DISALLOWING ASSESSEES CLAIM OF DEPRECIATION OF RS. 19,58,155/- ON FIXED ASSTS. ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 3 3 4. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THA T THE ASSESSEE HAD DEBITED RS.19,58,155/- AS DEPRECIA TION IN THE INCOME & EXPENDITURE ACCOUNT. THE AO, ASKED TH E ASSESSEE TO FURNISH THE DETAILS OF DEPRECIATION CLA IMED. IN RESPONSE, THE ASSESSEE STATED THAT THE DEPRECIATION HAD BEEN CLAIMED ON THE BASIS OF ITS ALLOWABILITY BY VARIOUS JUDGMENTS OF THE TRIBUNALS AND COURTS AS UNDER :- (1) CIT VS. INSTITUTE OF BANKING, 264 ITR 110 (BOM.TRIB ) (2) DIRECTOR OF INCOME-TAX (EXEMPTION) VS. FRAMJEE CAWASJEE INSTITUTE, (1993) 109 CTI 463 (BOM.) (3) CIT VS. SETH MANILAL RANCHHODDAS VISHRAM BHAWAN TRUST, 198 ITR 598 (GUJ). (4) CIT VS. SOCIETY OF SISTER OF ST.ANNE, 146 ITR 28 (K AR). BUT THE AO DID NOT ACCEPT THE SUBMISSION OF THE ASS ESSEE. THE AO NOTED THAT THE FACTS AND CIRCUMSTANCES OF THE C ASE DID NOT PERTAIN TO ABOVE MENTIONED CASE LAWS. THE MATTER IS STILL SUB- JUDICIAL IN THE APEX COURT. THE CASE OF ESCORTS LIM ITED VS. UNION OF INDIA,(1993) 199 ITR 43 IS RELEVANT IN THI S CASE. THE COURT OBSERVED THAT A DOUBLE DEDUCTION CANNOT BE A MATTER OF INFERENCE, IT MUST BE PROVIDED FOR IN CLEAR AND EXP RESS ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 4 4 LANGUAGE, REGARDING BEING HAD TO ITS UNUSUAL NATURE , ITS SERIOUS IMPACT ON THE REVENUES OF THE STATE. IN THI S CASE, SINCE THE ASSESSEE HAD BEEN ENJOYING THE BENEFIT O F EXEMPTION OF SECTION 11 FOR THE LAST MANY YEARS AND TO COMPUT E THE SPECIFIED PERCENTAGE OF THE APPLICATION OF INCOME, IT HAD BEEN GETTING THE BENEFIT OF APPLICATION IN THE CREATION OF FIXED ASSETS. NOW ALLOWING DEPRECIATION ON THE SAME AGAINST, WOUL D DEFINITELY TANTAMOUNT TO DOUBLE DEDUCTION. AS INT ENTION F THE LEGISLATURE, IT WOULD HAVE INCLUDED THE AMOUNT OF D EPRECIATION IN THE AMBIT OF APPLICATION OF INCOME FOR THE PUR POSE OF SECTION 11 OF THE ACT. IT WOULD HAVE MENTIONED IT EXPRESSLY AND IN NO AMBIGUOUS TERMS, AS IT GIVES THE ASSESSEE DOUBLE DEDUCTION. IN VIEW OF THE ABOVE REASONS, THE AO HEL D THAT NO DEPRECIATION WAS ALLOWABLE TO THE ASSESSEE IN BOTH THE ACCOUNTS AND THE SURPLUS OF INCOME OVER EXPENDITURE WAS AGAIN CALCULATED AFTER DENYING DEPRECATION TO THE A SSESSEE. ACCORDINGLY, THE INCOME WAS ASSESSED AT RS. 15,40,1 15/- IS AGAINST DEFICIT OF RS. 18,040/- SHOWN IN THE RETURN OF INCOME. ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 5 5 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER :- 3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND FACTS OF THE CASE. IT MAY BE NOTED THAT IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS OF ITAT AND HIGH COURTS THAT DEPRECIATION MUST BE ALLOWED TO THE CHARITABLE INSTITUTIONS BECAUSE INCOME DERIVED FROM THE TRUST HAS TO BE DETERMINED IN COMMERCIAL SENSE. IT HAS ALSO BEEN OBSERVED BY THE HON'BLE COURTS THAT IF THE DEPRECIATION IS NOT ALLOWABLE AS A NECESSARY DEDUCTION FOR COMPUTING THE INCOME FROM THE CHARITABLE INSTITUTION, THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THE EXPENDITURE SHOULD BE UNDERSTOOD AS A NECESSARY OUTGOING AND NOT MERELY ACTUAL ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 6 6 EXPENDITURE ON PARTING WITH MONEY. EXPENDITURE INCURRED, THEREFORE, INCLUDES THE CLAIM OF DEPRECIATION. THEREFORE, THE CHARITABLE TRUST IS ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. IT HAS ALSO BEEN HELD THAT THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. VS. UNION OF INDIA (1993) 199 ITR 43 (SC) IS NOT APPLICABLE IN THE CASE OF CHARITABLE INSTITUTION/TRUST. IT WILL BE RELEVANT TO REFER SOME DECISIONS OF THE HON'BLE HIGH COURTS WHEREIN, IT HAS BEEN HELD THAT CHARITABLE INSTITUTION/TRUST IS ENTITLED TO DEPRECIATION IN RESPECT OF ASSETS OWNED BY IT AND THE DEPRECIATION IS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF THE CHARITABLE TRUST. (I) IN CIT V, SHETH MANILAL RANCHODDAS VISHRAM BHAVAN TRUST/1992/ 198 ITR 0598- ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 7 7 /GUJ./, THE HON'BLE GUJARAT HIGH COURT OBSERVED AS UNDER (HEAD NOTES) :-- 'THE INCOME FROM THE PROPERTIES HELD UNDER TRUST HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT CLASSIFICATION UNDER THE VARIOUS HEADS SET OUT IN SECTION 14 OF THE INCOME-TAX ACT, 1961. THE EXPRESSION 'INCOME' HAS TO BE UNDERSTOOD IN THE POPULAR OR GENERAL SENSE AND NOT IN THE SENSE IN WHICH THE INCOME IS ARRIVED AT FOR THE PURPOSE OF ASSESSMENT TO LAX BY APPLICATION OF SOME ARTIFICIAL PROVISIONS EITHER GIVING OR DENYING DEDUCTION. THE COMPUTATION UNDER THE DIFFERENT CATEGORIES OR HEADS ARISES ONLY FOR THE PURPOSES OF ASCERTAINING THE TOTAL INCOME FOR THE PURPOSES OF CHARGE. THOSE PROVISIONS CANNOT BE INTRODUCED TO FIND OUT WHAT THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST TO BE EXCLUDED FROM THE TOTAL INCOME IS, FOR THE PURPOSE OF THE EXEMPTIONS UNDER ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 8 8 CHAPTER III. THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF 'FIE CHARITABLE INSTITUTION HAS TO BE DEDUCTED 10 ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. CIT V. SOCIETY OF THE SISTERS OF SI. ANNE [1984) 146 ITR 28 (KAR): CIT V. RAIPUR PALLOTTINE SOCIETY [1989) 180 ITR 579 (MP) AND CIT V. RAO BAHADUR CALAVALA CUNNAN CHETTY CHARITIES [1982} 135 ITR 185 (MAD) FOLLOWED' (II) THE HON'BLE BOMBAY HIGH COURT HAD AN OCCASION TO CONSIDER THIS ISSUE IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. INSTITUTE OF BANKING (2003) 264 ITR 0110/ BOM.]. THE FACTS IN BRIEF IN THIS CASE AND DECISION OF HON'BLE HIGH COURT ARE AS UNDER (RELEVANT PORTION OF HEAD NOTES) :- 'NORMAL DEPRECIATION CAN BE CONSIDERED AS ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 9 9 A LEGITIMATE DEDUCTION IN COMPUTING THE REAL INCOME OF THE ASSESSEE ON GENERAL PRINCIPLES OR UNDER SECTION 11(1)(A) OF THE INCOME-TAX ACT, 1961. INCOME OF A CHARITABLE TRUST DERIVED FROM BUILDING, PLANT AND MACHINERY AND FURNITURE IS LIABLE TO BE COMPUTED IN A NORMAL COMMERCIAL MANNER ALTHOUGH THE TRUST MAY NOT BE CARRYING ON ANY BUSINESS AND THE ASSETS IN RESPECT WHEREOF DEPRECIATION IS CLAIMED MAY NOT BE BUSINESS ASSETS. IN ALL SUCH CASES, SECTION 32 OF THE ACT PROVIDING FOR DEPRECIATION, FOR COMPUTATION OF INCOME DERIVED FROM BUSINESS OR PROFESSION IS NOT APPLICABLE. HOWEVER, THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPLES AFTER PROVIDING FOR ALLOWANCE FOR NORMAL DEPRECIATION AND DEDUCTION THEREOF FROM THE GROSS INCOME OF THE TRUST. ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 10 10 .. . THE ASSESSEE WAS A TRUST REGISTERED UNDER THE BOMBAY PUBLIC TRUST' ACT AND SECTION 12A OF THE INCOME-TAX ACT. THE OBJECT OF THE ASSESSEE WAS CHARITABLE IN NATURE. THE INCOME OF THE ASSESSEE WAS EXEMPT UNDER SECTION 11 OF THE INCOME-TAX ACT. THE ASSESSEE HAD CLAIMED DEPRECIATION WHICH WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT CAPITAL EXPENDITURE INCURRED DURING THE ACCOUNTING YEAR WAS ALLOWED AS A DEDUCTION FROM THE INCOME OF' THE ASSESSEE. FURTHER, THE ASSESSEE HAD CLAIMED DEPRECIATION ON FURNITURE AND FIXTURES TO THE TUNE OF RS. 49,453 AT 10 PER CENT OF THE WRITTEN DOWN VALUE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 11 11 GROUND THAT THE SAID ASSETS HAD BEEN RECEIVED BY THE ASSESSEE ON TRANSFER FROM NATIONAL INSTITUTE OF BANK MANAGEMENT. THAT INSTITUTE WAS A CHARITABLE TRUST. ITS INCOME WAS ALSO EXEMPT UNDER SECTION 11 OF THE INCOME-TAX ACT. THE ASSESSING OFFICER DID NOT ALLOW DEPRECIATION ON FIXTURES AND FURNITURE'S ON THE GROUND THAT FULL DEDUCTION HAD BEEN ALLOWED IN RESPECT OF CAPITAL COST OF FURNITURE AND FIXTURES AND IF THE DEPRECIATION WAS ALLOWED, AS CLAIMED BY THE ASSESSEE, IT WOULD RESULT IN DOUBLE DEDUCTION. IN THIS REFERENCE, THE HON'BLE HIGH COURT HELD AS UNDER :- HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 12 12 THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON THE ASSETS, THE COST 0/ WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTION 11 IN THE PAST YEARS. CIT V. MUNISUVARAT JAIN [1994) TAX LR 1084 (BAM) FOLLOWED. (II) THAT THE TRIBUNAL WAS JUSTIFIED IN LAW IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION OF RS. 49,453 ON ASSETS RECEIVED ON TRANSFER, WHEN THE ASSESSEE HAD NOT INCURRED THE COST OF ACQUIRING THE ASSETS. DIRECTOR OF INCOME-TAX (EXEMPTION) V. FRAMJEE CAWASJEE INSTITUTE [1993) 109 CTR 463 (BOM)FOLLOWED. (III) THE HON'BLE PUNJAB & HARYANA HIGH COURT ALSO CONSIDERED THIS ISSUE IN DETAIL IN THE CASE OF COMMISSIONER OF INCOME-TAX V, MARKET COMMITTEE, PIPLI (2011) 330 ITR 0016-( P & H ). ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 13 13 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS REGISTERED UNDER SECTION 12AA OF THE INCOME- TAX ACT, 1961, AS A CHARITABLE TRUST. THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION ON THE GROUND THAT SINCE THE INCOME OF THE ASSESSEE WAS EXEMPT FROM TAX UNDER SECTIONS 11 TO 13, ALLOWING DEPRECIATION TO ASCERTAIN WHETHER 85 PER CENT OF FUNDS WERE APPLIED FOR PURPOSES OF TRUST WOULD AMOUNT TO CONFERRING DOUBLE BENEFIT. THIS VIEW WAS AFFIRMED BY THE COMMISSIONER (APPEALS). THE APPEAL OF THE ASSESSEE TO THE TRIBUNAL WAS ALLOWED ON A STATEMENT THAT THE MATTER WAS COVERED IN FAVOUR OF THE ASSESSEE BY ANOTHER ORDER OF THE TRIBUNAL. ON APPEAL FILED BY THE DEPARTMENT THE HON'BLE HIGH COURT DISMISSING THE APPEAL, HELD AS UNDER: - 'THAT THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 14 14 FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRUST. THERE WAS NO DOUBLE DEDUCTION CLAIMED BY THE ASSESSEE. IT COULD NOT BE HELD THAT DOUBLE BENEFIT WAS GIVEN IN ALLOWING THE CLAIM FOR DEPRECIATION FOR COMPUTING INCOME/OR PURPOSES A/SECTION 11. CIT V. RAIPUR PALLOTTINE SOCIETY [1989) 180 ITR 579 (MP), CIT V. RAO BAHODUR CATAVALA CUNNAL CHETTY CHARITIES, (1982) 135 ITR 485 (MAD), CIT VS. SETH MANILAL RACHHODDAS VISHRAM BHAWAN TRUST, [1992) 198 ITR 598 (GUJ), CIT V. SOCIETY OF THE SISTERS OF ST. ANNE [1984] 146 ITR 28 (KARN) AND CIT V. INSTITUTE OF BANKING [2003) 264 ITR 110 (BORN) RELIED ON. ESCORTS LTD. V. UOI (I 993) 199 ITR .J3 (SC) DISTINGUISHED. ' (IV) SIMILARLY, IN THE CASE OF COMMISSIONER OF INCOME-TAX V, TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 0021- (P&H) , THE HON'BLE PUNJAB ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 15 15 & HARYANA HIGH COURT HAS EXPRESSED THE SAME VIEW. THE BRIEF FACTS OF THIS CASE ARE THAT THE ASSESSEE WAS A CHARITABLE INSTITUTION REGISTERED UNDER SECTION 12AA OF THE INCOME- TAX ACT, 1961. IN ITS ACCOUNTS, THE ASSESSEE CALCULATED DEPRECIATION FOR THE PURPOSE OF SHOWING THE AMOUNT UTILIZED. THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION ON THE GROUND THAT THE INCOME OF THE ASSESSEE BEING EXEMPT, CLAIM FOR DEPRECIATION WOULD AMOUNT TO TAKING OF DOUBLE BENEFIT. THE COMMISSIONER (APPEALS) HELD THAT DEDUCTION FOR COMPUTING INCOME TO PRESERVE THE CORPUS OF THE TRUST WAS PERMISSIBLE AND DID NOT AMOUNT TO DOUBLE BENEFIT. THIS VIEW WAS UPHELD BY THE TRIBUNAL OBSERVING THAT APPLICATION OF INCOME WAS NOT COMPUTATION OF INCOME OF THE CHARITABLE INSTITUTION. THEREFORE, THE QUESTION WHETHER DEPRECIATION WAS TO BE ALLOWED OR NOT HAD NOTHING TO DO WITH THE APPLICATION OF INCOME. ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 16 16 THE INCOME WAS ALWAYS TO BE COMPUTED ON COMMERCIAL PRINCIPLES AND AS PER THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE, SUBJECT ALWAYS TO THE STATUTORY PROVISIONS. ON APPEAL :- HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE WAS NOT CLAIMING DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION. THE INCOME OF THE ASSESSEE BEING EXEMPT, THE ASSESSEE WAS ONLY CLAIMING THAT DEPRECIATION SHOULD BE REDUCED FROM THE INCOME FOR DETERMINING THE PERCENTAGE OF FUNDS WHICH HAD TO BE APPLIED FOR THE PURPOSES OF THE TRUST. IT COULD NOT BE HELD THAT DOUBLE BENEFIT WAS GIVEN IN ALLOWING THE CLAIM JAR DEPRECIATION FOR COMPUTING INCOME FOR PURPOSES OF SECTION 11. (V) IN THE CASE OF CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE, (1984) 146 ITR 0028 (KARN), THE HON'BLE KARNATAKA HIGH COURT HAS ALSO HELD AS UNDER :- ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 17 17 'IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING THE INCOME OF A CHARITABLE INSTITUTION, THEN THERE CAN BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME. THEREFORE, THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF A CHARITABLE INSTITUTION IS TO BE DEDUCTED TO ARRIVE AT THE INCOME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. (VI) IT MAY BE NOTED THAT THE HON'BLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH HAS ALSO EXPRESSED THE SAME VIEW IN THE CASE OF CIT VS, RAIPUR PALLOTINE SOCIETY (1989) 180 ITR 579 (MP) AND IN THE CASE OF CIT VS. SHRI GUJRATI SAMAJ (REGD.) (2011) 64 DTR (MP) 76. IN THE CASE OF CIT VS. SHRI GUJRATI SAMAJ, THE HON'BLE HIGH COURT OBSERVED AS UNDER :- '6. WE FIND THAT THE QUESTION, WHETHER A CHARITABLE TRUST IS ENTITLED TO DEPRECIATION UNDER ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 18 18 S. 32 OF THE ACT IN RESPECT OF ASSETS OWNED BY IT, WAS DEALT WITH BY A DIVISION BENCH OF THIS COURT IN CIT VS. RAIPUR PALLOTINE SOCIETY (1989) 80 CTR 127: (1999) 180 ITR 579 (MP) BY PLACING RELIANCE OIL A DIVISION BENCH JUDGMENT 0/ KARNATAKA HIGH COURT IN CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE (1984 39 CTR (KAR) 9 : (1984) 146 ITR 28 (KAR) AND HAS HELD THAT DEPRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERLY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING ACCOUNTANCY, ETC. IT 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 ASSETS, OVER ITS EFFECTIVE LIFETIME; THE AMOUNT OF THE PROVISION, ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 19 19 MADE IN RESPECT OF AN ACCOUNTING PERIOD, IS INTENDED TO REPRESENT THE PROPORTION OF SUCH EXPENDITURE, WHICH HAS EXPIRED DURING THAT PERIOD. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN THERE WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST. A CHARITABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. (ALSO SEE SPICER AND PEGLER'S BOOK KEEPING AND ACCOUNTS, 17TH EDN. PP. - 44, 45 AND 46). 7. HAVING REGARD TO THE AFORESAID SETTLED LEGAL POSITION IN OUR CONSIDERED VIEW, THE TRIBUNAL HAS RIGHTLY DECIDED THE ISSUE ABOUT DISALLOWANCE OF CLAIM OF DEPRECIATION WHILE COMPUTING THE INCOME OF CHARITABLE TRUST AND HAS RIGHTLY HELD THAT THE ASSESSEE BEING A CHARITABLE TRUST IS ENTITLED FOR CLAIM OF DEPRECIATION ON THE ASSETS OWNED BY IT. WE, ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 20 20 ACCORDINGLY, AFFIRM THE VIEW TAKEN BY THE TRIBUNAL IN THAT REGARD. ' THEREFORE, CONSIDERING THE WELL SETTLED LEGAL POSITION ON THE ISSUE AND RESPECTFULLY FOLLOWING THE DECISIONS OF HIGH COURTS SPECIALLY THE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH, WHICH IS BINDING, IT IS HELD THAT THE APPELLANT IS ENTITLED FOR CLAIM OF DEPRECIATION ON THE ASSETS OWNED BY IT. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE APPELLANT'S CLAIM OF DEPRECIATION WHILE COMPUTING INCOME OF THE APPELLANT UNDER SECTION 11 OF THE ACT. THUS, THE DISALLOWANCE OF DEPRECIATION OF RS. 19,58,155/- MADE BY THE AO IS DELETED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING HEARD THE LD. DR, WE FIND THAT THE LD. C IT(A) HAS RELIED UPON THE DECISION OF VARIOUS HIGH COURTS INC LUDING THE ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 21 21 DECISION OF I.T.A.T., INDORE BENCH. MOREOVER, HE HA S ALSO RELIED UPON THE DECISION OF JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT VS. GUJARATI SAMAJ (REGD.), (2012) 349 ITR 559 (MP), WHEREIN THE HON'BLE HIGH COURT HAS OBSERVED AS UNDE R :- '6. WE FIND THAT THE QUESTION, WHETHER A CHARITABLE TRUST IS ENTITLED TO DEPRECIATION UNDER S. 32 OF THE ACT IN RESPECT OF ASSETS OWNED BY IT, WAS DEALT WITH BY A DIVISION BENCH OF THIS COURT IN CIT VS. RAIPUR PALLOTINE SOCIETY (1989) 80 CTR 127: (1999) 180 ITR 579 (MP) BY PLACING RELIANCE OIL A DIVISION BENCH JUDGMENT 0F KARNATAKA HIGH COURT IN CIT VS. SOCIETY OF THE SISTERS OF ST. ANNE (1984 39 CTR (KAR) 9 : (1984) 146 ITR 28 (KAR) AND HAS HELD THAT DEPRECIATION IS NOTHING BUT DECREASE IN VALUE OF PROPERLY THROUGH WEAR, DETERIORATION OR OBSOLESCENCE AND ALLOWANCE IS MADE FOR THIS PURPOSE IN BOOK KEEPING ACCOUNTANCY, ETC. IT IS THE EXHAUSTION OF THE EFFECTIVE LIFE OF A FIXED ASSET OWING TO 'USE' OR OBSOLESCENCE. IT MAY BE ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 22 22 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 ASSETS, OVER ITS EFFECTIVE 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. IF DEPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION IN COMPUTING THE INCOME OF A CHARITABLE TRUST, THEN THERE WOULD BE NO WAY TO PRESERVE THE CORPUS OF THE TRUST. A CHARITABLE TRUST IS, THEREFORE, ENTITLED TO DEPRECIATION IN RESPECT OF THE ASSETS OWNED BY IT. (ALSO SEE SPICER AND PEGLER'S BOOK KEEPING AND ACCOUNTS, 17TH EDN. PP. - 44, 45 AND 46). 7. HAVING REGARD TO THE AFORESAID SETTLED LEGAL POSITION IN OUR CONSIDERED VIEW, THE ACIT,BHOPAL VS. M.P.CONGRESS COMMITTEE (I) TRUST,I. T.A.NO. 677/IND/2014 A.Y. 2010-11. 23 23 TRIBUNAL HAS RIGHTLY DECIDED THE ISSUE ABOUT DISALLOWANCE OF CLAIM OF DEPRECIATION WHILE COMPUTING THE INCOME OF CHARITABLE TRUST AND HAS RIGHTLY HELD THAT THE ASSESSEE BEING A CHARITABLE TRUST IS ENTITLED FOR CLAIM OF DEPRECIATION ON THE ASSETS OWNED BY IT. WE, ACCORDINGLY, AFFIRM THE VIEW TAKEN BY THE TRIBUNAL IN THAT REGARD. ' 7. WE, RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, DIS MISS THE DEPARTMENTS APPEAL. THIS ORDER HAS BEEN PRONOUNCED IN THE OP EN COURT ON 5 TH JANUARY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 5 TH JANUARY, 2016. CPU* 23.17