DDIT, Bangalore V. Cutchi Memom Union, Bangalore

ITA 878/BANG/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68314 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 05-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JACINTA ZIMIK VASHAI
• Assessee Lawyers: SARANGAN
• Keywords: Capital asset; Business income; Depreciation; Charitable institution; Cost of acquisition; Capital expenditure
• Section: 27; 28; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.878/BANG/2012 ASSESSMENT YEAR : 2007-08 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), BANGALORE. VS. M/S. CUTCHI MEMON UNION, NO.62-63, 1 ST FLOOR, CHICK BAZAR ROAD, SHIVAJINAGAR, BANGALORE 560 001. PAN: AAATC 4202A APPELLANT RESPONDENT APPELLANT BY : SMT. JACINTA ZIMIK VASHAI, ADDL.CIT(DR) RESPONDENT BY : SHRI SARANGAN, SR. ADVOCATE DATE OF HEARING : 05.08.2013 DATE OF PRONOUNCEMENT : 14.08.2013 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 27.04.2012 OF THE CIT(APPEALS)-V, BENGALURU RELATING TO ASSESSMEN T YEAR 2007-08. ITA NO.878/BANG/2012 PAGE 2 OF 16 2. THE CONCISE GROUNDS OF APPEAL RAISED BY THE REVE NUE READS AS FOLLOWS:- 1) THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED T HE FACT THAT IN THE CASE OF CHARITABLE INSTITUTIONS CLAIMING EXE MPTION U/S 11 OF THE ACT, ONLY THE PROVISIONS OF SECTION 11 TO SECTI ON 13 OF THE ACT ARE ONLY APPLICABLE AND NOT OTHER PROVISIONS OF THE ACT. 2) THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT THE INCOME U/S 11 (1) REFERS TO THE INCOME FROM PROPERT Y HELD UNDER THE TRUST AND WHICH HAS TO BE APPLIED FOR CHARITABL E PURPOSES. THE DIFFERENT HEADS OF INCOME UNDER SECTION 14 OF THE I NCOME TAX ACT ARE NOT APPLICABLE AND HENCE QUESTION OF ALLOWANCE OF DEDUCTION U/S 24 (A) OF THE ACT DOES NOT ARISE WHILE COMPUTIN G INCOME U/S 11. 3) THE LEARNED CIT (A) HAS ERRED IN NOT FOLLOWING THE CBDT CIRCULAR IN NO.5 LXX-6 DATED 19.06.1968 WHEREIN IT IS CLARIFIED THAT THE METHOD OF COMPUTING THE INCOME OF A CHARIT ABLE TRUST IS DIFFERENT FROM THE COMPUTATION IN CASE OF OTHER ASS ESSES. IN THE CASE OF TRUST, COMMERCIAL CONCEPT OF INCOME HAS TO BE CONSIDERED. 4) THE DECISIONS RELIED ON BY THE CIT (A) ACTUALLY FAVOURS THE DEPARTMENT AS THE HIGH COURTS HAVE CATEGORICALL Y HELD THAT THE INCOME DERIVED FROM TRUST PROPERTY MUST BE DETE RMINED ON COMMERCIAL PRINCIPLES. IN FACT THE CALCUTTA HIGH CO URT IN ITS DECISIONS IN 159 ITR 280 AND 199 ITR 215 HAVE REFER RED TO THE CBDT CIRCULAR IN NO.5 LXX-6 DATED 19.06.1968 WHICH IS FAVORABLE TO THE DEPARTMENT. 5) THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LIMITED & ANOTHER VS. UNION OF INDIA 199 ITR 43. WITHOUT PRE JUDICE, THE CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT DEPR ECIATION BEING A NOTIONAL EXPENDITURE IS NOT ALLOWABLE. 3. GROUNDS NO.1 TO 4 OF THE CONCISE GROUNDS IS WITH REGARD TO THE ACTION OF THE CIT(APPEALS) IN ALLOWING THE CLAIM OF THE ASSESSEE FOR ITA NO.878/BANG/2012 PAGE 3 OF 16 DEDUCTION U/S. 24(A) OF THE ACT WHILE COMPUTING INC OME FROM HOUSE PROPERTY. 4. THE ASSESSEE IS A TRUST ASSESSED IN THE STATUS O F AOP. FOR THE A.Y. 2007-08, THE ASSESSEE FILED A RETURN OF INCOME DECL ARING NIL INCOME. WHILE COMPUTING INCOME FROM HOUSE PROPERTY, THE ASS ESSEE HAD REDUCED FROM THE ACTUAL RENT RECEIVED FROM THE PROPERTY A S UM EQUAL TO 30% OF THE ANNUAL VALUE BEING A DEDUCTION U/S. 24(A) OF THE AC T. THE AO AFTER MAKING THE FOLLOWING OBSERVATIONS, REFUSED TO ALLOW THE CL AIM OF THE ASSESSEE FOR DEDUCTION U/S. 24(A) OF THE ACT:- 3. ON GOING THROUGH THE COMPUTATION OF INCOME, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.43,25 ,983/- U/S. 24(A) OF THE I.T. ACT, 1961 WHILE COMPUTING INCOME FROM HOUSE PROPERTY. RELYING ON THE DECISIONS OF THE CALCUTTA HIGH COURT IN THE ITR NO.159 ITR 280, GUJARAT HIGH COURT IN ITR N O.162 ITR 612 AND MADRAS HIGH COURT IN THE ITR NO.136 ITR 120 , THE INCOME OF THE TRUST HAS TO BE COMPUTED IN A COMMERC IAL MANNER AND NOT AS PER INCOME TAX ACT. THEREFORE, THE DEDU CTION CLAIMED BY THE ASSESSEE U/S. 24(A) OF THE I.T. ACT, IS DISA LLOWED. 5. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTION 24(A) OF THE ACT DO NOT RESTRICT ITS APP LICATION TO ANY PARTICULAR ASSESSEE AND THEREFORE EVEN A CHARITABLE TRUST WHOS E INCOME IS CLAIMED AS EXEMPT U/S. 11 OF THE ACT, CAN AVAIL OF THE BENEFIT OF DEDUCTION U/S. 24(A) OF THE ACT. IT WAS ARGUED THAT SECTION 11(4A) OF THE ACT PROVIDES FOR THE CIRCUMSTANCES IN WHICH BUSINESS INCOME MAY BE SUBJE CTED TO TAX AND THE CIRCUMSTANCES IN WHICH THERE COULD BE EXEMPTION. SE CTION 11(4) EXPRESSLY ITA NO.878/BANG/2012 PAGE 4 OF 16 PROVIDES THAT PROPERTY HELD UNDER THE TRUST COULD INCLUDE BUSINESS. THEREFORE, IT WAS SUBMITTED THAT INCOME IS TO BE COMPUTED UNDER THE HEAD HOUSE PROPERTY BY APPLYING THE PROVISIONS OF SECT ION 23 TO 27 IN SO FAR AS THEY MAY APPLY, IN A MANNER BUSINESS INCOME IS BEIN G ARRIVED AT UNDER THE PROVISIONS OF SECTIONS 28 TO 44BB. THE ASSESSEE AL SO POINTED OUT THAT FORM ITR-7 WHICH A FORM REQUIRED TO BE FILED BY A P ERSON CLAIMING EXEMPTION U/S. 11 OF THE ACT CONTAINS CLASSIFICATIO N OF INCOME UNDER THE VARIOUS HEADS. ACCORDING TO THE ASSESSEE, THIS FOR M ALSO GIVES AN INDICATION THAT WHILE COMPUTING INCOME OF A CHARITA BLE TRUST, INCOME UNDER THE VARIOUS HEADS ARE TO BE COMPUTED AS PER THE PRO VISIONS OF THE ACT AND THEREAFTER THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES HAS TO BE EXAMINED. REFERENCE WAS ALSO MADE BY THE ASSESSEE TO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. JAYASHREE CHARITY TRUST, 159 ITR 280 (CAL) , WHEREIN IT WAS HELD THAT FOR THE PURPOSE OF SECTION 11 OF THE ACT, IT IS ONLY A REAL INCOME WHI CH HAS BEEN ACTUALLY RECEIVED BY THE ASSESSEE THAT HAS TO BE CONSIDERED AND APPLICATION OF SUCH REAL INCOME FOR CHARITABLE PURPOSE ASCERTAINED. RE FERENCE WAS ALSO MADE TO CBDT CIRCULAR BEARING NO.5-P(LXX-VI) DATED 19.05 .1998 WHICH WAS REFERRED TO BY THE HONBLE CALCUTTA HIGH COURT IN T HE CASE OF DIT V. GIRDHARLAL SHEWNARAIN TANTIA TRUST (1993) 199 ITR 0 215 (CAL) AND THE HONBLE HIGH COURT HELD THAT INCOME IN SECT ION 11(1)(A) HAS TO BE UNDERSTOOD IN A COMMERCIAL SENSE. REFERENCE WAS AL SO MADE TO THE ITA NO.878/BANG/2012 PAGE 5 OF 16 DECISION OF GUJARAT HIGH COURT IN THE CASE OF CIT V. GANGA CHARITY TRUST FUND, 162 ITR 612 (GUJ) , WHEREIN IDENTICAL PROPOSITION THAT ALL OUTGOINGS MUST BE DEDUCTED AND ONLY THE SURPLUS INC OME THAT REMAINS IN THE HANDS OF THE TRUSTEES SHOULD BE CONSIDERED AS A VAILABLE FOR APPLICATION. REFERENCE WAS ALSO MADE TO THE ORDER DATED 03.07.19 72 OF THE CIT(APPEALS), MYSORE IN ITA NO.32(SAL)71-72, WHEREI N A VIEW WAS TAKEN THAT INCOME SHOULD BE COMPUTED IN TERMS OF PROVISIO NS OF THE ACT UNDER DIFFERENT HEADS AND THEREAFTER IT IS TO BE SEEN WHE THER THE AMOUNT IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. 6. THE CIT(APPEALS) ON A CONSIDERATION OF THE ABOVE SUBMISSIONS, HELD AS FOLLOWS:- 5. I HAVE CAREFULLY CONSIDERED THE STAND TA KEN BY THE A.O AND THE SUBMISSIONS MADE ON BEHALF OF THE A PPELLANT. WITH REGARD TO DEDUCTION U/S. 24(A) OF THE ACT I AM IN AGREEMENT WITH THE A.R. OF THE APPELLANT AS THERE IS NO PROHI BITION UNDER THE IT ACT TO DENY THIS BENEFIT TO THE APPELLANT TRUST. THEREFORE, THE DISALLOWANCE MADE BY THE A.O AMOUNTING TO RS.43,25, 983/- IS DELETED. 7. AGGRIEVED BY THE ORDER OF THE CIT(APPEALS), THE REVENUE HAS RAISED GROUNDS 1 TO 4 REFERRED TO ABOVE. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LD. DR, WHO RELIED ON THE ORDER OF THE AO AND IN PARTICULAR THE DECISION OF DIT V. GIRDHARLAL SHEWNARAIN TANTIA TRUST ( SUPRA) . THE LD. COUNSEL FOR THE ASSESSEE, ITA NO.878/BANG/2012 PAGE 6 OF 16 ON THE OTHER HAND, DREW OUR ATTENTION TO THE PROVIS IONS OF SECTION 2(45) OF THE ACT WHICH DEFINES TOTAL INCOME AND SUBMITTED TH AT THE AFORESAID DEFINITION REFERS TO THE TOTAL AMOUNT OF INCOME REF ERRED TO IN SECTION 5 COMPUTED IN THE MANNER LAID DOWN IN THIS ACT. ATTE NTION WAS DRAWN TO SECTION 4 OF THE ACT WHICH CREATES A CHARGE ON THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON. EMPHASIS WAS LAID O N THE FACT THAT THE EXPRESSION EVERY PERSON USED IN SECTION 4 OF THE ACT COVERS A CHARITABLE TRUST ALSO. REFERENCE WAS MADE TO THE PROVISIONS O F SECTION 11(1) OF THE ACT, WHICH LAYS DOWN THAT SUBJECT TO THE PROVISIONS OF SECTIONS 60 TO 63, THE FOLLOWING INCOME SHALL NOT BE INCLUDED TO THE T OTAL INCOME OF THE PREVIOUS YEAR .. HE LAID EMPHASIS ON THE FACT THAT TOTAL I NCOME WAS ALSO FOUND IN SECTION 11(1) OF THE ACT. OUR AT TENTION WAS ALSO DRAWN TO A FORM OF INCOME REQUIRED TO BE FILED BY THE ASSESS EE FOR CLAIMING DEDUCTION U/S. 11 OF THE ACT, IN WHICH THERE IS A R EFERENCE TO DIFFERENT HEADS OF INCOME. ACCORDING TO HIM, THE ACT CLEARLY CONTE MPLATES DETERMINING INCOME OF A CHARITABLE TRUST BY HAVING DUE REGARD T O HEADS OF INCOME AND THE MANNER OF COMPUTATION TO BE DONE UNDER DIFFEREN T HEADS OF INCOME UNDER THE VARIOUS PROVISIONS OF THE ACT. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WHILE SEC.2(45) OF THE ACT SPECIFICALLY DEFINES 'TOTAL INCOME' THE EXPRESS ION USED IN SECTION 11(1) IS ONLY INCOME. ACCORDINGLY, IT WOULD BE INCORRECT TO ASSIGN TO THE WORD INCOME' USED IN SECTION 11(1)(A), THE SAME MEANING AS HAS BEEN SPECIFICALLY ASSIGNED TO THE EXPRESSION TOTAL INCO ME' IN SEC.2(45) OF THE ITA NO.878/BANG/2012 PAGE 7 OF 16 ACT. THE CBDT IN CIRCULAR NO.5P (LXX-6), DATED 19. 6.1968 HAS ALSO ADOPTED THE SAME APPROACH. THE SAME IS AS FOLLOWS: IN THE CASE OF A BUSINESS UNDERTAKING HELD UNDER T RUST, ITS 'INCOME' DISCLOSED BY THE ACCOUNT WILL BE ELIGIBLE FOR EXEMP TION UNDER SECTION 11(1). THE PERMITTED ACCUMULATION OF 25 PER CENT WI LL ALSO BE CALCULATED WITH REFERENCE TO THIS INCOME. WHERE THE TRUST DERIVES INCOME FROM HOUSE PROPERTY, INTEREST ON SECURITIES, CAPITAL GAINS, OR OTHER SOURCES, THE WO RD 'INCOME' SHOULD BE UNDERSTOOD IN ITS COMMERCIAL SENSE I.E., BOOK INCOM E, AFTER ADDING BACK ANY APPROPRIATIONS OR APPLICATIONS THEREOF TOWARDS THE PURPOSES OF THE TRUST OR OTHERWISE, AND ALSO AFTER ADDING BACK ANY DEBITS MADE FOR CAPITAL EXPENDITURE INCURRED FOR THE PURPOSES OF TH E TRUST OR OTHERWISE. THE AMOUNTS SPENT OR APPLIED FOR THE PURPOSES OF TH E TRUST FROM OUT OF THE INCOME COMPUTED IN THE AFORESAID MANNER, SHOULD BE NOT LESS THAN 75 PERCENT OF THE LATTER, IF THE TRUST IS TO GET TH E FULL BENEFIT OF THE EXEMPTION UNDER SECTION 11(1).' 10. THE METHOD OF COMPUTING INCOME OF A CHARITABLE TRUST IS DIFFERENT FROM THAT FOLLOWED IN THE CASE OF OTHER ASSESSES, I N THAT, IT IS THE COMMERCIAL CONCEPT OF INCOME WHICH IS TO BE CONSIDE RED AND NOT THE INCOME AS COMPUTED UNDER THE VARIOUS HEADS OF INCOM E AS SPECIFIED IN SECTION 14. IN OTHER WORDS, THE INCOME FOR THE PURP OSE OF SECTION 11 IS THE INCOME AS PER THE ACCOUNTS OF THE TRUST. IT MEANS T HE INCOME IN THE COMMERCIAL SENSE, WITHOUT REFERENCE TO THE HEADS OF INCOME SPECIFIED IN SECTION 14, I.E., THE BOOK INCOME AND NOT THE TOTAL INCOME AS DEFINED IN SEC.2(45). THEREFORE IN COMPUTING THE INCOME OF THE TRUST, THE INCOME ARISING FROM PROPERTY HELD UNDER TRUST FOR PUBLIC C HARITABLE OR RELIGIOUS PURPOSES IS TO BE FIRST COMPUTED AND THEREAFTER, TH E AMOUNT APPLIED FOR CHARITABLE PURPOSE IS DETERMINED. ITA NO.878/BANG/2012 PAGE 8 OF 16 11. IN SUPPORT OF THE ABOVE CONCLUSION REFERENCE MA Y BE MADE TO THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF DIT( E) VS. GIRIDHARILAL SHEWNARAIN TANTIA TRUST 199 ITR 215 (C AL) . THE FACTS OF THE AFORESAID CASE WERE THE ASSESSEE WAS A TRUST . THE ASSESSING OFFICER REJECTED THE ASSESSEE'S CLAIM FOR DEDUCTION UNDER S ECTION 80T OF THE INCOME-TAX ACT, 1961. SECTION 80T PROVIDED THAT WHE RE THE GROSS TOTAL INCOME OF AN ASSESSEE NOT BEING A COMPANY INCLUDES ANY INCOME CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS' RELATING TO CAPITAL ASSETS OTHER THAN SHORT-TERM CAPITAL ASSETS, A STRAIGHT DEDUCTIO N TO THE EXTENT OF THE PRESCRIBED PERCENTAGE OF SUCH GAINS FROM THE TOTAL INCOME ITSELF SHALL BE ALLOWED. THE FIRST RS. 5,000 OF THE LONG-TERM CAPIT AL GAINS IS NOT LIABLE TO ANY TAX AND HAS TO BE EXCLUDED FROM THE AMOUNT OF L ONG-TERM CAPITAL GAINS AND, ON THE BALANCE, THE RELIEF IS ALLOWABLE AT THE PRESCRIBED PERCENTAGE. THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.80T OF THE ACT. THE QUESTION BEFORE THE HON'BLE HIGH COURT WAS AS TO 'WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE PROPER INTERPRETATION OF SECTION 11 OF THE INCOME-TAX ACT, 1961, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE CAPITAL GAIN AMOUNTIN G TO RS. 2,91,644 IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80T OF THE INCOME-TAX A CT, 1961?' THE HON'BLE CALCUTTA HIGH COURT HELD THAT UNDER SECTION 11 OF T HE INCOME-TAX ACT, 1961, INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR C HARITABLE OR RELIGIOUS PURPOSES IS EXEMPT FROM INCOME-TAX TO THE EXTENT SU CH INCOME IS ACTUALLY APPLIED TO SUCH PURPOSES DURING THE PREVIOUS YEAR I TSELF OR WITHIN THE THREE ITA NO.878/BANG/2012 PAGE 9 OF 16 MONTHS NEXT FOLLOWING. AS 'INCOME' INCLUDES 'CAPITA L GAINS', A CHARITABLE OR RELIGIOUS TRUST WOULD FORFEIT EXEMPTION FROM INCOME -TAX IN RESPECT OF ITS INCOME BY WAY OF CAPITAL GAINS UNLESS SUCH INCOME I S ALSO APPLIED FOR THE PURPOSES OF THE TRUST DURING THE STIPULATED PERIOD. BY SUB-SECTION (1A), IT HAS BEEN PROVIDED THAT, IN A CASE WHERE A CAPITAL A SSET BEING PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES IS TRANSFERRED AND THE WHOLE OR ANY PART OF THE NET CONSIDERATION FOR THE TRANSF ER (I.E., FULL VALUE OF CONSIDERATION AS REDUCED BY THE EXPENDITURE INCURRE D WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER) IS UTI LISED FOR ACQUIRING ANOTHER CAPITAL ASSET TO BE HELD AS PART OF THE CORPUS OF T HE TRUST, THE CAPITAL GAIN ARISING FROM THE TRANSFER WILL BE REGARDED AS HAVIN G BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES. WHERE THE WHOLE O F SUCH NET CONSIDERATION IS UTILISED IN ACQUIRING THE NEW CAPITAL ASSET, THE ENTIRE AMOUNT OF THE CAPITAL GAIN WILL BE REGARDED AS HAVING BEEN APPLIED TO CHA RITABLE OR RELIGIOUS PURPOSES WHILE, IN A CASE WHERE ONLY A PART OF THE NET CONSIDERATION IS UTILISED FOR ACQUIRING THE NEW CAPITAL ASSET, SO MU CH OF SUCH CAPITAL GAINS AS IS EQUAL TO THE AMOUNT, IF ANY, BY WHICH THE AMO UNT SO UTILISED EXCEEDS THE AGGREGATE OF THE COST OF ACQUISITION OF THE CAP ITAL ASSET TRANSFERRED AND THE COST OF ANY IMPROVEMENTS MADE TO SUCH ASSET, WI LL BE REGARDED AS HAVING BEEN APPLIED TO SUCH PURPOSES. FROM A COMBIN ED READING OF SECTIONS 11 (1)(A), 11(1 )(B) AND SECTION 11(1 A), IT IS CLEAR THAT THE INCOME OF A TRUST INCLUDING CAPITAL GAINS IS TREATED ON A SEPARATE FOOTING AND THE ASSESSEE-TRUST HAS TO FULFIL THE CONDITIONS LAID DO WN THEREIN FOR THE PURPOSE ITA NO.878/BANG/2012 PAGE 10 OF 16 OF AVAILING OF EXEMPTIONS FROM TAXATION. THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES CANNOT, THEREFORE, BE EQUATED WITH THE INCOME WHICH IS COMPUTED UNDER THE GENERAL PROVISIO NS OF THE ACT IN RESPECT OF OTHER ASSESSEES WHO ARE NOT ENTITLED TO THE BENEFIT OF THE AFORESAID PROVISIONS. IN A CASE WHERE AN ASSESSEE-T RUST HAS INCOME FROM DIFFERENT SOURCES AND HAS APPLIED SUCH INCOME AND A PART OF SUCH INCOME COMES WITHIN THE AMBIT OF TAXATION, IT WILL NOT BE POSSIBLE TO EARMARK ANY PART OF SUCH INCOME TO A PARTICULAR HEAD. THEREFORE , THE QUESTION OF ALLOWING ANY STATUTORY DEDUCTIONS AS CONTEMPLATED B Y THE DIFFERENT PROVISIONS OF THE ACT DEALING WITH DIFFERENT HEADS OF INCOME IN COMPUTING THE INCOME ACCUMULATED WILL NOT ARISE WHEN THE TRUS T LOSES THE BENEFIT OF ACCUMULATION. HENCE, A CHARITABLE TRUST IS NOT ENTI TLED TO DEDUCTION UNDER SECTION 80T IN RESPECT OF ITS LONG-TERM CAPITAL GAI NS. 12. THE ISSUE CAN BE LOOKED AT FROM ANOTHER ANGLE. SUB-SECTION (4) OF SECTION 11 SPECIFICALLY LAYS DOWN THE MODE OF DETER MINATION OF THE INCOME OF THE BUSINESS UNDERTAKING OF A TRUST. A SIMILAR P ROVISION IS NOT TO BE FOUND WITH REGARD TO THE OTHER INCOMES OF THE TRUST. BY A N INFERENTIAL PROCESS IT CAN BE SAID THAT THE MODE OF DETERMINATION BY THE I TO IS ONLY RESTRICTED TO THE INCOME OF THE BUSINESS UNDERTAKING. IMPLIEDLY, THE INCOME THAT HAS TO BE COMPUTED WITH REGARD TO A TRUST IS ONE BASED ON THE ACCOUNTS OF THE TRUST WHERE THE ACCOUNTS ARE MAINTAINED IN CONFORMI TY WITH THE PRINCIPLES OF ACCOUNTING. ITA NO.878/BANG/2012 PAGE 11 OF 16 13. THERE IS YET ANOTHER ANGLE TO THE AFORESAID IS SUE. EVEN IN INTERPRETING THE SEVERAL PROVISIONS OF THE I.T. ACT , WHEREVER THE EXPRESSION 'INCOME' OCCURS, THERE HAS BEEN SOME DIVERGENCE IN THE MEANING GIVEN TO THAT EXPRESSION ON ACCOUNT OF THE PARTICULAR CONTEX T INVOLVED. IN THE CONTEXT OF SECTION 11, WHICH CONTEMPLATES APPLICATION OR AC CUMULATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSE, IT HAS NECESSA RILY TO BE THE INCOME AS ACCOUNTED FOR IN THE ACCOUNTS AND NOT AS COMPUTED U NDER THE I.T. ACT. HENCE, FOR THE PURPOSE OF SECTION 11(1) THE EXPRESS ION 'INCOME' HAS TO BE UNDERSTOOD IN THE POPULAR OR GENERAL SENSE, I.E., I N THE SENSE WHAT IS ACTUALLY AVAILABLE IN THE HANDS OF THE ASSESSEE SUB JECT, OF COURSE, TO ANY ADJUSTMENT FOR EXPENSES EXTRANEOUS TO THE TRUST. IT IS ONLY THE INCOME AS AVAILABLE TO THE ASSESSEE AND, AS STATED IN LORD CHETWODE VS. IRC (1977) 1 ALL ER 638 , OVER WHICH THE ASSESSEE HAS POWER TO ENJOY WHICH CAN BE APPLIED OR ACCUMULATED FOR CHARITABLE PURPOS ES. MOREOVER, WHEREVER THE STATUTE CONTEMPLATED THE INCOME BEING COMPUTED IN THE MANNER SET OUT IN THE PROVISIONS OF THE ACT, APPROP RIATE WORDS ARE USED. SUCH IS NOT THE CASE WITH SECTION 11(1). HENCE, INC OME FROM THE PROPERTIES HELD UNDER TRUST WOULD HAVE TO BE ARRIVED AT IN THE NORMAL COMMERCIAL MANNER WITHOUT REFERENCE TO THE PROVISIONS WHICH AR E ATTRACTED BY SECTION 14. IN OTHER WORDS, THE APPLICATION OR ACCUMULATION AS PER SECTION 11(1) MUST BE OF REAL INCOME ONLY. [ CIT VS. JAYASHREE CHARITY TRUST 159 ITR 280 (CAL). ] ITA NO.878/BANG/2012 PAGE 12 OF 16 14. THE INCOME FROM PROPERTY HELD FOR CHARITABLE O R RELIGIOUS PURPOSES CANNOT BE EQUATED WITH THE INCOME WHICH IS COMPUTED UNDER THE GENERAL PROVISIONS OF THE IT ACT IN RESPECT OF OTHER ASSESS EES. IN A CASE WHERE AN ASSESSEE-TRUST HAS INCOME FROM DIFFERENT SOURCES AN D A PART OF SUCH INCOME COMES WITHIN THE AMBIT OF TAXATION, IT WILL NOT BE POSSIBLE TO EARMARK ANY PART OF SUCH INCOME TO A PARTICULAR HEAD. SUCH INCOME HAS TO BE COMPUTED IN A NORMAL COMMERCIAL MANNER. THEREFORE, THE QUESTION OF ALLOWING ANY STATUTORY DEDUCTIONS AS CONTEMPLATED B Y THE DIFFERENT PROVISIONS OF THE IT ACT DEALING WITH DIFFERENT HEA DS OF INCOME CANNOT ARISE WHILE DECIDING THE PERCENTAGE OF APPLICATION OR ACC UMULATION UNDER SECTION 11 [ DIT VS. GIRDHARILAL SHEWNARAIN TANTIA TRUST 199 ITR 215 (CAL) ]. 15. FOR THE REASONS GIVEN ABOVE, WE ARE OF THE VIEW THAT THE CIT(APPEALS) FELL INTO AN ERROR IN DIRECTING THE AO TO ALLOW DEDUCTION TO THE ASSESSEE U/S. 24(A) OF THE ACT WHILE COMPUTING INCO ME OF THE TRUST. THUS, GROUNDS 1 TO 4 RAISED BY THE REVENUE ARE ALLOWED. 16. IN GROUND NO.5, THE REVENUE HAS RAISED THE ISSU E WITH REGARD TO ALLOWING DEPRECIATION WHILE COMPUTING INCOME OF THE TRUST. THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.1,95,082. THE AO FOU ND THAT THE EXPENDITURE INCURRED AT THE TIME OF ACQUIRING THESE CAPITAL ASSETS WAS CLAIMED, HAD BEEN CONSIDERED AS APPLICATION OF INCO ME IN THE YEAR OF ITS ACQUISITION. ACCORDING TO THE AO, ON THE VERY SAME ASSET, IF DEPRECIATION IS ITA NO.878/BANG/2012 PAGE 13 OF 16 ALLOWED, IT WOULD BE CONFERRING DOUBLE DEDUCTION ON THE ASSESSEE. THE AO REFERRED TO THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF ESCORTS LTD. & ANR. V. UOI & ORS., 199 ITR 43 (SC) . IN THE AFORESAID CASE, THE ASSESSEE HAD CLAIMED DEDUCTION ON ACCOUNT OF AN ASSET WHICH IS USED IN THE BUSINESS. THE ASSESSEE ALSO CLAIMED DEDUCTION U/S. 35(1)(IV) OF THE ACT ON THE VERY SAME ASSETS O N THE GROUND THAT THEY WERE CAPITAL EXPENDITURE INCURRED ON SCIENTIFIC RES EARCH RELATING TO THE BUSINESS CARRIED ON BY THE ASSESSEE WHICH WAS TO BE ALLOWED AT 1/5 TH OF CAPITAL EXPENDITURE IN FIVE ASSESSMENT YEARS. THE QUESTION BEFORE THE HONBLE COURT WAS AS TO WHETHER THE ASSESSEE COULD GET DOUBLE DEDUCTION ON THE VERY SAME EXPENDITURE. THE HONBLE COURT HE LD THAT LEGISLATURE COULD NOT HAVE ENVISAGED DOUBLE DEDUCTION QUA SAME EXPENDITURE. RELYING ON THE AFORESAID DECISION, THE AO DISALLOWE D THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF DEPRECIATION. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(APPEALS). 17. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT THERE WAS NO DOUBLE DEDUCTION CLAIMED ON THE SAME EXPENDITURE AN D THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) WILL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE. 18. THE CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE AND HELD THAT THE ASSESSEE WAS ENTITLED TO DEPRECIATION. AG GRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE HAS RAISED GROUND NO.5 BEFO RE THE TRIBUNAL. ITA NO.878/BANG/2012 PAGE 14 OF 16 19. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARN ED DR RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR THE ASSES SEE REITERATED SUBMISSIONS MADE BEFORE CIT(A) AND THE ORDER OF THE CIT(A). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF D EPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTING INCO ME OF CHARITABLE INSTITUTIONS, THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT IS NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR, DETERIORATION, OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF SECTION 11(1) HAS TO BE COMPUTED IN NOR MAL COMMERCIAL MANNER, THE AMOUNT OF DEPRECIATION DEBITED IN THE B OOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). I T WAS HELD IN CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) , FOLLOWING CIT VS. MARKET COMMITTEE, PIPLI (2011) 330 ITR 16 (P&H) : (2011) 238 CTR (P&H ) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITU TION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHAR ITABLE OBJECTS. CLAIM FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HONBLE COURT IN THE AFORESAID DECISIONS. ITA NO.878/BANG/2012 PAGE 15 OF 16 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND O F APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HONBLE PUNJAB & HARYAN A HIGH COURT IN THE CASE OF CIT V. MARKET COMMITTEE, PIPLI, 330 ITR 16 (P&H) . THE HONBLE PUNJAB & HARYANA HIGH COURT AFTER C ONSIDERING SEVERAL DECISIONS ON THAT ISSUE AND ALSO THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) , CAME TO THE CONCLUSION THAT DEPRECIATION IS ALLOWABLE ON CAPITA L ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUNDS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TERMS OF SECTI ON 11 OF THE ACT. THE HONBLE PUNJAB & HARYANA HIGH COURT MADE A REFERENC E TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HONBLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCTIONS UNDER DIFFERENT PROVISIONS OF THE ACT, O NE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITUR E OF A CAPITAL NATURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF T HE ACT. THE HONBLE COURT THEREAFTER HELD THAT A TRUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOUBLE DEDUCTION. THE HONBLE PUNJAB & H ARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HONBL E KARNATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF ANNE, 146 ITR 28 (KAR) , WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE ACT, INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DE BITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IN VIEW OF THE AFORESAID DECISION ITA NO.878/BANG/2012 PAGE 16 OF 16 ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. 22. CONSEQUENTLY, GROUND NO.5 RAISED BY THE REVENUE IS DISMISSED . 23. IN THE RESULT, THE APPEAL BY THE REVENUE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF AUGUST, 2013. SD/- SD/- ( N. BARATHVAJA SANKAR ) ( N.V. VASU DEVAN ) VICE PRESIDENT JUDIC IAL MEMBER BANGALORE, DATED, THE 14 TH AUGUST, 2013. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.