2015 (4) TMI 1066 - HC - Income Tax

Concept of capital or revenue receipt for a trust - amount received as development fund by the assessee and directly taken to the balance as liability - Held that - We are informed that in the succeeding years 2009-10 onwards the revenue has consistently brought to tax similar amounts. In these circumstances we leave the question of law open to be urged later in an appropriate case. As far as the other issue with respect to claim for depreciation allowed in favour of the assessee is concerned the Court noticed that the question of law sought to be urged stands covered in the assessee s favour in Director of Income Tax V. Indraprasth Cancer Society 2014 (11) TMI 733 - DELHI HIGH COURT

Summary

Issues:
1. Treatment of sum of Rs. 66,25,049 received as development fund by the assessee.
2. Concept of capital or revenue receipt for a trust under Section 12(1).
3. Taxation of similar amounts in succeeding years.
4. Claim for depreciation of Rs. 15,94,466.

Analysis:

1. The High Court addressed the issue of the treatment of the sum of Rs. 66,25,049 received as a development fund by the assessee. The revenue contended that the amount, taken to the balance as a liability, was impermissible for a chargeable organization enjoying exemption under the Income Tax Act. The Court observed neutrality regarding the effect of this amount for the relevant assessment year.

2. The revenue argued that for a trust, all amounts received should be treated as income except those directly credited to the corpus, as per Section 12(1). The Court considered the absence of a distinction between capital or revenue receipt for such trusts.

3. It was noted that in subsequent years, the revenue consistently taxed similar amounts. The Court decided to keep the question of law open for future consideration in an appropriate case, indicating the possibility of revisiting this issue in the future.

4. Regarding the claim for depreciation of Rs. 15,94,466, which was allowed in favor of the assessee, the Court found that the issue was already settled in the assessee's favor in a previous judgment. The Court referred to the decision in Director of Income Tax v. Indraprasth Cancer Society dated 18.11.2014 in ITA No.240/2014, which supported the assessee's position.

5. Consequently, the appeal was disposed of based on the findings related to the treatment of the development fund amount and the resolution of the depreciation claim issue in favor of the assessee.