2013 (10) TMI 1482 - AT - Income Tax

Summary

Issues Involved:
The judgment involves issues related to violation of Section 13(1)(c) of the Income-tax Act, 1961, denial of benefit under Section 11 to a charitable institution, and computation of income including depreciation for charitable purposes.

Violation of Section 13(1)(c):
The case revolved around a charitable institution violating Section 13(1)(c) by providing funds to interested parties associated with the institution, as per the findings of the Assessing Officer. The Assessing Officer highlighted transactions involving M/s General Commercial Agencies and trustees with substantial interest, leading to the denial of benefits under Section 11.

Benefit under Section 11:
The Commissioner of Income Tax (Appeals) examined the grounds raised by the assessee in detail, particularly regarding the accounting of transactions involving trustees and interested parties. It was found that the separate accounting of receipts and payments without netting or squaring up did not constitute a violation under Section 13(1)(c). The Commissioner concluded that there was no breach of Section 13(1)(c) and directed the Assessing Officer to grant the benefit of Section 11 to the assessee.

Depreciation Computation for Charitable Purposes:
Regarding the computation of income including depreciation for charitable purposes, it was argued that the assessee, being a charitable institution, was entitled to depreciation allowance as per normal accounting practices. The judgment clarified that the allowance of depreciation and recognition of funds spent on acquiring assets for charitable purposes are distinct segments. There was no double benefit as the application of funds for charitable purposes was derived from the income computed conventionally. The lower authorities were directed to compute the income after providing for depreciation and treat the asset acquisition expenses as application of funds for charitable purposes.

In conclusion, the appeals filed by the Revenue were dismissed, and the cross-objections filed by the assessee were allowed, emphasizing compliance with Section 11 benefits and proper computation of income including depreciation for charitable activities.