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2017 (4) TMI 1289 - AT - Income TaxDisallowance of depreciation as part of application of income of the trust - Held that - This issue is no more res integra as the Hon ble jurisdictional High Court, in the case of CIT vs. Karnataka Reddy Janasangha (2016 (6) TMI 1181 - KARNATAKA HIGH COURT) considering several precedents on the issue, held that the same does not amount to double deduction and the same is allowable and the amended provisions of section 11(6) of the Act are prospective in nature and operative effective from 01/04/2015 Whether accumulation of income should be on gross receipt or net income after deducting the expenditure, is covered by the decision of the Hon ble Supreme Court in the case of CIT vs. Programme for Community Organisation (2000 (11) TMI 4 - SUPREME Court) wherein it was held that 25% should be calculated on the gross receipts of income and not on the net income. Therefore, these grounds of appeal raised by the revenue are dismissed. Carry forward of excess application of income to subsequent years - Held that - This issue is covered against the revenue by co-ordinate bench of Tribunal in the case of Deputy Director of Income-tax vs. Jyothy Charitable Trust (2015 (7) TMI 859 - ITAT BANGALORE).
Issues Involved:
1. Disallowance of depreciation. 2. Repayment of loan. 3. Net receipts vs. Gross receipts. 4. Carry forward of excess application. Issue-Wise Detailed Analysis: 1. Disallowance of Depreciation: The revenue argued that depreciation should not be allowed on assets whose cost has already been treated as an application of income. They cited the Kerala High Court decision in Lissie Medical Institutions Vs. CIT and the Supreme Court decision in Escorts Ltd. & another Vs. Union of India, which held that double deductions are not permissible unless explicitly stated by the statute. However, the CIT(A) allowed the depreciation based on the Karnataka High Court's decision in CIT vs. Society of the Sisters of St. Anne and other precedents, which held that depreciation does not amount to double deduction. The Tribunal upheld the CIT(A)'s decision, noting that the amendment to Section 11(6) of the Act, which disallows depreciation, is prospective from 01/04/2015 and not retrospective. 2. Repayment of Loan: The revenue contended that the CIT(A) erred in allowing the repayment of the loan as it results in a double deduction. The CIT(A) relied on decisions from the Karnataka and Madras High Courts to adjudicate the matter. The Tribunal did not explicitly address this issue in their final decision, implying acceptance of the CIT(A)'s stance. 3. Net Receipts vs. Gross Receipts: The revenue argued that the CIT(A) incorrectly allowed the accumulation of income based on gross receipts instead of net income. They cited a Board Circular explaining that if a trust fails to comply with accumulation provisions, the entire income accumulated would be liable to assessment. However, the CIT(A) followed the Supreme Court's decision in CIT vs. Programme for Community Organisation, which held that 25% should be calculated on gross receipts. The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's grounds. 4. Carry Forward of Excess Application: The revenue contended that the CIT(A) erred in allowing the carry forward of excess application of income to subsequent years. They argued that normal computation rules under sections 15 to 59 and set-off provisions under sections 70 to 79 do not apply to charitable trusts. The CIT(A) allowed the carry forward based on the Tribunal's decisions in CIT vs. City Hospital Charitable Trust and DCIT vs. Manipal Academy of Higher Education. The Tribunal upheld the CIT(A)'s decision, referencing the case of Deputy Director of Income-tax vs. Jyothy Charitable Trust, which allowed the set-off of excess expenditure against subsequent years' income. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal's reasoning was consistent with established precedents and the prospective application of the amendment to Section 11(6). The appeal was treated as partly allowed for statistical purposes, with the order pronounced on 07th April 2017.
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