2018 (7) TMI 2204 - AT - Income Tax

Exemption u/s 11 - Assessment of trust - assessee is making huge profits and the dominant object is profit-making - CIT- A allowed the deduction - HELD THAT - CIT(A) followed the order in assessee s own case for the Assessment Year 2009-10 inasmuch as the facts and circumstances of the case are the same and there is no material to deviate from such decision of the earlier year. It is also brought to our notice by the Ld. AR that this issue has been directly and substantially been dealt a with the by the Tribunal in assessee s own case for the assessment years 2009-10 and 2012-13 and also the Hon ble jurisdictional High Court upheld the findings of the Tribunal for Assessment Year 2009-10 Addition on account of interest income - AO observed that the assessee society had given some loans to Sh. Balkrishan Education and Social Welfare Society and added the notional interest at 12% to the income of the assessee - HELD THAT - Tribunal deleted the same holding that the interest free funds transferred to Sri Balakrishna Society having similar charitable objects have finally reached to Sri Balakrishna Education and Social Welfare Society for construction of school building wherein 600 students of the assessee are studying. On this aspect also there is no allegation that the funds have not reached back finally to Sri Balakrishna Education and Social Welfare Society with which the assessee merged for construction of school building. Depreciation to asset of assessee trust - claim of depreciation which the Ld. AO disallowed on the premise that the purchase of assets was an application of income and hence the grant of depreciation would amount to double benefit - HELD THAT - This issue was considered in the light of the decision in CIT vs. Rajasthan and Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT to reach a conclusion that subsection (6) of section 11 was inserted by Finance Act 2014 and is only prospective in nature as such depreciation cannot be disallowed. While respectfully following the same we dismiss the grounds of appeal of revenue relating to this issue.

Summary

Issues:
- Exemption under section 11(1) of the Income Tax Act for the assessee
- Deletion of addition of interest income
- Allowance of depreciation on assets purchased by application of receipts

Exemption under section 11(1) of the Income Tax Act for the assessee:
The Revenue challenged the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2005-06, 2010-11, and 2011-12. The key issue was the direction given by the Commissioner to the Assessing Officer to allow the exemption under section 11(1) of the Act to the assessee. The Revenue contended that the assessee, a society registered under the Societies Registration Act, 1860, was denied the exemption under section 11(1) due to profit-making activities. However, the Tribunal, after considering previous decisions and the facts of the case, upheld the exemption for the assessee, stating that there was no reason to deviate from earlier decisions and dismissed the Revenue's appeals.

Deletion of addition of interest income:
Regarding the deletion of addition of interest income made by the Assessing Officer, the Tribunal referred to a similar case from a previous year where the interest-free funds transferred by the assessee to another society with charitable objectives were eventually used for constructing a school building. The Tribunal held that the funds had reached the intended destination and were used for a charitable purpose, thereby dismissing the Revenue's appeal on this ground.

Allowance of depreciation on assets purchased by application of receipts:
The issue of disallowance of depreciation on assets purchased by the application of receipts was also addressed. The Tribunal noted that a recent decision by the Honorable Apex Court clarified that subsection (6) of section 11, inserted by the Finance Act, 2014, was prospective in nature. Therefore, the Tribunal dismissed the Revenue's appeal related to the disallowance of depreciation, stating that it cannot be denied. The cross objections by the assessee were not pressed and were accordingly dismissed. In conclusion, the appeals of the Revenue and the cross objections of the assessee were dismissed by the Tribunal.