2015 (11) TMI 1863 - AT - Income Tax

Exemption u/s 11 - assessee had not carried on any activity of charitable nature as contemplated under the trust deed - assessee - trust engaged running the business of printing a newspaper - depreciation claim of assessee trust - HELD THAT - As relying on AL-MADEENA CHARITABLE TRUST. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX 1999 (11) TMI 104 - ITAT COCHIN held that when an assessee had not carried on any activity of charitable nature as contemplated under the trust deed except running the business of printing a newspaper, the assessee cannot be considered as carrying on charitable activity so as to grant exemption u/s.11 of the Act. In view of the binding precedent relied on by the ld. DR, we are of the opinion that the assessee is not carrying on any charitable activity and cannot be granted exemption u/s.11 of the Act. However, we have to make it clear that the claim of depreciation to be granted on written down value of the assets. In other words, if the assessee has already claimed capital expenditure on acquisition of assets as application of income in earlier years and the value of the assets on which depreciation claimed has been fully allowed as expenditure or application in the earlier years that cannot be any claim of depreciation once again. The present claim of depreciation cannot be a double deduction over and above the fully value of the assets, if it was granted as application of income in earlier years. With these observations, we allow the Revenue s appeal.

Summary

Issues Involved:
- Appeal filed by Revenue and cross objection filed by assessee against order of Commissioner of Income-tax(Appeals) dated 28.2.2014.
- Revenue's grounds: CIT(A) ignored relevant facts, assessee's activities not charitable, entitlement for exemption u/s 11, depreciation on assets.
- Cross objection by assessee regarding maintainability of sec.260A of the Act.

Analysis:

Issue 1: Revenue's Grounds
- Revenue contended that CIT(A) ignored relevant facts and failed to apply provisos to Section 2(15) of the Income Tax Act. Claimed assessee's activities are not charitable but commercial.
- CIT(A) held that assessee's activities fall under "general public utility" and are eligible for exemption u/s 11. Referred to specific objectives of the trust and the impact of its activities on the toiling masses.
- Regarding depreciation, CIT(A) allowed the claim as it is essential for calculating income and applying it for charitable purposes. Directed AO to accept returned income and allow depreciation based on various High Court decisions.
- Revenue's appeal allowed by ITAT Chennai, stating that the assessee is not engaged in charitable activities as per trust deed. Clarified that depreciation should be granted based on written down value of assets.

Issue 2: Cross Objection by Assessee
- Assessee raised issue on maintainability of sec.260A of the Act. ITAT Chennai dismissed the cross objection, stating that the Revenue's appeal was proper and rectified any mistakes pointed out by the assessee.

Conclusion:
- ITAT Chennai allowed Revenue's appeal, denying exemption u/s 11 to the assessee and clarifying the treatment of depreciation on assets. Dismissed the cross objection by the assessee regarding maintainability and depreciation. The judgment was pronounced on 6th Nov., 2015 in Chennai.