2017 (10) TMI 385 - HC - Income Tax

Depreciation claim to assessee trust - application of income under Section 11(1)(a) - Held that - Law permits this course and there is no double deduction. See Commissioner of Income Tax Vs. Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY High Court Appeal admitted on (B) Whether on the facts of the case and in law the Hon ble Tribunal erred in allowing the assessee had investment of ₹ 25 lakhs with Canara Robeco Mutual Fund which was not permissible under Section 11(5)(2)(b) of the Income Tax Act, 1961? (C) Whether, on the facts and in the circumstances of the case and in law, the Hon ble ITAT is justified in allowing exemption under Section 11 of the Act to the Assessee Trust in spite of violation of the provisions of Section 13(1)(d) read with Section 11(5) of the Act by the AssesseeTrust in investing ₹ 50 lakhs in Fixed Deposit with Tata Motors Ltd?

Summary

Issues:
1. Whether the Tribunal erred in allowing the assessee's investment with Canara Robeco Mutual Fund under Section 11(5)(2)(b) of the Income Tax Act, 1961?
2. Whether the Tribunal was justified in allowing exemption under Section 11 of the Act to the Assessee Trust despite investing in Fixed Deposit with Tata Motors Ltd in violation of the provisions of Section 13(1)(d) read with Section 11(5) of the Act?

Analysis:
1. The High Court examined the appellant's contention regarding the investment of ?25 lakhs with Canara Robeco Mutual Fund by the assessee Trust. The Assessing Officer noted that depreciation was claimed on assets as application of income under Section 11(1)(a) of the Act, despite the capital expenditure on these assets already being allowed as application of income. The appellant argued that this amounted to double deduction. However, the assessee relied on previous court decisions to support their claim, stating that the Revenue's objection was without substance. The High Court agreed with the assessee's position, citing past judgments that permitted such deductions and dismissed the appeal on this issue.

2. The Court then considered the Tribunal's decision to allow exemption under Section 11 of the Act to the Assessee Trust, despite investing ?50 lakhs in Fixed Deposit with Tata Motors Ltd, which was alleged to violate the provisions of Section 13(1)(d) read with Section 11(5) of the Act. The Court found that the Tribunal's findings raised substantial questions of law and admitted the appeal on this issue for further examination. The High Court directed the Registry to summon the original record from the Tribunal for inspection and preparation of a complete paper-book in accordance with the Rules, signaling the advancement of the appeal process.

In conclusion, the High Court dismissed the appeal concerning the investment with Canara Robeco Mutual Fund but admitted the appeal on the issue of exemption under Section 11 despite investment in Fixed Deposit with Tata Motors Ltd. The judgment highlighted the importance of legal precedents and the interpretation of tax laws in charitable trust cases, setting the stage for further legal scrutiny and proceedings.