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2023 (7) TMI 273 - AT - Income TaxExemption u/s 11 and 12 - assessee cannot be considered to cover by the proviso to section 2(15) of the Act and cannot withdraw the claim of exemption u/s. 11 - HELD THAT - The Hon ble Supreme Court Judgment in Civil Appeal 2022 (10) TMI 948 - SUPREME COURT which has settled the issue by dismissing the Revenue s appeal. Hon ble Supreme Court in the very same case of ACIT vs. Ahmedabad Urban Development Authority reported 2022 (11) TMI 255 - SUPREME COURT wherein it has been clearly held that the Revenues Appeals are dismissed as far as statutory Corporations/Boards Rate of depreciation on the basis of normal commercial principles not as per section 32 of the Act not applicable to exempt person - HELD THAT - The Co-ordinate Bench of the Tribunal held that the fixed assets served some special purpose of the working of the assessee and thereby considered as plant and machinery in the working process of the assessee. CIT(A) has not justified in holding that the income of exempt person has to be calculated on the basis of normal commercial principles and by Rule of accountancy. We hold that the assessee is entitled to claim the depreciation as plant and machinery as the assessee in promoting public objects which are activities in the nature of trade commerce or business but without commercial motive. Ground raised by the Assessee allowed. Accumulation of income - whether application of income shall precede accumulation by directing A.O. to allow accumulation u/s. 11(1)(a) from income remaining after deducting amount applied for the objects of the assessee trust - HELD THAT - As relying on Gnyan Dham Vapi Charitable Trust 2020 (10) TMI 238 - ITAT AHMEDABAD and Maharshi Karve Stree Shikshan Samstha Karvenagar 2019 (1) TMI 1260 - ITAT PUNE we hereby set aside the order passed by the Ld. CIT(A) and held that when application of income is more than receipts of year excess application of income i.e. expenditure in the hands of the assessee can be carried forward to succeeding Year. Ground raised by the Assessee allowed.
Issues Involved:
1. Denial of benefits under Sections 11 and 12 of the Income Tax Act. 2. Computation of income and treatment of grants and funds. 3. Application of depreciation rates. 4. Carry forward of deficit and accumulation of income. 5. Levy of interest and initiation of penalty proceedings. Summary: Issue 1: Denial of Benefits under Sections 11 and 12 The Revenue challenged the CIT(A)'s decision to allow benefits under Sections 11 and 12, which the Assessing Officer had denied by invoking Section 2(15) read with Section 13(8) of the Act. The Tribunal noted that the CIT(A) followed the Gujarat High Court judgment in the assessee's own case. The Supreme Court's judgment in Civil Appeal No. 21762 of 2017, which dismissed the Revenue's appeal, was also cited. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision. Issue 2: Computation of Income and Treatment of Grants and Funds The assessee's appeal included multiple grounds regarding the computation of income and the treatment of grants and funds. The Tribunal noted that Ground No. 1 was covered by the Supreme Court judgment in the assessee's favor. Grounds Nos. 2 to 6 were considered consequential and not pressed by the assessee. Therefore, Ground No. 1 was allowed, and Grounds Nos. 2 to 6 were dismissed. Issue 3: Application of Depreciation Rates The CIT(A) directed the AO to verify and apply depreciation rates based on normal commercial principles rather than Section 32 of the Act. The Tribunal referred to the Cuttack Bench's decision in Paradip Port Trust Vs. Additional Commissioner of Income-tax, which allowed depreciation at 15% for assets serving special purposes. The Tribunal held that the assessee is entitled to claim depreciation as 'plant and machinery' and allowed Ground No. 8. Issue 4: Carry Forward of Deficit and Accumulation of Income Ground No. 9 concerned the application of income and the carry forward of the deficit. The Tribunal cited the Co-ordinate Bench's decision in Gnyan Dham Vapi Charitable Trust Vs. DCIT (Exemptions) and the Pune Bench's decision in Maharshi Karve Stree Shikshan Samstha Karvenagar Vs. ITO. It was held that when the application of income exceeds receipts, the excess expenditure can be carried forward to succeeding years. Thus, Ground No. 9 was allowed. Issue 5: Levy of Interest and Initiation of Penalty Proceedings Ground Nos. 10 and 11, concerning the levy of interest under Sections 234B and 234C and the initiation of penalty proceedings under Section 271(1)(c), were deemed consequential. Since the main appeal was allowed in favor of the assessee, these grounds did not require further adjudication. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal, providing relief on several grounds based on precedents and judicial principles.
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