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2023 (8) TMI 142 - AT - Income TaxAssessment of trust - entitlement to accumulation @ 15% u/s. 11(1)(a) - HELD THAT - As decided in own case 2023 (6) TMI 1212 - ITAT AHMEDABAD 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. Thus the ground raised by the assessee is hereby allowed. Entitlement to claim capital expenditure as application of income - HELD THAT - As assessee fairly conceded that if any item of income has been accepted by the Department as capital in nature and hence not forming part of the taxable income of the assessee then the assessee is not eligible to claim corresponding expenditure incurred in relation thereto, against the same. However, if any item reflected as a capital receipt in the balance sheet is treated as having been earned on revenue account, then the assessee would be eligible to claim corresponding expenditure against the same as well in accordance with law. The Ld. A.O. may carry out the necessary verification and allow the claim of the assessee as per the above directions. Entitlement to depreciation on fixed asset created out of such funds - HELD THAT - As assessee fairly conceded that w.e.f. assessment year 2015-16, the law has undergone a change and accordingly depreciation would not be allowed on such assets purchased after 01-04-2015. However, the counsel for the assessee submitted that in the interest of justice, the matter may be set aside to the file of Assessing Officer to check the applicability of provisions of section 11(6) of the Act to the extent, the assessee has not claimed such depreciation on fixed assets created out of grant given for a specific purpose. Depreciation as plant and machinery - HELD THAT - As assessee is entitled to claim depreciation as plant and machinery since the assessee is promoting public objects which are activities in the nature of trade, commerce or business but without a commercial motive. Whether assessee is not entitled to exemption u/s 11 and 12 of the Act since it is covered by first and second proviso to section 2(15)? - This issue has been settled by the Hon ble Supreme Court in assessee s own case ACIT (E) vs. Ahmedabad Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT held that the fact that bodies which carry on statutory functions whose income was eligible to be considered for exemption u/s 10(20A) ceased to enjoy that benefit after deletion of that provision w.e.f. 01.04.2003, does not ipso facto preclude their claim for consideration for benefit as GPU category charities, under Section 11 read with Section 2(15) of the Act. Statutory Corporations, Boards, Authorities, Commissions, etc. (by whatsoever names called) in the housing development, town planning, industrial development sectors are involved in the advancement of objects of general public utility, therefore are entitled to be considered as charities in the GPU categories. Such statutory corporations, boards, trusts authorities, etc. may be involved in promoting public objects and also in the course of their pursuing their objects, involved or engaged in activities in the nature of trade, commerce or business. Nature of receipt - Not to consider certain receipts as revenue receipts - HELD THAT - In deciding whether the income would qualify as capital or revenue receipt, the entire purport of the claim has to be gathered. Accordingly, Gujarat Safai Kamdar Vikas Nigam 2011 (5) TMI 815 - GUJARAT HIGH COURT held that aforesaid amount received by the assessee should be treated as capital receipt of the assessee. Further, the counsel for the assessee submitted before us that in all fairness if the aforesaid receipts are treated a capital receipts, the corresponding expenditure should also be disallowed in the assessee s hands being capital in nature. In view of the above discussion, we are of the considered view that ld. CIT(A) has not erred in holding the aforesaid amounts to be capital receipts. However, corresponding expenses if any claimed against the aforesaid receipt shall also be disallowed.
Issues Involved:
1. Treatment of income and grants received by the assessee. 2. Entitlement to claim accumulation, capital expenditure, and depreciation under the Income Tax Act. 3. Classification of various receipts as capital or revenue. 4. Applicability of exemptions under sections 11 and 12 of the Income Tax Act. Summary: Issue 1: Treatment of Income and Grants Received by the Assessee The assessee's appeal included several grounds concerning the treatment of income and grants. Grounds 1-5 were dismissed as not pressed. For Ground 6(i), the ITAT ruled in favor of the assessee, allowing accumulation @ 15% u/s 11(1)(a) following the precedent set in the assessee's own case for AY 2014-15. The ITAT directed the AO to allow carry forward of deficit and accumulation as per the guidelines provided. Issue 2: Entitlement to Claim Accumulation, Capital Expenditure, and Depreciation For Ground 6(ii), the ITAT noted the assessee's concession that capital expenditure cannot be claimed against capital receipts if treated as such by the Department. The AO was directed to verify and allow claims accordingly. Ground 6(iii) concerning depreciation on fixed assets post-01-04-2015 was set aside to the AO to check the applicability of section 11(6). Ground 7, being similar to Ground 6, was treated identically. Ground 8 was allowed, entitling the assessee to claim depreciation as plant and machinery under normal commercial principles, following the ITAT's ruling for AY 2014-15. Issue 3: Classification of Various Receipts as Capital or Revenue Ground 9 of the assessee's appeal, similar to Ground 6(i), was allowed based on the same rationale. Ground 10 was deemed consequential and required no specific adjudication. The Department's appeal's Ground iii, regarding the classification of certain receipts as capital, was upheld by the ITAT, following the Gujarat High Court's ruling in the case of CIT vs. Gujarat Safai Kamdar Vikas Nigam. Corresponding expenses against these receipts were also to be disallowed. Issue 4: Applicability of Exemptions under Sections 11 and 12 For Ground 1 of the Department's appeal, the ITAT referred to the Supreme Court's decision in the assessee's own case (ACIT(E) vs. Ahmedabad Urban Development Authority), which settled that statutory bodies involved in public utility activities are entitled to exemptions under sections 11 and 12. Consequently, Ground ii, related to deemed application and accumulation under section 11, was dismissed in line with the Supreme Court's ruling. Conclusion: The assessee's appeal was partly allowed for statistical purposes, directing the AO to verify and allow claims as per the guidelines. The Department's appeal was dismissed, affirming the Supreme Court's decision on the applicability of exemptions and classification of receipts. The ITAT's order emphasized adherence to judicial precedents and statutory provisions in determining the tax treatment of the assessee's income and expenditures.
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