2024 (5) TMI 1238 - AT - Income Tax

Assessment of trust - Application of income by the Trust - assessee argued that besides depreciation there was more than statutory required application of Income - as submitted that since there was application of income more than 85% of total income before depreciation there would not be any tax liability even if depreciation was inadvertently claimed in the return. HELD THAT - Section 11(6) as inserted with effect from 1.4.2015 by Finance Act No. 2/2014 reads as under (6) In this section where any income is required to be applied or accumulated or set apart for application then for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset acquisition of which has been claimed as an application of income under this section in the same or any other previous year. Looking into the entire conspectus of section 11(6) of the Act and argument put forth by assessee it is necessary to set aside this issue to the file of A.O. to look into the application of income by the Trust afresh. Accordingly we set aside this issue to AO to look into afresh the application of income by the Trust and calculate tax liability if any as per law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
The appeal challenging the order passed u/s 250 of the Income Tax Act, 1961 for Assessment Year 2015-16 due to delay in filing the appeal and the grounds of appeal raised by the assessee regarding the Rectification Order for the same assessment year.

Delay in Filing Appeal:
The appeal was filed challenging the order dated 04.11.2023 passed u/s 250 of the Income Tax Act, 1961 by the Ld. Commissioner of Income Tax(Appeals)(NFAC) Delhi. The delay of 54 days in filing the appeal was condoned due to the trustee's medical condition and inability to attend to official duties, as supported by an affidavit. The delay was considered reasonable, and the appeal was admitted for adjudication.

Grounds of Appeal - Rectification Order:
The assessee raised several grounds of appeal against the Rectification Order for Assessment Year 2015-16. The grounds included challenging the levy of tax based solely on claiming depreciation, without considering the application of income for charitable purposes, and the refusal to rectify the assessment order under section 143(1) without proper investigation. The appellant also argued that the tax was levied without considering the actual application of income for charitable purposes, which exceeded the income after disallowance of depreciation.

Case Background and Decision:
The assessee, a Charitable Trust, filed its return of income for A.Y. 2015-16 claiming exemption under sections 11 & 10(23C) of the Act. The assessment order disallowed depreciation but did not consider the application of total income for charitable purposes. The rectification application was rejected by the AO CPC, Bangalore, and the appeal before the CIT(A) was dismissed. The Tribunal set aside the issue to the AO to reexamine the application of income by the Trust and calculate tax liability accordingly. The appeal of the assessee was allowed for statistical purposes.

Conclusion:
The Tribunal's decision to set aside the issue for reexamination of the application of income by the Trust showcases a thorough consideration of the legal provisions and arguments presented by both parties, ultimately leading to a favorable outcome for the assessee in this case.