2014 (1) TMI 597 - AT - Income Tax

Depreciation as application of income Held that - Following ACIT vs. Shri Adichunchanagiri Shikshana Trust 2013 (11) TMI 123 - ITAT BANGALORE - The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purpose of Trust - There is no double deduction - The assessee is entitled to the deduction of depreciation Decided in favour of assessee. Exemption u/s 10(34) Held that - Following assessee s own case for AY 2006-2007 - The ld. CIT(A) held that even if the income is exempt, the same has to be included in the gross receipts and has to be applied as per provisions of section 11(1) because income has to be computed in commercial manner - The ld. CIT(A) has not adjudicated the issue properly and has not passed a reasoned order The issue was restored for fresh adjudication in the light of decision in case of General Insurance Corporation of India vs. DCIT. Adjustment of carry forward of excess application of income of earlier years Held that - Following assessee s own case for AY 2006-2007 - The exemption u/s 11 in the earlier years was not claimed by the assessee and the returns are barred by limitation, therefore, the question of excess application does not arise The Tribunal held that the issue requires fresh examination with a direction to examine the matter, on merit, for eligibility to tax exemption as a result of the registration u/s 12AA now available to the assessee and in the light of the requisite audit report and other documents now filed by the assessee - The assessments for the earlier assessment years are still pending The issue was restored for fresh adjudication. Interest u/s 234D Held that - Following assessee s own case for AY 2006-2007 - As per Explanation 2 which has been inserted in section 234D by the Finance Act, 2012 with retrospective effect from 1.6.2003 - The provisions of sec.234D shall also apply to the assessment year commencing before the first day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date - The A.O. was justified in charging the interest u/s 234D of the Act Decided against assessee.

Issues Involved:
1. Classification of income as business income under section 11(4) vs. income derived from property held under section 11(1)(a).
2. Addition of container income of Rs. 24,67,000/-.
3. Claim of depreciation as application of income.
4. Claim of exemption under section 10(34).
5. Adjustment of carry forward of excess application of income from earlier years.
6. Charging of interest under section 234D.

Issue-Wise Detailed Analysis:

1. Classification of Income:
The appellant did not press this ground, leading to its dismissal. The issue involved whether the CIT(A) erred in confirming the AO's action of assessing the appellant's income as business income under section 11(4) instead of as income derived from property held under section 11(1)(a).

2. Addition of Container Income:
The appellant objected to the addition of Rs. 24,67,000/- for the assessment year 2008-2009, arguing it was already offered for taxation in AY 2009-2010. The Tribunal found merit in the appellant's argument and directed the AO to grant relief in subsequent assessment years after providing a reasonable opportunity of being heard to the appellant. This ground was allowed for statistical purposes.

3. Claim of Depreciation:
The appellant claimed depreciation of Rs. 16,83,16,468/- as application income. The Tribunal referred to its previous decision in the appellant's case for AY 2006-2007, where it was held that there was no double deduction, and the appellant was entitled to the deduction of depreciation. Following the principle of consistency, the Tribunal allowed this ground.

4. Claim of Exemption under Section 10(34):
The appellant claimed an exemption of Rs. 10,42,71,151/- under section 10(34). The Tribunal noted that the CIT(A) had not properly adjudicated the issue and had not passed a reasoned order. The matter was remanded to the AO to decide afresh, considering relevant precedents and providing a reasonable opportunity of being heard to the appellant. This ground was allowed for statistical purposes.

5. Adjustment of Carry Forward of Excess Application of Income:
The appellant sought to adjust the carry forward of excess application of income from earlier years. The Tribunal referred to its previous decision for AY 2006-2007, where the matter was remanded to the AO to examine the eligibility for tax exemption based on the registration under section 12AA. Since assessments for earlier years were still pending, the Tribunal remanded this issue to the AO for fresh adjudication, providing a reasonable opportunity of being heard to the appellant. This ground was allowed for statistical purposes.

6. Charging of Interest under Section 234D:
The appellant contested the interest charged under section 234D. The Tribunal referred to the Bombay High Court's decision in CIT vs. M/s Indian Oil Corporation Ltd., which held that Explanation 2 to section 234D applies to pending proceedings. The Tribunal upheld the AO's action of charging interest under section 234D, rejecting the appellant's ground.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for the AO to reconsider specific issues while providing the appellant a reasonable opportunity to be heard. The Tribunal upheld the AO's action regarding the charging of interest under section 234D.

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