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2017 (12) TMI 194 - AT - Income TaxDepreciation on assets as taken into account for application for the purpose of Section 11(1)(a) - double deduction - The first issue regarding allowability of depreciation on the assets which was considered as application of income in the earlier year, this issue is covered in favour of the assessee by the Tribunal order rendered in the case of DDIT(E) Vs. Karnataka Jesuit Educational Society (2016 (9) TMI 1046 - ITAT BANGALORE ) in which the Tribunal has followed the judgment of Hon ble Karnataka High Court rendered in the case of DIT Vs. Al-Ameen Charitable Fund Trust (2016 (3) TMI 462 - KARNATAKA HIGH COURT) and several other Tribunal orders and hence, respectfully following these judicial pronouncements, we decide this issue in favour of the assessee and accordingly, the ground raised by the revenue in this regard is rejected. Carry forward of deficit - Held that - We find that this issue is also covered in favour of the assessee by the Tribunal order rendered in the case of Jyothi Seva Society of Bangalore Vs. ADIT(E)(2015 (11) TMI 1270 - ITAT BANGALORE) wherein held The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income during the year can be regarded as application of the income of future years and can be adjusted. Therefore, in our view, the claim of the assessee for carry forward of excess application is in accordance with the judicial precedents on the issue and the same is allowable.
Issues Involved:
1. Allowability of depreciation on assets considered as application of income under Section 11(1)(a). 2. Set-off and carry forward of excess expenditure over income for charitable or religious trusts. Issue-wise Detailed Analysis: 1. Allowability of Depreciation on Assets: The revenue appealed against the decision of the CIT(A) allowing depreciation on assets which had already been considered for application of income under Section 11(1)(a) in previous years. The revenue argued that allowing depreciation on such assets would amount to a double deduction. They cited the cases of M/s Lissy Medical Institutions vs. CIT and Escorts Ltd. vs. Union of India to support their argument. The assessee, however, relied on the Tribunal's order in the case of DDIT(E) Vs. Karnataka Jesuit Educational Society, which followed the judgment of the Karnataka High Court in DIT Vs. Al-Ameen Charitable Fund Trust. The Tribunal noted that the acquisition of assets to fulfill the trust's objectives, considered as application of income, does not equate to a deduction, as it only exempts the income under Section 11 without reducing it. Therefore, allowing depreciation on these assets does not result in a double deduction. The Tribunal, following the judgment of the Karnataka High Court and other Tribunal orders, decided in favor of the assessee, rejecting the revenue's grounds. 2. Set-off and Carry Forward of Excess Expenditure: The revenue contended that the CIT(A) erred in admitting the ground regarding the set-off of excess expenditure over income, as this ground did not arise from the Assessing Officer's order and was not claimed in the Returns of Income. They cited various judicial precedents, including the cases of Trustees of Sri Sathya Sai Trust and Pushpavati Singhania Research Institute for Liver, Renal and Digestive Diseases. The assessee supported the CIT(A)'s decision, citing the Tribunal's order in Jyothi Seva Society of Bangalore Vs. ADIT(E), which allowed the carry forward of the deficit. The Tribunal noted that the income of charitable trusts should be computed on commercial principles, and the application of income is not limited to the year it arises. Excess expenditure can be carried forward and set off against future income. The Tribunal referenced several judgments, including the Bombay High Court's decision in CIT Vs. Institute of Banking Personnel Selection, which supported the view that excess expenditure can be adjusted in subsequent years. The Tribunal found the CIT(A)'s order consistent with these judicial precedents and dismissed the revenue's appeal on this issue. Conclusion: The Tribunal dismissed all the appeals of the revenue, upholding the CIT(A)'s decisions on both issues. The Tribunal found that the judgments cited by the revenue did not apply to the present case and that the principles established by the Karnataka High Court and other Tribunal orders were applicable. Consequently, the COs filed by the assessee were dismissed as not pressed. Order: All appeals of the revenue and all COs of the assessee were dismissed, with the decision pronounced in the open court.
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