9911796707
TMI Blog2012 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ous decisions, we hold that the depreciation is allowable. It will be useful to reproduce paras 11 to 23 of the above order. The depreciation as debited in the books will be allowable. ''11. The Hon'ble Karnataka High Court in the case of CIT v. Society of the Sisters of St. Anne 146 ITR 28 had an occasion to consider the following question of law: "Whether the Tribunal is correct in holding that the amount of depreciation debited to accounts of a charitable institution is to be deducted to arrive at the income available for application to charitable and religious purposes." 12. Before the Hon'ble High Court, the contention of the revenue is that depreciation allowance being a notional expenditure and hence it can not be allowed to be debited to the expenditure of account of the trust. According to the Hon'ble High Court such assumption is on the basis that expenditure should necessarily involve actual delivery of or parting with the money. The expenditure should be understood as necessary outgoings. Depreciation is a necessary outgoing. The depreciation, if it is not allowed as a necessary deduction for computing the income from the charitable institutions, then there is no way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me charged and income to be computed under Chapter-III. The Hon'ble High Court observed as under :- "Whether depreciation has to be allowed as a necessary deduction for computing the income of a charitable institution was the question which came up before the Karnataka High Court in CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28. Noticing the difference between the word "income" and the expression "total income" and the necessity for providing depreciation in order to maintain correct accounts, the High Court held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. Same view has been taken by the Madhya Pradesh High Court in CIT v. Raipur Pallottine Society [1989] 180 ITR 579. In CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1992] 135 ITR 485, the Madras High Court was required to consider whether, for the purpose of computing accumulation in excess of 25 per cent, as laid down in section 11(i)(a) of the Act, "income" has to be computed under the various heads enumerated in the Income-tax Act. It held that the income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohibits to calculate or compute the income ass per the provisions of the Act. Section 11(1) refers to income and not total income defined in section 2(45) but income itself has been defined in the Act in section 2(24) why the meaning of income given in section 2(24) should not be taken for income referred in section 11(1) of the Act. Therefore the decision referred to also requires reconsideration. But in the case in hand the assessment year involved is 1983-84, even if we differ from the view taken by this court it will take another five years to conclude. The tax effect is only Rs. 7,000/-. Therefore, no purpose will be served to differ on this issue with the view taken by this court in Jayashree Charity Trust's case [1986] 159 ITR 280 and we leave the issue open to consider this issue in the appropriate case in future. 18. The Bombay High Court in the case of CIT v. Institute of Banking 264 ITR 110 had on occasion to consider as to whether Tribunal has rightly directed the A.O. to allow depreciation on assets received on transfer and for which the assessee has not incurred any cost. Furniture and Fixtures were received on transfer from another Trust. Since cost was already allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the Revenue that section 32 of the Income-tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a charitable trust derived from building, plant and machinery and furniture was liable to be computed in a normal commercial manner although the trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income-tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. In view of the aforestated judgment of the Bombay High Court, we answer question No. 1 in the affirmative, i.e., in favour of the assessee and against the Department." 19. The Hon'ble Bombay High Court in the case of Director of Income Tax (Exemption) v. Framjee Caswasjee Institute 109 CTR 463 (Bom.) had an occasion to consider the following question of law. "Whether on the facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een allowed then it will mean double deduction and funds will be available for non-charitable work without paying tax. We respectfully differ with the view of Ld. Cochin Bench as the matter has been considered by various High Courts and it has been held that depreciation is allowable even if list of asset is treated as application of income. 21. We also draw attention to section 11(1A) which provides for computation of capital gain on transfer of assets being property held under trust. It is mentioned that in case whole of net consideration is utilized in acquiring new capital asset then no capital gain of part of net consideration is utilized for acquiring the new capital asset then so much of the capital gain as is equal to the amount, any, by which the amount so utilized exceeds the cost of transferred asset. Let us illustrate it Cost of transferred asset = Rs. 100/- Net Consideration = Rs. 250/- Consideration utilized for New capital asset = Rs. 125 Capital gain = Rs. 150 22. Hence Rs. 25 which is the difference between the consideration utilized and of transferred asset is to be treated as applied for charitable purpose. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
