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TMI Blog2012 (10) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2005-06) especially when the same was already allowed as application of income with the grant of registration u/s 12AA(1) of I.T. Act, 1961." 2.2 We have heard both the parties. This issue has been considered in the case of the Krishi Upaj Mandi Samiti, Baran for the assessment years 2005-06 and 2006-07 in ITA Nos. 560 561/ JP/2010 vide order dated 06-01-2011. After considering various 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 579 held that depreciation is allowable in respect of assets owned by the trust. "Reference was made to the decision of Hon'ble Karnataka High Court in CIT v. Society of the Sisters of St. Anne ( supra )." 15. The Hon'ble Gujarat High Court in the case of CIT v. Sheth Manilal Ranchoddas Vishram Bhavan Trust 198 ITR 598 had an occasion to consider the allowability of depreciation and the difference between total income 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 Madh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Madras High Court in CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 and held that while computing the income of the charitable trust, income to be arrived at in the commercial manner. It is true that the view has been taken by various High Courts including this court in the cases referred to above that in the case of a charitable trust income should be computed and arrived at in the commercial manner but nowhere in the Act it prohibits 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 [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the Revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income-tax Act and not under general principles. The court rejected this argument. It was held that normal depreciation can be considered on general principles or under section 11(1)(a) of the Income-tax Act. The court rejected the argument on 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 allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the answer to the question is obvious." 20. It is true that Ld. D/R has placed reliance on the decision of the Cochin Bench in the case of Deputy Director of Income Tax (Exemption) v. Lissie Medical Institutions in ITA No. 1010/Coch/2008 dated 26.10.2010. The Ld. Cochin Bench has held that no double deduction can be allowed in view of decision of Hon'ble Apex Court in the case of Escorts Ltd others v. Vol 199 ITR 43. In case depreciation is allowed when cost has already been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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