9911796707
TMI Blog2012 (10) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue has been decided in favour of the assessee by the Tribunal vide its order dated 11.5.2012 in I.T.A.No. 1853/Mds/2011. He submitted that following the same, the issue should be decided in favour of the assesses in all the appeals under consideration. 4. The DR, on the other hand, relying on the decision of Hon'ble Supreme Court in the case of Nectar Beverages (P) Ltd vs Dy. CIT, [2009] 182 Taxman 319(S.C), argued that the Hon'ble Supreme Court in that case has held that depreciation is neither a loss nor an expenditure nor a trading liability and hence, no deduction of the same was allowable. He, therefore, argued that in view of the above cited decision of Hon'ble Supreme Court, all the appeals of the assessee deserve to be dismissed. 5. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. We find that the issue of allowability of depreciation while computing the income of the assessee in terms of section 11 of the Income-tax Act, 1961, is squarely covered by the decision of this Bench of the Tribunal in the case of Services Association of Seventh Day Adventists P. Ltd in assessment year 2006-07 in I.T.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is reproduced as under: 3. Briefly, the facts are that the assessee is a trust running educational trust and registered u/s. 12A(a) of the Income Tax Act, 1961. 4. The gross receipts, amounts of depreciation claimed and reasons for disallowance for respective years are given as under: (a) The return of income filed for (i) Assessment Year 2004-05 declares NIL income and gross receipts of Rs..18,95,45,440/- in which the claim of depreciation made at Rs..2,72,85,356/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same assets could not be allowed. (b) The return of income filed for (i) Assessment Year 2005-06 declares NIL income and gross receipts of Rs.. 22,17,53,309/- in which the claim of depreciation made at Rs..2,82,17,782/- which was completed as "No Demand" while disallowing the depreciation claim of the assessee, the Assessing Officer has stated that when the assessee had claimed the cost of addition to assets as application of funds, claim of depreciation on the same asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on could not be taken into account because full capital expenditure had been allowed in the year of acquisition of the assets. The assessee went in appeal before the Appellate Assistant Commissioner. The appeal was rejected. The Tribunal, however, took the view that when the ITO stated that full expenditure had been allowed in the year of acquisition of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as "application of income" of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets can not be taken into account. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgement i.e. Director of Income tax( Exemption) v. Framjee Cawasjee Institute [1993] 109 CTR 463. Hence, this issue was covered by the decision of the Bombay High Court in the above judgement. Consequently, this issue was answered in the affirmative i.e. in favour of the assessee and against the Department. 10. The ratio of the above mentioned decision reported in 264 ITR 110 (2003) in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, which was the only view available at the time of deciding the appeals and now also Hon'ble Punjab & Haryana High Court in the case of CIT Vs. M/s.Tiny Tots Education Society as reported in 2010-TIOL-550-High Court-P&H-IT vide order dt.28th July, 2010, under similar facts, has decided the identical issue in favour of the assessee and while enclosing the copy of the judgement of Hon'ble Bombay High Court as well as Hon'ble Punjab & Haryana High Court, Ld. Counsel for the assessee has strongly pleaded that since the issue is squarely covered in favour of the assessee, not by one High Court but by second High Court also in which Supreme Court decision's case of Escort Ltd. Vs. UOI and others has been discussed, has concluded to hold the question proposed in favour of the assessee, therefore being covered the matter, order of the CIT(A) for all the years are liable to be upheld. It was thus urged for upholding the impugned orders and for dismissing all the appeals of the Revenue. 10. After hearing both the sides, considering the material as well as case laws cited by the rival side, we find that in the recent judgement of the Hon'ble High Court of Punjab & Haryana in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmity or flaw in the orders of the CIT(A) in this regard as such while concurring with the conclusion as drawn by the CIT(A), we uphold his orders and dismiss the appeals of the Revenue being devoid of any merits." 6. Since the issue is squarely covered in favour of the assessee and Department has not brought any contrary material or any higher Courts order in its favour, therefore, while following the said decision, we accept all the appeals of the assessee an direct the Assessing Officer to allow the claim of the assessee in this regard." The issue thus stands fully covered in favour of assessee. No other orders of any higher authorities were brought before us by the Revenue to take a different view. Hence, we set aside the orders of the authorities below and direct that assessee's claim with regard to depreciation while computing its exemption under Section 11 of the Act, be allowed." 9. The facts being identical, respectfully following the precedent, we set aside the order of the lower authorities and direct the Assessing Officer to allow the claim of depreciation of Rs. 57,09,195/- to the assessee. Thus, the grounds of appeal of the assessee are allowed." 6. We do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 41 (2) stood deleted.)" 7. We find that the issue does not relate to recovery of depreciation allowed earlier. Before us, the issue is whether depreciation is to be allowed to the assessee-trust while computing its income or not. It is a well settled position that the income of the charitable trust is to be computed not as per the provisions of Chapter IV-D of the Income-tax Act, 1961 but as per the normal accounting principles. In the normal accounting principles, depreciation is a charge against profit on account of diminution in the value of asset because of wear and tear etc. Thus, it cannot be held that for computing profit under normal accounting principles, depreciation is not to be deducted. We find that the issue is squarely covered not only by the decision of this Tribunal in the case of the assessee - Services Association of Seventh Day Adventists P. Ltd in assessment year 2006-07 but also by the decision of the P&H High Court in the case of CIT vs Market Committee, Pipli [2011] 330 ITR 16(P&H) and decisions of several other High Courts including the Hon'ble Madras High Court as quoted in the above order of the Tribunal. We, therefore, set aside the orders of the lowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. After hearing the rival submissions and perusing the materials on record, we find that the Assessing Officer, while determining the income of the assessee has not quantified the excess application of income by the assessee-trust for the objects of the Trust and allowed it to be carried forward for set off against the surplus made by it in a subsequent year. The CIT(A) has confirmed the action of the Assessing Officer by observing that each assessment year is independent and hence, the expenses of one year cannot be treated as the expenses or application of income of the other year unless specifically provided for in the Statute. We are of the considered opinion that there are no specific provisions for carry forward of depreciation by a charitable Trust. However, the courts have also held that if a Trust has incurred a deficit during a particular year, then the surplus made by it in a subsequent year to make up for the past deficit should be allowed to be set off against such deficit. Such decisions of the High Courts are:- CIT vs Maharana of Mewar Charitable Foundation 164 ITR 439 (Raj) CIT vs Shri Plot Swetambar Murti Pujak Jain Mandal 211 ITR 293(Guj) CIT vs Matriseava Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
