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TMI Blog2015 (7) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... be claimed by a charitable institution in determining percentage of funds applied for the purpose of charitable objects. Claim for depreciation will not amount to double benefit. - Decided against revenue. Entitlement to carry forward expenditure incurred in excess of its income for setting off against income of the succeeding years? - CIT(A) allowed claim - Held that:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year. The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not be liable to tax. The expenditure, if incurred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to double allowance. The assessee also pointed out that the decision of Escorts Ltd. (supra) will not be applicable as it was rendered on a different set of facts. 4. The AO however, held that allowance of depreciation when the cost has already been recovered by way of exemption as application of income amounts to double deduction and double benefit on the same asset. The AO referred to the decision of the of Hon'ble High Court of Kerala in the case of DDIT(E) v. Lissie Medical Institutions, 348 ITR 344 (Ker) wherein it was held that allowing depreciation of a depreciable asset when the cost of acquisition of depreciable asset was allowed as application of income for charitable purpose amounts to double depreciation and therefore depreciation cannot be allowed. The AO also distinguished the cases cited by the Assessee. 5. On appeal by the Assessee, the CIT(A), following the decisions rendered in the case of St.Ann s Convent 349 ITR 559 (Karn) and Dr.T.M.A. Pai Foundation, Manipal in ITA No. 481 to 485/Bang/2009 dated 16.2.2010 held that the claim of the Assessee for depreciation has to be allowed. 6. Aggrieved by the order of the CIT(A), the revenue has preferred the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l decisions on that issue and also the decision of the Hon ble Supreme Court in the case of Escorts Ltd. (supra), came to the conclusion that depreciation is allowable on capital assets on the income of the charitable trust for determining the quantum of funds which have to be applied for the purpose of trusts in terms of section 11 of the Act. The Hon ble Punjab Haryana High Court made a reference to the decision of the Hon ble Supreme Court in the case of Escorts Ltd. (supra) and observed that the Hon ble Supreme Court was dealing with a case of two deductions under different provisions of the Act, one u/s. 32 for depreciation and the other on account of expenditure of a capital nature incurred on scientific research u/s. 35(1)(iv) of the Act. The Hon ble Court thereafter held that a trust claiming depreciation cannot be equated with a claim for double deduction. The Hon ble Punjab Haryana High Court has also made a reference to the decision of the Hon'ble Karnataka High Court in the case of CIT v. Society of Sisters of Anne, 146 ITR 28 (Kar), wherein it was held that u/s. 11(1) of the Act, income has to be computed in normal commercial manner and the amount of depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue has filed the present appeal before the Tribunal. 13. In the grounds of appeal, the Revenue has reiterated the stand of the AO that there is no provision in the Act to allow carry forward of excess application of income for set off as application of income in subsequent years. The ld. DR reiterated the stand of the Revenue as contained in the grounds of appeal. 14. We have considered his submission. Section 11(1)(a) does not contain any words of limitation to the effect that the income should have been applied for charitable or religious purpose only in the year in which the income has arisen. The application for charitable purposes as contemplated in section 11(1)(a) takes place in the year in which the income is adjusted to meet the expenses incurred for charitable or religious purposes. Hence, even if the expenses for such purposes have been incurred in the earlier years and the said expenses are adjusted against the income of a subsequent year, the income of such subsequent year can be said to be applied for charitable or religious purposes in the year in which such adjustment takes place. In other words, the set-off of excess of expenditure incurred over the income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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