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TMI Blog2015 (12) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax from the publishers of the books. According to the Ld. D.R., the object of the assessee-trust falls under the fourth limb of Section 2(15) of the Act, namely, advancement of any other object of general public utility. According to the Ld. D.R., collection on sale of tickets, rent on stalls, service tax, etc. are in the nature of trade, commerce, business, etc. Referring to proviso to Section 2(15) of the Act, the Ld. D.R. submitted that the activities of the assessee are commercial in nature, therefore, its object cannot be treated as charitable activities. Therefore, the Assessing Officer has rightly rejected the claim of the assessee for exemption under Sections 11 and 12 of the Act. However, on appeal by the assessee, the CIT(Appeals) found there was no element of profit making, therefore, proviso to Section 2(15) of the Act is not applicable. According to the Ld. D.R., when the object of the assessee is general public utility, the assessee is engaged in trade, according to the Ld. D.R., the proviso to Section 2(15) would come into operation. Therefore, the assessee is not eligible for exemption under Section 11 of the Act. 4. The Ld. D.R. further submitted that the CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the income of the assessee has to be computed on commercial basis. Therefore, depreciation has to be allowed on the capital asset of the assessee. To a query from the Bench, whether Section 32 of the Act is applicable for business activities or for charitable activities? The Ld. counsel without answering the query, simply submitted that in that case, the assessee may not claim depreciation. The Ld. counsel also clarified that the issue of depreciation is pending before the Madras High Court for consideration. Therefore, the issue may be remitted back to the file of the Assessing Officer for reconsideration. 7. We have considered the rival submissions on either side and perused the relevant material available on record. The object of the trust appears to be to promote the habit of reading among general public. In furtherance of this object, the assessee is organizing book fair at various places. The assessee is collecting entrance fee on sale of tickets, rent on stalls and also service tax. The Revenue claims that the collection of entrance fee on sale of tickets, rent on stalls and service tax would amount to trade or commerce. Therefore, proviso to Section 2(15) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the case of Tamil Nadu Cricket Association has observed as follows:- "11. We have considered the rival submissions on either side and perused the relevant material on record. Let's first take assessment year 2008-09. The assessee is claiming depreciation under Section 32 of the Act. For the purpose of convenience, we are reproducing Section 32 hereunder:- "32 (1) In respect of depreciation of-- (i) buildings, machinery, plant or furniture being tangible assets ; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession the following deductions shall be allowed-- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed. (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991. Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any residential accommodation, including accommodation in the nature of a guest-house ; or(C) any office appliances or road transport vehicles ; or(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any one previous year ; (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. Explanation - For the purposes of this clause,-- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes- (a) any insurance, salvage or compensation moneys payable in respect thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession. In this case, it is not a case of the assessee that they are not doing any business or profession. The assessee is categorically making a statement that they are charitable organization engaged itself in public utility service. Once the assessee claims that it is a charitable organization and not engaged in business or profession, this Tribunal is of the considered opinion that the provisions of Section 32 have no application at all. The provisions of Section 32 in fact were not brought to the notice of this Tribunal while deciding the assessee's own case for assessment year 2007-08 and also the decision of Sri Mariamman Educational Health and Charitable Trust (supra). In fact, this Tribunal examined the issue elaborately in The Anjuman-E-Himayath-E-Islam v. ADIT in I.T.A. No.2271/Mds/2014 by order dated 2nd July, 2015 and found that when the assessee is eligible for exemption under Section 11 of the Act, it is not eligible for depreciation under Section 32 of the Act. For the purpose of convenience, we are reproducing the decision taken by the co-ordinate Bench of this Tribunal in The Anjuman-EHimayath- E-Islam (supra):- "5.2 We find this issue is elaborately discu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, capital gains, or other sources, the word "income" should be understood in its commercial sense, i.e., book income, after adding back any appropriations or applications thereof towards the purposes of the trust or otherwise, and also after adding back any debits made for capital expenditure incurred for the purposes of the trust or otherwise. It should be noted, in this connection, that the amounts so added back will become chargeable to tax under section 11(3) to the extent that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trust from out of the income computed in the aforesaid manner, should be not less than 75 per cent of the latter, if the trust is to get the full benefit of the exemption under section 11(1). 5. To sum up, the business income of the trust as disclosed by the accounts plus its other income computed above, will be the "income" of the trust for purposes of section 11(1). Further, the trust must spend at least 75 per cent of this income and not accumulate more than 25 per cent thereof. The excess accumulation, if any, will become taxable under section 11(1). After considering the C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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