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TMI Blog2013 (1) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation of ₹ 11,55,9747- made by the Assessing officer. (ii).The Ld. CIT (A) has erred in law and on facts in allowing depreciation on the assets, the cost of which has already been allowed as a deduction on account of application of income as this would amount to double deduction in view of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd., 199ITR 43. (iii) whether, on the facts and in the circumstances of the case, deduction of depreciation u/s.32which falls under the head profit and Gains from business and profession' of the Income Tax Act, 1961, would be available to a charitable trust whose income is otherwise not assessable under the above head. (IV) On the facts and circumstances of the case, the Ld CIT (A) ought to have upheld the order of the Assessing Officer. (V) It is therefore, prayed that the order of the Ld. Commissioner of Income -Tax (Appeals) ought may be set aside and that of the Assessing Officer be restored. 3. Ld. D.R. supported the assessment order and reliance was placed on the judgement of Hon ble Apex Court rendered in the case of Escorts Ltd. Vs Union of India Ors. as reported in 199 ITR 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes under Section 11(1 )(a) and if the assessee claims depreciation on the value of such assets, then in order to reflect the true income to be available for application for charitable purposes, the assessee should write back in the accounts the depreciation amount to form part of the income to be accounted for application for charitable purposes. This is obviously not done by the assessee and so much so, the income which should be available for application for charitable purposes gets reduced by the depreciation amount, which is not permissible under Section 11(1)(a) of the Act. In fact the net effect is that after writing off full value of the capital expenditure on acquisition of assets as application of income for charitable purposes and when the assessee again claims the same amount in the form of depreciation, such notional claim becomes cash surplus available with the assessee, which goes outside the books of accounts of the Trust unless it is written back which is not done. We do not think it is permissible for a charitable institution to generate income outside the books in this fashion. Besides, the said decision has carefully analyzed the existing decisions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Murti Pujak Jain Mandal, 211 ITR 293: The head notes in this case is reproduced to prove that case law is rendered in a different context altogether: Section 11 of the Income-tax Act, 1961 -Charitable or religious Trust - Exemption of income from property held under - Assessment year 1973-74 - Whether where expenses for charitable and religious purposes have been incurred in earlier year and said expenses are adjusted against income of a subsequent year, income of that year be said to have been applied for charitable and religious purposes in year in which expenses has been adjusted - I Held yes * This is a case where expenditure was incurred prior to receipt and whether it amounted to application of income or not* D. Miscellaneous In the case of CIT vs. Kalpetta Estates Ltd, 211 ITR 635, 78 Taxman 265, the Hon'ble Kerala HC held as under: 4. ... What the Bench did was to affirm that the principles of res judicata will not apply to Income-tax proceedings Nevertheless, the Tribunal may place reliance on an earlier decision to support its conclusion . It could not, therefore, be said that the decision in the assessee's case befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that there is no such specific restriction for allowing depreciation under the provisions of section 11 as per which exemption is allowable to the assessee for usage of income for the purpose of the objects of the Trust. 5. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the judgements cited by both the sides. We find that the assessment order is also based on this judgment of Hon ble Apex Court rendered in the case of Escorts Ltd. (supra) and before us also, reliance has been placed by the Ld. D.R. on this judgement and hence, we first examine the applicability of this judgement in the present case. - We find that on page 5 of his order, Ld. CIT (A) has observed that this judgement of Hon ble Apex Court rendered in the case of Escorts Ltd. (supra) has already been distinguished by Hon ble Punjab Haryana High Court in the judgement rendered in the case of CIT vs. Tiny Tots Education Society as reported in 330 ITR 21 (P H). We also find that since there is specific provision in Section 35(2) for not allowing depreciation on those assets for which deduction is allowed u/s 35(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT Vs Rao Bahadur Calavala Cunnan Chetty Charities as reported in 135 ITR 485 that the income from the property held under trust would have to be arrived at in the commercial manner and not under the various heads set out in Section 14. In our considered opinion, this judgement of Hon ble Gujarat High court along with this judgement of Hon ble Madras High Court agreed to by Hon ble Gujarat High Court covers this aspect also against the revenue and hence, this ground of the revenue is also liable to be rejected. We order accordingly. 7. Before parting, we would like to observe that the written submissions filed by the learned DR as reproduced above does not render any help to the revenue because sitting in Gujarat, we are duty bound to follow the judgment of Hon ble Gujarat High Court in preference to the Judgment of Hon ble Kerala High Court cited by learned DR. Moreover, we also find that in the present case, it is not an allegation of the A. O. in the assessment order that any cash of the assessee has gone outside the books of the assessee. Facts are not brought to our notice on the basis of which it is observed by Hon ble Kerala High Court that cash surplus has gone outsi ..... 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