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TMI Blog2016 (6) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, the Income Tax Appellate Tribunal is justified in allowing depreciation on capital assets, when capital expenditure relating to acquisition of such assets had already been allowed as "application of income" for the purpose of allowing exemption under section 11 of the Income Tax Act, 1961 and as such further allowing of depreciation on these capital assets will amount to double deduction for the same expenditure? (ii) Whether allowing of depreciation on the capital assets by the Income Tax Appellate Tribunal is justified in the light of the Hon'ble Apex Court decision in the case of Escorts India Limited (199 ITR 43) wherein it has been held that in the absence of clear statutory indication to the contrary, the statute should not be read as to permit an assessee two deductions on the same expenditure? (iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in deleting the addition, made on account of unexplained payment to Haryana State Agricultural Marketing Board (in short HSAMB) for capital works, on the grounds that the assessee Market Committee was required to pay 30% of its income to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer made under section 143(3) of the Act, the CIT(A) as in the earlier years dismissed the assessee's appeal by holding that income of the assessee had been completely exempt ab initio. The income of the assessee was exempt from income tax upto the assessment year 2002-03 as per Section 10(20) of the Act in the status of local authority and thereafter from assessment year 2003-04, it had availed of exemption under sections 11 to 13 of the Act. The amounts expended on acquisition of depreciable capital assets were treated as application of income. It was further held that any further claim of depreciation on the assets will amount to claim for double deduction which was not allowable. Against the order passed by the CIT(A), the assessee filed appeal before the Tribunal. The Tribunal following the decision of Bombay High Court in Institute of Banking Personnel Selection's case (supra) allowed the appeal of the assessee holding that normal depreciation could be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(i)(a) of the Act. It was further held that income of a charitable trust derived from buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat we have to consider the income as arrived at in the context of what is available in the hands of the assessee, subject of course to any adjustment for expenses extraneous to the trust. If the expression "income" is so understood, then we have to take the accounts of the assessee with reference to the receipts and deduct therefrom the expenses necessary for earning or looking after that income.The net amount that remains would be available for distribution or application for charitable purpose. In applying the income for charitable purposes, even capital expenditure may be incurred. Therefore, the nature of the expenditure in the hands of the entity which receives the money is not the criterion. So long as the assessee disburses the amount for charitable purposes, whether the amounts are utilised for capital or revenue purposes by the charity concerned, the assessee would have complied with that part of the requirement of section 11, namely, application of the income for charitable purposes. The authorities will have to find out as to whether they are really charitable purposes or not. Subject to such examination, the application of the income for charitable purposes will have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in CIT v. Raipur Pallottine Society [1989] 180 ITR 579. Similar view was taken by Gujarat High Court in CIT v. Seth Manilal Ranchhoddas Vishram Bhawan Trust [1992] 198 ITR 598 by relying upon the aforesaid decisions. We are in respectful agreement with the view taken by Madras, M.P., Karnataka, Gujarat and Bombay High Courts referred to above. No contrary view has been brought to our notice. 8. In all fairness to the learned counsel for the Revenue, reference is made to the judgment of the Hon'ble Apex Court in Escort Limited's case (supra), on which reliance has been placed by the learned counsel for the Revenue. The Hon'ble Supreme Court in that case was dealing with a case relating to two deductions both under Sections 10(2)(vi) and 10(2)(xiv) of the 1922 Act or both under Sections 32(1)(ii) and 35(1)(iv) of the Act. The assessee therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assessee had sought to claim a specified percentage of the written down value of the asset as depreciation and at the same time claimed deduction, in five consecutive years of the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee with Haryana State Electricity Board and also Market Committee, Pundri. The relevant findings recorded by the Tribunal read thus:- "5. We have considered the rival submissions and also perused the orders of the lower authorities. The income tax is charged on the total income of the assessee in terms of sections 4 and 5 of the Act. The income so computable is as per method of accounting provided under section 145 of the Act. In this case, the claim of the assessee is that it is following cash system of accounting, we find such averment of the assesse is not without any basis. The Assessing Officer has also so noted in the cause title of the assessment order itself. In relation to the interest income in question, the assessee contends that no such income has been received and therefore, no amount was offered for taxation on this count. On the other hand, the Assessing Officer has added the income by way of interest on deposit with HSEB on accrual basis. The reason advanced is that the assessee is not following the pure cash system of accounting but is following a mixed system of accounting. In our view, there is no case made out by the Assessing Officer as to how th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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