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TMI Blog2016 (6) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... ider term than the expression "profits and gains of business or profession". Net receipt after deducting all the necessary expenditure of the trust (sic). Depreciation is the exhaustion of the effective life of a fixed asset owing to 'use' or obsolescence. It may be computed as that part of the cost of the asset which will not be recovered when the asset is finally put out of use. The object of providing for depreciation is to spread the expenditure, incurred in acquiring the asset, over its effective lifetime; the amount of the provision, made in respect of an accounting period, is intended to represent the proportion of such expenditure, which has expired during that period. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee. See Director of Income Tax Vs. Al-Ameen Charitable Fund Trust [2016 (3) TMI 462 - KARNATAKA HIGH COURT ] - ITA NO. 105/2016 - - - Dated:- 16-6-2016 - MR. JAYANT PATEL AND MR. B. SREENIVASE GOWDA JJ. Appellants (by Sri. E.I. Sanmathi, Advocate) JUDGMENT JAYA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22 held that any expenditure of a capital nature (or incurred towards purchase of capital assets) on scientific research allowed as deduction under section 35(1)(iv) cannot be allowed once again as deduction in the form of depreciation on such capital asset . 2. We have heard Mr.E.I.Sanmathi, learned Counsel appearing for the appellant-Revenue. 3. The learned Counsel for the appellants-Revenue fairly concedes that the similar questions came to be considered by this Court in case of The Director of Income Tax Vs. Al-Ameen Charitable Fund Trust in ITA No.62/2010 and allied matters and vide its decision dated 22.02.2016, the appeal of the Revenue has been dismissed. 4. We may record that in the above referred decision of this Court, it was observed thus: These appeals are filed by the revenue under Section 260-A of the Income Tax Act, 1961( the Act for short) challenging the orders passed by the Income Tax Appellate Tribunal, Bangalore Bench. 2. Since, common question of law is raised in all these appeals, the matters are heard together and disposed of by this common Judgment. 3. The assessees in all these appeals are the charitable institutions registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. 11. Learned counsel Sri. K.V. Aravind appearing for the revenue would contend that the depreciation is not allowable as deduction in computing the total income of a charitable trust under Section 11 of the Act, as the amount spent on the capital asset is already allowed as application of income in the year of such acquisition. Claim of deduction by way of depreciation on the same capital asset in the subsequent years results in allowing double deduction contrary to the scheme of the Act. It is further contended that depreciation has to be computed in terms of Section 32 of the Act. He also places reliance on Section 37 of the Act to point out that any expenditure not being expenditure of the nature described in Sections 30 to 36, not being in the nature of capital expenditure or personal expenses of the assessee expended wholly and exclusively for the purposes of business or profession shall be allowed in computing the income chargeable under the head Profit and gains of business or profession . Applying the same analogy if, application of income is allowed under Section 11 of the Act, no depreciation can be allowed under Section 32 of the Act. Reliance i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THE SISTERS OF ST. ANNE [(1984) 39 CTR (KAR) 9] [6] DIRECTOR OF INCOME TAX [EXEMPTION] Vs. COUNCIL OF SCIENTIFIC AND INDUSTRIAL RESEARCH in ITA No.331/2013 DD 27.11.2013 15. The question involved in this case is no more res integra. This question was considered by this Court as far back as in the year 1984, in the case of Society of the Sister s of St.Anne (supra) wherein the Division Bench of this Court has held thus: 9. It is clear from the above provisions that the income derived from property held under trust cannot be the total income because s. 11(1) says that the former shall not be included in the latter, of the person in receipt of the income. The expression total income has been defined under s. 2(45) of the Act to mean the total amount of income referred to in s. 5 computed in the manner laid down in this Act . The word income is defined under s. 2(24) of the Act to include profits and gains, dividends, voluntary payment received by trust, etc. It may be noted that profits and gains are generally used in terms of business or profession as provided u/s. 28. The word income , therefore, is a much wider term than the expression profits and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Punjab and Haryana High Court in the case of Market Committee, Pipli (supra) and held thus: 9. In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Judgment of the Hon ble Supreme Court in Escorts Ltd., Anr. (supra) is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee. 17. High Court of Bombay in the case of Institute of Banking (supra) after placing reliance on the Judgment of CIT vs Muniswarat Jain (1994 TLR 1084) on an identical issue, held:- In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the other provisions of the Act to which reference has been made- some of which were inserted after the present controversy started - are not helpful and we have to construe the real scope of the provisions with which we are concerned. We think that all misconception will vanish and all the provisions will fall into place, if we hear in mind a fundamental, through unwritten, axiom that no legislature could have at all intended a double deduction in regard to the same business outgoing, and if it is intended it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two deductions both under S.10(2)(vi) and S.10(2)(xiv) under the 1922 Act or under S.32(1)(ii) and 35(2)(iv) of the 1922 Act - qua the same expenditure. Is then the use of the words in respect of the same previous year in clause (d) of the proviso to S.10(2) (xiv) of the 1922 Act and S. 35(2) (iv) of the 1961 Act contra-indication which permits a disallowance of depreciation only in the previous years in which the other allowance is actually allowed. We think the answer is an emphatic `no' and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to disturb the settled position of law at this length of time/depart from the said reasoning. As such, the arguments advanced by the Revenue apprehending double deduction is totally misconceived. 21. Section 11[6] inserted with effect from 1.4.2015 by Finance Act No.2/2014, reads as under: (6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year. 22. The plain language of the amendment establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust is to be effective from 1.4.2015. This view is further supported by the Notes on Clauses in Finance [No.2} Bill, 2014, memo explaining provisions and circulars issued by the Central Board of Direct Taxes in this regard. Clause No.7 of the Notes on Clauses reads thus: Clause 7. of the Bill seeks to amend section 11 of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 7.5.1, 7.6 of Central Board of Direct Taxes Circular reported in 371 ITR 22 makes it clear that the said amendment shall take effect from 1.4.2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent assessment years. 24. The Constitution Bench of the Apex Court in Vatika Township [P] Ltd., s case [supra], had laid down general principles concerning retrospectivity in Paragraphs 33 and 34, and the same is extracted hereunder: 33. We would also like to point out, for the sake of completeness, that where a benefit is conferred by a legislation, the rule against a retrospective construction is different. If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such a legislation, giving it a purposive construction, would warrant it to be given a retrospective effect. This exactly is the justification to treat procedural provisions as retrospective. In Government of India Ors. v. Indian Tobacco Association, the doctrine of fairness wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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