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TMI Blog2017 (6) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... t the first appellate authority should seek a remand report, in case the factual matrix are not clear from the records, from the AO. In the light of the above, we remand the matter to the file of the CIT (A) with a direction to seek a remand report from the AO on this issue, i.e., whether the grants received from other agencies including AICTE, were utilised for the specific purposes or not and whether the assessee has kept the said grants received by it in a separate bank account and has not merged the same with the regular account of the assessee. Claim for acquisition of capital assets from the borrowed fund - investment in fixed asset by using the loan - Held that:- Section 11 only contemplates the application of income and if the said income is applied for the aims and objectives of the trust, then the trust is entitled for exemption under the provision. The said analogy cannot be extended to acquisition of assets from the borrowed funds. If we hold so, then we would be equating the borrowed fund with the income of the trust. Under the law, it is the application of income and not of the fund that is required to be seen for the purpose of granting the exemption. In fact, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in ITA No.62/2010 (67 taxmann.com 160), dt.22.02.2016, is clearly distinguishable. 05. The Ld. AR has submitted as follows : Section 11 of the Act clearly states that: 11 (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income ..... '. As per Section 11(1), income derived from property held under trust, wholly for charitable or religious purpose, will be exempt to the extent it is applied or accumulated for application towards objects of the Trust in India, provided the amount of application is not less than 85% of the income from such property. Thus, it is evident that the term used therein is income and not total income , which is applicable for the purposes of taxation of other taxable entities under the Act. b) Further, distinguishing the terms 'total income' and 'income' for the purpose of Sec 11, the Central Board of Direct Taxes vide Circular No5- 1)I[LXX-6) of 198, dated 19.6.1968, has stated that 2. The reference in clause (a) of Section 21(1) is invariably to income and not to total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that they represent outgoings for purposes other than those of the trust. The amounts spent or applied for the purposes of the trus 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 u/s. 11(1). Hence the jurisdictional High Court has upheld the claim of depreciation as application of income under section ii while computing the Income of a Charitable entity e) The allowance of depreciation as application of income for the computation of application under section 11 in the case of a charitable institution has been upheld by the Hon'ble High court of Bombay in the case of CIT v Institute of Banking 264 ITR 110. f) A similar view in the matter was taken by the Hon'ble ITAT, Bangalore, in the case of Karnataka Reddy Janasangha in ITA No. 220/Bang/201 1, Karnataka State Muslim Federation in ITA No. 37/Bang/2013, in the case of DDIT (E) V.s Cutchi Memon Union (2013) 60 SOT 260, Jyothi Charitable Trust in 60 taxmann.com. 165 Bangalore and ACIT Vs. City Hospital Charitable Trust in 42 ITR(Trib) 583 Bangalore. 06. We have gone through the record and hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose it was intended for a long-time. In view of the above, it was submitted that the findings of the CIT (A) are also required to be specified. Our attention was also drawn to para 6.4 of the order of the CIT (A), wherein it is mentioned as under : 6.4 As the AR has produced all records, accounts, bank statements and other related documents during the course of hearing and after due verification of them it is seen that they are specific grants to be utilised in a specific time frame and necessary accounting, auditing and verification is being undertaken as per the rules framed by the AICTE or funding agency and it is also seen that the assessee has opened separate bank a/c s for the same and is submitting utilisation certificate as required by the persons giving the grants. On the basis of the above, it was submitted that the CIT (A) has decided the issue without giving an opportunity to the AO by seeking a remand report in respect of the facts now brought to the notice of the CIT (A). 13. On the other hand, it was submitted by the Ld. AR that the grants which were received from AICTE, and other research agencies were utilised for the specific purpose / education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration, which were purchased vide said deeds dt.18.03.2011 and 16.09.2010, for a sum of ₹ 2,58,67,200/- and ₹ 3,67,00,000/-. It was submitted by the Ld. DR that the reliance placed by the CIT (A) on the judgment of Hon ble jurisdictional High Court in the matter of CIT v. Janmabhoomi Press Trust [242 ITR 703] was wholly incorrect as the facts in the said case was different from the facts in the present case. It was submitted that in the cited case, it was an application of fund for the purposes of servicing the interest . It was submitted that the present case is not on application of income, but is a case of acquiring the assets from the loan amount. It was submitted that the assessee is only entitled to the benefit if there is a repayment of debt availed for the purposes of construction of building taken by the assessee for the purposes of augmenting its income. In those circumstances, it was held that it is an application of income for charitable purposes. 17. On the other hand, the Ld. AR has submitted as under : 4. Capital Expenditure out of Lo n Funds:- (a) With respect to the above ground, the respondent vide its submissions made to the Ld. Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The income of the assessee is lying invested in FDR and it is not utilised for the objects of the trust or for repayment of loan earlier taken for objects of the trust. The assessee is asking for accepting the usage of borrowed funds as application of income for the objects of the trust , therefore seeking exemption under section 11 of the Act , the same cannot be allowed as in future when the assessee start repaying the loan, at that time repayment of loan would be treated as application of income in that year of repayment , as the repayment of loan would be from the income of trust . Further, the Ld. DR during the course of argument has submitted that the judgment of Hon ble jurisdictional High Court in Janmabhoomi Press Trust (supra) is not applicable as it is the case of application of repayment of loan. 19. In our view, Section 11 only contemplates the application of income and if the said income is applied for the aims and objectives of the trust, then the trust is entitled for exemption under the provision. The said analogy cannot be extended to acquisition of assets from the borrowed funds. If we hold so, then we would be equating the borrowed fund with the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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