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TMI Blog2017 (7) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... Act cannot override the provisions of Section 11 of the Act. In other words, the provisions of Section 11 which falls under Chapter III would override the provisions of Section 32 of the Act which provides for depreciation which falls under Chapter IV of the Act. The assessee is not eligible for depreciation in respect of the assets, the cost of which has already been allowed as application of income under Section 11 of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. See The Music Academy Madras Versus The Deputy Director of Income Tax (Exemptions) , Chennai [2016 (5) TMI 165 - ITAT CHENNAI ] - ITA Nos. 2556 & 2557/Mds/2016 & C.O. Nos.158 & 159/Mds/2016 - - - Dated:- 31-5-2017 - Shri N.R.S. Ganesan, Judicial Member And Shri D. S. Sunder Singh, Accountant Member Appellant by : Dr. Milind Madhukar Bhusari, CIT Respondent by : Shri V. Ravichandran, CA ORDER Per N.R.S. Ganesan, Judicial Member Both the appeals of the Revenue are directed against the common order passed by the Commissioner of Income Tax (Appeals)-17, Chennai, dated 30.03.2016, for the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal has observed as follows:- 14. The next contention of the Ld. D.R. that the assessee is engaged in business activity. We have carefully gone through the provisions of Section 2(15) of the Act and the circular issued by the CBDT. In fact, the assessee has filed a copy of the said circular at page 1 of its paper-book. For the purpose of convenience, we are reproducing Section 2(15) of the Act hereunder:- 2(15) charitable purpose includes relief of the poor, education, medical relief, 79[preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility : Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity ; Provided furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p1ayers, officials such as Managers, Coaches, Umpires,, Selectors and others who are directly connected with the game. (f) To provide, acquire and maintain suitable places, playgrounds, buildings and club houses to afford required facilities for the cricketers, officials such as Managers, Coaches, Umpires, Selectors and others who are directly connected with the game, members to acquire by purchase, lease, hire or Otherwise suitable playgrounds, stadia and any other property, movable and immovable, rights or privileges to the same and to provide all amenities thereon for the promotion of the objects of the Association. (g) To lay our any ground for playing the game and for other purposes and to provide pavilion, canteen and other conveniences and amenities in connection therewith and for such purpose purchase, lease or otherwise acquire the land at such price or rent for such period and upon such terms and conditions as may seem expedient. (h) To establish promote or assist in establishing and promoting and to subscribe to and become a member of any other Association or Club whether incorporated or not whose objects are similar or in part to the objects of the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct matches and tours of representative teams visiting its area on invitation and to regulate and control the visits of the State s representative teams going out of Tamil Nadu. (q) To encourage the formation of Zones in the City of Madras and District or regional clubs in every district or part of a district and playing facilities in all such centres. (r) To select teams to represent the Association in tournaments, championships or fixtures, local or otherwise. (s) To acquire by all lawful means of movable and immovable property on behalf of the Association and to sell, manage, mortgage lease and exchange, dispose off or otherwise deal with all or any of its properties and/or any income therefrom. (t) To promote and to contribute to any enterprise conducted by individuals or Associations in conformity with the objects of the Association. (u) To organize a proper coaching scheme for the benefit of cricketers in the City and in the Districts under the supervision of coaches from India and abroad. (v) To collect funds and whenever necessary borrow with or without security for purposes of the Association and in particular by the issue of debentures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the matches which are conducted by BCCI. For the purpose of meeting its expenditure, the BCCI allocates funds from the revenue it collected from advertisement and other sources. The assessee-society is allowed to sell tickets to the cricket viewers. No doubt, the players of Indian Premier League are sold in public auction for very huge amount. But the question is who is conducting and who is auctioning, whether the assessee-society or BCCI? In fact, BCCI conducts the public auction for selling premier players at a huge premium rate. In fact, the BCCI collects the money. The role of the assessee-society is only to provide stadium for conducting matches. Other than that, the assessee-society has no role in conducting the international matches and Indian Premier League matches. 16. The other activity of the assessee-society is to conduct training programmes, coaching classes for college students at district level in the State of Tamil Nadu and in the Union Territory of Puducherry. The assessee is also conducting inter-university, inter-school and inter-association matches. Expenditures involved in such activities were met out of surplus funds remaining with the assessee-societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 in respect of--(a) any motor car manufactured outside India, where such motor car is acqired by the assessee after the 28th day of February, 1975 5but before the 1st day of April, 2001, unless it is used--(i) in a busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction, 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 be, in the ratio of the number of days for which the assets were used by them. Explanation - 1. Where the business or profession of the assessee is carried on in a building not owned by him but in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-E-Himayath-E-Islam (supra):- 5.2 We find this issue is elaborately discussed in the case of Lissie Medical Institution Vs. CIT reported in [2012] 348 ITR 344(Ker.) and held the issue against the assessee. While doi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Circular, the Hon ble Kerala High Court held as follows:- Held, that after writing off the full value of the cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 dated 22/4/2016 examined this issue and found that depreciation under Section 32 of the Act falls under Chapter IV of the Act which provides for computation of total income. Section 11 of the Act falls under Chapter III of the Act which deals with income which does not form part of total income. Therefore, this Tribunal found that provisions of Section 32 of the Act cannot override the provisions of Section 11 of the Act. In other words, the provisions of Section 11 which falls under Chapter III would override the provisions of Section 32 of the Act which provides for depreciation which falls under Chapter IV of the Act. In fact, this Tribunal observed in Music Academy Madras (supra) as follows:- 9. Income-tax Act provides for procedure and method for computing income under different heads. Depreciation is provided under Section 32 of the Act when computing income under the head Income from business or profession . In respect of other heads, no depreciation is provided under the scheme of the Act. The income of the trust is exempted on application and accumulation as provided under the Act. If any violation, the income of the trust is liable for taxation, in such a case, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing business, then the assessee is not eligible for exemption under Section 11 of the Act and as rightly submitted by the Ld. Departmental Representative, the registration under Section 12AA of the Act has to be cancelled under Section 12AA(3) of the Act. Moreover, the assessee will not be eligible for exemption under Section 11 of the Act if it is carrying on any business activity. Therefore, this Tribunal is of the considered opinion that the assessee is not eligible for depreciation. 12. As rightly submitted by the Ld. Departmental Representative, in view of Section 11(4) (4A) of the Act, if the property held under trust is a business undertaking, then the income of the business undertaking, which was so held as property held under trust, has to be computed by applying the provisions of Income-tax Act under Chapter IV. While computing income of the business undertaking, all expenditure, including depreciation, has to be allowed and the income of such business undertaking which was held under Trust has to be allowed as exemption under Section 11 on application and accumulation. In this case, as rightly submitted by the Ld. D.R., no business undertaking was held under trus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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