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TMI Blog2017 (9) TMI 1601X X X X Extracts X X X X X X X X Extracts X X X X ..... galore dated June 30, 2016 for the assessment year 2006-07. 2. Briefly stated, the facts of the case are as under : 2.1 The assessee, an association of persons (trust) engaged in the promotion and development of cricket in the State of Karnataka, filed its return for the assessment year 2006-07 on October 31, 2006 declaring nil income. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Income-tax Act, 1961 (in short the Act ) vide order dated December 19, 2008 disallowing the depreciation claimed by the assessee by following the decision of the hon'ble Kerala High Court in the case of Lissie Medical Institutions v. CIT [2012] 348 ITR 344 (Ker). 2.2 Aggrieved by the order of assessment dated December 19, 2008 for the assessment year 2006-07, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals)-14, Bangalore challenging the Assessing Officer's action in disallowing the assessee's claim for depreciation. The learned Commissioner of Income-tax (Appeals) vide the impugned order dated June 30, 2016 allowed the assessee's appeal following, inter alia, the decision of the hon'ble Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten off/claimed as deduction under section 35(1)(iv) on the ground that the amendment only set out more clearly and categorically what the provision intended even earlier. (iii) The Commissioner of Income-tax (Appeals) has failed to appreciate the fact that the issue involved in respect of capital expenditure on scientific research under section 35(1)(iv) is similar to that of issue involved in respect of allowance of expenditure incurred towards purchase of capital assets for charitable purposes as application of income under section 11(1)(a). Accordingly. the law laid down by the hon'ble Supreme Court is squarely applicable to the taxation of charitable/religious trust or institution under sections 11, 12 and 13 of the Income-tax Act. (iv) Though the Finance (No. 2) Act, 2014 has amended has amended the Income-tax Act, 1961, with regard to non-allowance of depreciation to charitable/religious trust or institution on the value of assets which has already been allowed as depreciation of income under section 11(1) by inserting sub-section (6) of section 11, with effect from April 1, 2015, such amendment cannot be construed as effective prospectively inasmuch as in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is not allowed, then there is no way to preserve the corpus of the trust for deriving its income. While rendering this finding the hon'ble Karnataka High Court has distinguished the decision of the hon'ble Kerala High Court in the case of Lissie Medical Institutions [2012] 348 ITR 344 (Ker) and has followed its own decision in the case of CIT v. Society of Sisters of St. Anne [1984] 146 ITR 28 (Karn) and of the hon'ble apex court in the case of CIT v. Vatika Township P. Ltd. [2014] 367 ITR 466 (SC). 3.4.2 The relevant finding of the hon'ble High Court in the case of Al- Ameen Charitable Fund Trust (supra) in paragraphs 15 to 25 of the order are extracted hereunder (pages 522 to 528 of 383 ITR) : 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 (page 31 of 146 ITR) : '9. It is clear from the above provisions that the income derived from property held under trust cannot be the total income because section. 11(1) says that the former shall not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1990] 50 Taxman 233 (MP) ; (3) CIT v. Sheth Manilal Ranchhoddas Vishram Bhavan Trust [1992] 198 ITR 598 (Guj) ; [1993] 70 Taxman 228 (Guj) (4) CIT v. Bhoruka Public Welfare Trust [1999] 240 ITR 513 (Cal)/106 Taxman 311 (Cal) (5) CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad) and (6) CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P H) Allowing depreciation in subsequent years, on the capital asset, which has already availed the benefit of deduction in computing the income of the trust in the year of its acquisition is considered by the Punjab and Haryana High Court in the case of Market Committee, Pipli (supra) and held thus (page 20 of 330 ITR) : '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. The judgment of the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ides claiming deduction in 5 consecutive years of the expenditure incurred on the acquisition of the capital asset used for scientific research. In such circumstances, the apex court held thus (page 57 of 199 ITR) : 'There is an apparent plausibility about these arguments, particularly in the context of the alleged departure in the language used in section 10(2)(xiv) from that employed in section 20 of the U. K. Finance Act, 1944. We may, however, point out that the last few underlined words of the English statute show that there is really no difference between the English and Indian Acts ; the former also in terms prohibits depreciation only so long as the assets are used for scientific research. In our opinion, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Accordingly, the judgment of Lissie Medical Institutions case (supra) based on Escorts Ltd.'s case (supra), is not applicable to the facts of the present case. It is also to be noticed that while in the year of acquiring the capital asset, what is allowed as exemption is the income out of which such acquisition of asset is made and when depreciation deduction is allowed in the subsequent years, it is for the losses or expenses representing the wear and tear of such capital asset incurred if, not allowed then there is no way to preserve the corpus of the trust for deriving its income as held in Society of the Sisters of St. Anne's case (supra). This judgment of the co-ordinate Bench of this court is binding on us and we have no 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. Section 11(6) inserted with effect from April 1, 2015 by the Finance (No. 2) Act, 2014, reads as under : '(6) In this section where any income is required to be applied or accumulated or set apart for application, then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd subsequent years.' The Memo explaining the provisions in Finance (No. 2) Bill, 2014 reads thus (see [2014] 365 ITR (St.) 149, 171) : 'The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc., is claimed and such amount of notional deduction remains to be applied for charitable purpose. Therefore, double benefit is claimed by the trusts and institutions under the existing law. The provisions need to be rationalised to ensure that double benefit is not claimed and such notional amount does not excluded from the condition of application of income for charitable purpose.' Paragraphs 7.5, 7.5.1, 7.6 of the Central Board of Direct Taxes Circular reported in [2015] 371 ITR (St.) 22 makes it clear that the said amendment shall take effect from April 1, 2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent assessment years. The Constitution Bench of the apex court in Vatik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso, whether to be applied retrospectively or prospectively, has considered the Notes on Clauses appended, the Finance Bill and the understanding of the Central Board of Direct Taxes in this regard. The apex court has also taken cognizance of the fact that the Legislature is fully aware of 3 concepts in so far as amendments made to a statute : (i) prospective amendments with effect from a fixed date ; (ii) retrospective amendments with effect from a fixed anterior date ; and (iii) clarificatory amendments which are prospective in nature. Keeping in view, the aforesaid principles enunciated by the apex court, in Vatika Township (P.) Ltd.'s case (supra), it would be safely held that section 11(6) of the Act is prospective in nature and operates with effect from April 1, 2015. This is further clarified when compared with certain other provisions which have been made retrospectively in the same Finance Act. 3.4.3 Respectfully following the judgment of the hon'ble jurisdictional High Court in the case of Al-Ameen Charitable Fund Trust (supra), we do not find any error or illegality requiring our interference in the impugned order of the learned Commissi ..... 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