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TMI Blog2003 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... application of income in the subsequent year for charitable purposes? - IT REFERENCE NO. 197 OF 1997 - - - Dated:- 9-7-2003 - Judge(s) : S. H. KAPADIA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by S.H. KAPADIA J. -This reference is made at the instance of the Revenue under section 256(1) of the Income-tax Act, 1961, under which the following three questions have been referred to us for our opinion: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in directing the Assessing Officer to allow depreciation on the assets the cost of which has been fully allowed as application of income under section 11 in the past years? 2. Without prejudice to the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act. The assessee had claimed depreciation which was rejected by the Assessing Officer on the ground that capital expenditure incurred during the accounting year was allowed as a deduction from the income of the assessee and, therefore, the claim of the assessee for depreciation on buildings was disallowed. Further, the assessee had claimed depreciation on furniture and fixtures to the tune of ₹ 49,453 at 10 per cent. of the written down value which was disallowed by the Assessing Officer on the ground that the said assets have been received by the assessee on transfer from_National Institute of Bank Management. That institute was also a charitable trust. Its income was also exempt under section 11 of the Income-tax Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT v. Munisuvrat Jain [1994] Tax LR 1084 (Bom), the facts were as follows: The assessee was a charitable trust. It was registered as a public charitable trust. It was also registered with the Commissioner of Income-tax, Pune. The assessee derived income from temple property which was a trust property. During the course of assessment proceedings for the assessment years 1977-78, 1978-79 and 1979-80, the assessee claimed depreciation on the value of the building at 2 1/2 per cent. and they also claimed depreciation on furniture at 5 per cent. The question which arose before the court for determination was: whether depreciation could be denied to the assessee, as expenditure on acquisition of the assets had been. treated as applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and furniture was liable to be computed in a normal commercial manner although the trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income-tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the trust. In view of the aforestated judgment of the Bombay High Court, we answer question No. 1 in the affirmative, i.e., in favour of the assessee and against the Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Now coming to question No. 3, the point which arises for consideration is : whether excess of expenditure in the earlier years can be adjusted against the income of the subsequent year and whether such adjustment should be treated as application of income in the subsequent year for charitable purposes? It was argued on behalf of the Department that expenditure incurred in the earlier years cannot be met out of the income of the subsequent year and that utilisation of such income for meeting the expenditure of earlier years would not amount to application of income for charitable or religious purposes. In the present case, the Assessing Officer did not allow carry forward of the excess of expenditure to be set off against the surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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