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TMI Blog2018 (2) TMI 1593X X X X Extracts X X X X X X X X Extracts X X X X ..... so held that the Assessing Officer during the remand proceedings had not commended adversely on the written submissions filed by the assessee. As regards the adverse comments by the Assessing Officer regarding depreciation claimed by the assessee, we find that in the case of CIT vs. Krishi Utpadan Mandi Samiti [2013 (11) TMI 1062 - ALLAHABAD HIGH COURT], under similar facts and circumstances, has held that depreciation was allowable even if the entire capital expenditure was allowed as deduction. With effect from 01/04/2015 section 11(6) has been inserted by which it has been laid down that income of trust/society registered u/s 12A 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 u/s 11 in the same or any other previous year. This amendment is prospective and is applicable from 01/04/2015 and before this many courts, as noted by learned CIT(A) in his order, have held that depreciation claim is allowable. The case of assessee relates to assessment year 2011-12 and therefore, this amendment will not be applicable in the case of the assessee. - Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2016 which is on record. The observations of the Assessing Officer in the remand report are as under:- During the assessment proceedings, the AO had made addition of ₹ 2,71,20,688/- towards Administrative Expenses @ 30% of total expenses claimed at ₹ 9,04,02,294/- as the assessee trust failed to produce books of accounts, bills/vouchers etc. in respect of claim of application of income towards charitable purpose. During the remand proceedings, the assessee trust has submitted copies of ledger account of expenses exceeding ₹ 2 Lakhs and submitted photocopy of some bills and vouchers. 6.5 A copy of remand report was provided to the appellant for comments. The appellant has filed the written submissions claiming that With respect to aforesaid expense we would like to state that during the remand proceeding we had submitted copies of ledger accounts of expenses of 2,00,000/- and above claimed under the head Administrative Expenses in Income & Expenditure account of relevant assessment year alongwith copies of .some bills and vouchers. We would further like to state that all bills and vouchers of administrative expenses amounting to ₹ 9,04,02,294.92 inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion along with copies of some letter/notices issue by the management of the appellant trust for fee concession along with incentive policy for admission of meritorious students and copies of some applications for fee concession of financially deprived students along with the hand written ledger during the remand proceeding. Further, the appellant Trust had produced all its books of accounts along with bills and vouchers before the Ld. Assessing Officer for verification with reply dated 06.01.2016 during remand proceeding. The activity of giving fee concessions to deserving students is not new for this year and is a regular practice of the appellant trust. The activities of appellant are exactly similar to the activities undertaken by appellant in the earlier A.Y.'s In the earlier A.Y.'s the appellant has been granted exemption u/s 11 as it is registered u/s 12A of the Act. The audit report was filed alongwith Balance Sheet. These fee concessions have been allowed to the appellant-trust in the earlier A.Y's also. The relevant ledger accounts of fee concession and supporting documentary evidence was produced before the AO in remand proceedings and same were checked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets acquired out of application of trust income, irrespective of the facts that cost of purchase is out of application of income exempt u/s 11 and 12 of the Act. In this regard, our reliance is placed on judgment of Hon'ble ITAT, Jaipur in the case of M/s Santokbha Durlabhji cuke trust, Jaipur v. Income tax Officer in ITA NO. 241 & 242/JP/2014 for A.Ys. 2004-05 and 2009-10 dated 13.03.2015. Relevant portion is reproduced below: "2.5 Besides by a catena of judgments of ITAT and Hon'ble High Court it is by now well settled that charitable institutions can claim depreciation on assets acquired out of application of trust income, irrespective of the facts that cost of purchase is out of application of income exempt u/s 11 and 12 of the Act Following are the case laws relied:- a. In ITO v. SS Jain Subodh Shiksha Samiti in [ITA No. 250/JP/2007] it was held: Where the society had claimed depreciation even when the cost of the assets have been treated as applied, it shall be treated as applied towards the income of the society. The word 'applied' used in section 11 should be construed widely and not in a narrow sense as held in: b. In ACIT Vs. Bhopal Campion S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated the similar stand in its latest judgment in CIT Vs. Market Committee [2011] 330 ITR 16. M/s Santokbha Durlabhji Trust vs. ITO Ward-Kl). Jaipur. It is further pleaded that the legal position in behalf of such depreciation has been amended w.e.f. 01.04.2015 by insertion of Section 11(6) of I.T. Act, 1961 by Finance (No.2) Act, 2014 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. The memorandum explaining the amendment of above provision appended with Finance (No.2) Act, 2014 explains the same as under:- The section 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 section, notional deduction by way of depreciation etc, is claimed and such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment in the Act and income for purpose of application shall be determined without any allowance of depreciation. This amendment took effect from 01.04.2015 i.e. A.Y. 2015-16 and subsequent years. The issue in appeal is for A.Y. 2011-12 and the pre amended section will apply in the case of appellant. In view of these facts the provisions of Section 11(6) of the Act shall be applicable only after 01.04.2015. In view of existing scheme of section 11 & section 10(23C) for A.Y. 2011-12 and the judgments in case of M/s Santokbha Durlabhji Trust of Hon'ble ITAT Jaipur the claim of depreciation is allowed to the appellant. The addition made by AO is deleted." Addition on account of capital expenditure "9.3 The submissions of appellant were forwarded to the Assessing Officer for necessary inquiry and report. The AO has since submitted a remand report vide letter F.No. ITO(E)/Lko/Remand Report/2015-16 dated 20.01.2016 which is on record. The observations of the Assessing Officer in the remand report are as under:- The AO had made the addition towards capital expenditure At ₹ 8,14,/18/262/- the assessee trust had not produced the details and documentary evidences in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital assets is allowed to be treated as application of income while computing income u/s 11 and 12 of the Act. The action of AO is deleted." Aggrieved, the Revenue is in appeal before us. 3. Learned D. R., at the outset, heavily placed his reliance on the order of the Assessing Officer. It was submitted that during the remand proceedings the Assessing Officer had specifically held that the allowance of depreciation will amount to double benefit to the assessee as the capital expenditure was already allowed to the assessee in earlier years. 4. Learned A. R., on the other hand, heavily placed her reliance on the order of learned CIT(A) and submitted that learned CIT(A) after going through the submissions of the assessee and after obtaining remand report from the Assessing Officer has elaborately dealt with the issues and has rightly deleted the additions. It was submitted that the registration u/s 12A of the Act was never cancelled and assessee was being allowed exemption u/s 11 as the assessee was engaged in charitable activities. As regards the arguments of Learned D. R. regarding double claim on account of depreciation, Learned A. R. submitted that various courts have already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so recorded by the Appellate Tribunal are on the basis of cogent material on records. Therefore, it cannot be said that the findings recorded by the Tribunal are perverse or contrary to the material on record. It is settled law that the findings of fact cannot be upset unless perversity is shown. We also take note of the fact that income for the Assessment Year under consideration declared by the assessee is nil. Therefore, the Appellate Tribunal has rightly passed the impugned order. During the course of arguments, Sri Alok Mathur, learned Counsel for the department has also failed to point out any reasonable cause which shows that depreciation was allowable. Moreover, as per Clause 3 of Circular No. 3/2011[F.No. 279/Misc. 142/2007-ITJ] dated 9.2.2011, appeal is not maintainable. For the reasons aforesaid, the question so framed is answered in the negative i.e. against the department. The impugned judgment and order passed by the Appellate Tribunal is hereby confirmed." 5.1 We further find that with effect from 01/04/2015 section 11(6) has been inserted by which it has been laid down that income of trust/society registered u/s 12A shall be determined without any deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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