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TMI Blog2018 (4) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... the department confirming the order of CIT(A). Counsel for the appellant has framed following questions of law:- In DBITA No. 13/2018, 38/2018 & 39/2018 i) Whether on the facts and in the circumstances of the case and in law the Hon'ble ITAT is right in dismissing the appeal filed by the revenue on the issue of disallowance of depreciation by ignoring the facts that assessees like charitable or religious institutions are governed by almost the separate or independent provisions of Section 11, 12, 12A, 12AA & 13 and these provisions are independent code in itself in Chapter III of the Income Tax Act, 1961 and claim of depreciation u/s 32 come under chapter IV of the Act under the head 'D' - Profit and Gains of Business or profession and depreciation is allowed when the capital assets are used for the purpose of business? ii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is right in dismissing appeal filed by the revenue on the issue of disallowance of depreciation by ignoring the fact that in the case of charitable or religious institutions, the assessee is not eligible for any type of depreciation as the entire expenditure for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me time, the Appellant was granted relief in the following terms.: We find force in this contention because Assessee cannot be taken by surprise by disallowing depreciation which, was being allowed for several years and to demand tax for one year after making disallowance. We feel Assessee should be allowed to write back the depreciation for this year and even for previous year and then allow the same to be carried forward for application for subsequent years. It is for the Assessee to write back depreciation and if done the AO will modify the assessment determining higher income and allow recomputed income with the depreciation written back by the Assessee to be carried forward for subsequent years for application for charitable purposes. 2. Since the High Court has also already given the benefit for other assessment years we do not find any reason to interfere with the order passed by the High Court. The appeal is accordingly dismissed. In view of the aforesaid, the application for intervention is not pressed as we have not gone into the merits of the case." He further relied upon the decision of Supreme Court in CIT- III, Pune vs. Rajasthan and Gujarati Charitable Foundatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10(23C) is to ignore the language of the Section and to ignore the tests laid down in the Surat Art Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income Tax MANU/SC/0107/1998 : (1998) 2 SCC 584, this Court in the context of benefit claimed Under Section 11 of the Act held: 9. In the present case, the Assessee is not claiming any benefit Under Section 11(2) as it cannot; because in respect of this assessment year, the Assessee has not complied with the conditions laid down in Section 11(2). The Assessee, however, is entitled to claim the benefit of Section 11(1)(a). In the present case, the Assessee has applied ₹ 8 lakhs for charitable purposes in India by purchasing a building which is to be utilised as a hospital. This income, therefore, is entitled to an exemption Under Section 11(1). In addition, Under Section 11(1)(a), the Assessee can accumulate 25% of its total income pertaining to the relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that the Revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C)read with Section 11 of the Income-tax Act." In all those appeals which have come from the High Court of Punjab and Haryana and filed by the Department of Income-tax except one from the Gujarat High Court, the High Court has followed its aforesaid judgment in Pinegrove International Charitable Trust. Since this view stands approved, all these appeals are dismissed. We, however, make it clear that observations made in para. 25, reproduced above, shall apply in these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration the aforesaid, we are of the opinion that the contention raised by Mr. Jhanwar is required to accepted. 20. Therefore, the first question, we answering in favour of the assessee that it is an income entitled for exemption under Section 23C(iiiad) of the Act." 7. Thus, in view of the above, all the issues are required to be answered in favour of assessee and against the Department. " He has further relied upon the decision of this Court in case of Commissioner of Income Tax vs. M/s Compucom Foundation and other connected matters (DBITA No. 209/2017) decided on 14th November, 2017, wherein it has been held as under:- "4. Now the issue is squarely covered as stated by counsel for the respondent in case of Commissioner of Income Tax-II vs. Krishi Upaj Mandi Samiti (DBITA No. 32/2010) decided on 16th January, 2015 wherein it has been held as under:- "5. The assessee is a charitable institution registered under Section 12-A of the Act of 1961 and 100% capital expenditure was availed by it against the asset concerned i.e. a building. Section 32(1) of the Act of 1961 provides for depreciation in respect of building, plant and machinery owned by the assessee and used for busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, the appeal, being devoid of merit, is hereby dismissed in limine. No order as to costs. 18. He contended that the view taken by the tribunal is on consideration of facts and it is not a question of law. 19. He has relied upon the judgment of this court in Murari Lal Khandelwal vs. CIT (2003) 263 ITR 642 wherein it has been held as under:- 4. Learned counsel for the assessee Mr. Jhanwar submits that the amount of salary claimed on account of payment to the sons i.e., Anoop and Alock was reasonable, as both are looking after the business and assessee has got paralytic attack in the year 1983, therefore, the payment of salary to these persons at the rate of ₹ 6,000 and ₹ 5,000 per month, respectively, was justified. 5. The facts on record reveal that both are graduates and Anoop, to whom assessee has paid ₹ 6,000 p.m. in the year under consideration was getting only ₹ 1,000 p.m. just in the preceding year. So far paralytic attack to the assessee is concerned, it happened in the year 1983. The assessee has carried on the business even after paralytic attack without the help of these two sons. 6. We also notice that in the preceding year i.e., 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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