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TMI Blog2018 (12) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets cannot be taken into account. See CIT v. Rajasthan and Gujarati Charitable Foundation [2017 (12) TMI 1067 - SUPREME COURT]. Claim for depreciation on new assets put into use during the accounting year relevant to this assessment year, even though the entire cost of these assets have been claimed by the assessee as an application of income for charitable activities - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious pur poses in the subsequent year in which adjustment had been made having regard to the benevolent provisions contained in section 11 of the Act and such adjustment will have to be excluded from the income of the trust under section 11(1)(a) CIT - See (Exemptions) v. Ohio University Christ College [2018 (11) TMI 1055 - KARNATAKA HIGH COURT] - I. T. A. No. 862 of 2017. - - - Dated:- 21-8-2018 - Dr. Vineet Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the asset as an application of income and allowing of depreciation on the value of such assets in the same year results in double deduction and is not admissible in the absence of clear statutory indication ? 3. The learned counsel for the Revenue submits that he does not press question No. 2. He further submitted that question No. 1 is covered by a decision of this court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation [2018] 402 ITR 441 (SC) ; [2018] 89 taxmann.com 127 (SC) with regard to allowability of Depreciation in the hands of religious and charitable trust held as under : 5. Learned counsel at the Bar submitted that so far as the issue regarding claim of depreciation under section 32 of the Act is con cerned, the controversy is no longer res integra, having been settled by the hon'ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation [2018] 402 ITR 441 (SC) ; [2018] 89 taxmann.com 127 (SC), by which the hon'ble Supreme Court has affirmed the view taken by the Bombay High Court in CIT v. Institute of Banking [2003] 264 ITR 110 (Bom) ; [2003] 131 Taxman 386 (Bom). The relevant portion of the said judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that normal deprecia tion can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income-tax Act. The court rejected the argument on behalf of the Revenue that section 32 of the Income-tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a charitable trust derived from building, plant and machinery 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 depre ciation 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 ..... gs (Deputy DIT (Exemptions) v. Ohio University Christ College [2015] 44 ITR (Trib) 291 (Bang)) in this regard do not give rise to any substantial question of law. The said findings are quoted below for ready refer ence (page 306 of 44 ITR (Trib)) : 'In the course of assessment proceedings, the Assessing Officer observed that the assessee had claimed application of income on account of expenditure of earlier years, which has been brought for ward and set off in the year under consideration. The Assessing Officer disallowed the same on the ground that there is no express provision in the Act permitting the adjustment of earlier years brought forward expenses as application of income in the current year. According to the Assessing Officer, the application of income for charitable purposes must be during the relevant previous year. Since the income of the trust is exempt from tax, the question of deficit does not arise and also the trust is required to utilize 85 per cent. of the income of the previous year for charitable purposes during the year. In this view of the matter and for the above reasons, the Assessing Officer disallowed the assessee's claim of expenditure of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consequently, ground No. B (1 to 6) of the Revenue's appeal for the assessment year 2008-09 and ground No. C for the assessment year 2009-10 are dis missed.' 17. In our opinion, the matter is squarely covered by a decision of the cognate Bench of this court in the case of CIT v. Society of the Sis ters of St. Anne [1984] 146 ITR 28 (Karn) ; [1984] 16 Taxman 400 (Karn), wherein the cognate Bench of this court held that even the depreciation not involving any cash outflow is also in the character of expenditure and therefore such depreciation is nothing but decrease in the value of property through wear and tear, deterioration or obso lescence and the allowance made for that purpose in the books of account were deemed to be the application of funds for the purpose of section 11 of the Act. The relevant portion of the said judgment is also quoted below for ready reference (page 32 of 146 ITR) : 'Mr. Srinivasan, however, urged that there are enough indications in section 11 to exclude the mercantile system of accounting. The learned counsel relied upon section 11(1)(a) and 11(4) in support of his contention. We do not think that there is anything in these sub- sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified finding of fact based on the correct interpretation of law and the judgment relied upon by it rendered by the cognate Bench. Therefore, the same does not call for interference. A similar view was also taken by the Division Bench of the Bombay High Court in CIT v. Institute of Bank ing [2003] 264 ITR 110 (Bom), wherein the Division Bench of the Bombay High Court held that the income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied, then adjustment of expenses incurred by the trust for charitable and religious purposes in the ear lier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year. The relevant portion of the said judgment of the Bombay High Court is also quoted below for ready reference (headnote of 264 ITR 110 ) : '. . . Normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income-tax Act, 1961. Income of a charitable trust derived from buil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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