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TMI Blog2019 (1) TMI 1451X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.08.2017 passed by the CIT(A)-25, Kolkata in ITA No.103/CIT(A)-25/Kol/2014- 15, involving proceedings u/s 143(3) of the Income tax Act, 1961 (in short Act ). Heard both the parties. Case file perused. 2. The assessee s sole substantive grounds raised in the instant appeal challenged the CIT(A) s action reversing assessment findings treating assessee s depreciation claim of ₹ 2,52,14,568/- as an instance of double deduction in both application of income involving cost of acquisition as well as for the purpose of computing depreciation on the relevant fixed assets. Learned CIT(A) s findings under challenge read as under:- 5. Grounds of Decision: The only ground of appeal relates to not treating the depreciation of ₹ 2,52,14,568/- as application of income for the year under consideration in the computation of income as application. In the Income Tax Return for the year, the appellant has treated depreciation of ₹ 2,52,14,568 as application of income. But the JDlT (Exemption), Kolkata, while computing the total income of the appellant, did not consider the depreciation as application of income for medical purposes as referred to u/s.10(23C)(via) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case) is deployed from surplus fund of the trust which is generated from charitable activity; the assets value should be either 'nil' or no depreciation should be charged. The charging of depreciation on assets leaves no trail of fund which is debited in the shape of depreciation. In the business entity, the depreciation fund is utilized to repayment of capital loan or capital of the managers and there is no siphoning of fund as such. In case of charitable organization rather than increasing the corpus fund (as the depreciation reduces surplus and Balance sheet is also reduced on both sides to the extent of depreciation) the trail of depreciation is out of books of account. The Hon'ble Kolkata High Court, in the case of [2014] 51 taxmann.com 455 (Calcutta) HIGH COURT OF CALCUTTA Commissioner of Income-tax vs.Siliguri Regulated Market Committee Has held as under:- We have considered the submissions and perused the judgments of the Punjab and Haryana High Court and the Bombay High Court as also the judgment of this court in the case of Jayashree Charity Trust (supra) and in the case of Bheruka Public Welfare Trust (supra). We are of the opinion that the views expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which may be a cause for generation of black money and the Hon'ble Court has dismissed the claim of the appellant for claiming double deduction of depreciation. In this case, the appellant has taken two time benefit; once on a commercial line claim of Sec. 32 has been made and secondly, on application of surplus by virtue of Sec. 11 and other one in form of depreciation claimed u/s. 32 of the I. T. Act. Thus if depreciation is allowed then there remains no trail of the fund from the Balance sheet, the appellant took benefit of section 32 and Section 11 of the I. T. Act. But it did not maintain its net worth as per the benefit by it which can show the availability of fund with trust. Definitely once the entire asset has been purchased from surplus fund and again depreciation is charged then every year appellant should show its accumulated fund on account of depreciation but neither any such accumulation is made nor its utilization is shown and surplus generated by debiting depreciation, goes out of books. The funds trail should always be there for the public but the same is without any record and in the present knowledge of the Trustees which gives loose end to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et or other asset, the Ld.counsel for the assessee very fairly submitted that Section 32 of the Act provides for allowing depreciation only on business asset. The Ld.counsel further clarified that the assessee is not doing business, the assessee is claiming as charitable institution. According to the Ld. counsel, while computing income on commercial principle, irrespective of the provisions of Section 32 of the Act, the assessee is eligible for depreciation. The Ld.counsel further submitted that there is no conflict between computation of income on commercial principle and the provisions of Section 32 which allows depreciation only on the commercial asset, which is used for business. 5. On the contrary, Sh. P. Radhakrishnan, the Ld. Departmental Representative, submitted that Section 32 of the Act provides for allowing depreciation in respect of the asset which used for business or profession. In this case, the assessee admittedly registered as a charitable institution under Section 12AA of the Act. The assessee is not doing any business or profession. If the assessee claims that it is doing business or profession, then the registration has to be cancelled under Section 12AA(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as expenditure laid out over the years during the life time of the machinery. In other words, the value of the asset, machinery, etc. reduced pro tanto. This Tribunal is of the considered opinion that the depreciation is spread over during the effective life time of the machinery or asset, etc. used for business by allowing the same as deduction on notional basis. The amount of depreciation allowed in a particular year is intended to represent the life of the machinery such as expenditure during the above said period. In other words, the value of the machinery was spread over for the effective life time of the asset and a provision was made by way of notional deduction to replace the machinery after expiry of its entire life time. Therefore, the Legislature provided depreciation under Section 32 of the Act as an incentive/allowance to the asset which was used for the business or profession. This can be construed as reduction in value in the balance sheet while computing the income from business or profession. 7. Section 32(1) of the Act clearly says that the asset owned wholly or partly by the assessee and used for the purpose of business or profession . In view of the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation, when the income was exempted on application or accumulation as provided under the scheme of the Act. The charitable institution under the scheme of Income-tax Act is on a different footing. The entire income of the assessee-trust from the property held under trust do not form part of total income under Section 11 of the Act provided the same is applied for charitable object. Section 11 of the Act also provides for accumulation of 15% of income for future application for the object of the trust. Therefore, the business and charitable institution are two different categories in the scheme of Income-tax Act. This Tribunal is of the considered opinion that the customary way of computing income or the commercial principle of computing income cannot override the specific provision of Income-tax Act. The Income-tax Act does not provide for allowing depreciation other than the asset which was used for business or profession. There is no other provision in the Income-tax Act other than Section 32 of the Act for allowing depreciation. Therefore, the claim of the assessee that the depreciation has to be allowed on commercial principle or customary principle of computation of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g out charitable object of the institution. When the asset was used as tool for carrying out the object of the charitable institution, such activity cannot be construed as a business or profession of the assessee. Therefore, Section 32 of the Act is not applicable in this case. 13. We have carefully gone through all the judgments and decisions cited by the Ld.counsel for the assessee, which are as under:- 1. DIT v. Vishwa Jagriti Mission (2012) 73 DTR (Del) 195 2. CIT v. Market Committee, Pipli (2011) 330 ITR 16 (P H) 3. CIT v. Society of Sisters of St.Anne (1984) 146 ITR 28 (Kar) 4. CIT v. Bhoruka Public Welfare Trust (1999) 240 ITR 513 (Cal) 5. CIT v. Tiny Tots Education Society (2011) 330 ITR 21 (P H) 6. CIT v. Sheth Manilal Ranchhoddas (1992) 1981TR 598 (Guj) Vishram Bhavan Trust 7. CIT v. Raipur Pallottine Society (1989) 180 ITR 579 (MP) 8. CIT v. Institute of Banking Personnel (2003) 264 ITR 110 (Bom) Selection 9. DIT(E) v. Framjee Cawasjee (1993) 109 CTR (Bom) 463 Institute 10. DOlT v. Lakshmi SaraswathilTA No.452/Mds/2014 Educational Trust Chennai ITAT 11. Apollo Hospitals Educational Trust v.ITA No.2090/Mds/2012 D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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