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TMI Blog2006 (3) TMI 191X X X X Extracts X X X X X X X X Extracts X X X X ..... being no supportive material with regard to this contention of learned Departmental Representative, we find no merit in such contention. No dispute to the fact that the object of assessee-trust includes merely establishment of hospital. Establishment of hospital in itself embedded the provisions for medical help to be extended to the public. Establishment of hospital is one of the modes to provide such medical help. Taking a liberal view we hold that providing medical help is also covered in the objects of the trust, particularly when genuineness of such payments incurred by assessee in respect of medical help have not been doubted. Therefore, we direct AO to delete the disallowance. To sum up, our findings are as under: (a) The assessee is not entitled to deduction u/s 24(1)(i). (b) The assessee is entitled to get depreciation as claimed by it in the income and expenditure account [we find that the claim of depreciation before CIT(A) in the grounds of appeal was Rs. 4,41,530 whereas in the grounds filed before us is Rs. 6,49,856]. According to decision in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust [ 1992 (2) TMI 51 - GUJARAT HIGH COURT] the amount of depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) That the learned CIT(A) has grievously erred in rejecting the said alternative on the judgment of Supreme Court of India in the case of Addl. CIT vs. Gurjargravures (P) Ltd. 1978 CTR (SC) 1 : (1978) 111 ITR 1 (SC), even though the Supreme Court itself has explained the said judgment in the case of Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC). (8) Thus, there being claim of deduction as well as evidence on record, the learned CIT(A) ought to have exercised his jurisdiction in allowing the additional claim in proper perspective. (9) The learned CIT(A) has grievously erred in not following the latest judgment of Supreme Court of India in this regard reported in the case of National Thermal Power Co. Ltd. vs. CIT (1999) 157 CTR (SC) 249 : (1998) 229 ITR 383 (SC) and ought to have entertained the said alternative claim on merit. (10) That the learned CIT(A) has equally erred in not taking into account the statement of facts, grounds of appeal and different notes submitted from time-to-time. III. Medical Expenses (Rs. 79,346) (11) That the learned CIT(A) has erred in confirming the finding of the learned AO in relation to the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot as computed under the IT Act, subject of course to what is provided in sub-s. (4) of s. 11. The expression income has to be understood in the popular or general sense and not in the sense in which the income is arrived at for purpose of assessment to tax by the application of some artificial provisions either giving or denying deduction. Taking into account the purpose for which the conditions of s. 11(1)(a) are imposed, it would be clear that one has to consider the income as arrived at in the context of what is available in the hands of the assessee, subject of course to any adjustment for expenses extraneous to the trust. If the expression income is so understood, then one has to take the accounts of the assessee with reference to the receipts and deduct therefrom the expenses necessary for earning or looking after that income. The net amount that remains would be available for distribution or application for charitable purpose. In applying the income for charitable purposes, even capital expenditure may be incurred. Therefore, the nature of the expenditure in the hands of the entity which receives the money is not the criterion. So long as the assessee disburses the amount f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing depreciation of immovable property as per normal commercial principles as per aforementioned decision of Hon'ble Madras High Court in the case of CIT vs. Rao Bahadur Calawala Cunnan Chetty Charities. 8. With respect to other disallowance of Rs. 79,346 it was pleaded that AO has construed the objects of medical relief in narrower manner. It was pleaded that establishing of hospital will include in itself provisions for medical help and disallowance has wrongly been made. 9. Learned CIT(A) did not accept any such submissions of assessee. He rejected the first contention of regarding allowance of Rs. 2,96,702 on the ground that said disallowance is as per aforementioned decision of Hon'ble Madras High Court in the case of CIT vs. Rao Bahadur Calawala Cunnan Chetty Charities. He rejected the alternative claim of the assessee regarding depreciation on the ground that the said claim was not made by assessee before AO and if such deduction is not claimed before AO the same could not be claimed before CIT(A) as per decision in the case of Addl. CIT vs. Gurjargravures (P) Ltd. 1978 CTR (SC) 1: (1978) 111 ITR 1 (SC). The disallowance of Rs. 79,346 was sustained on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended on assessee for deduction under s. 24(1)(i) of the Act: 1. CIT vs. Ganga Charity Trust Fund (1986) 53 CTR (Guj) 365 : (1986) 162 ITR 612 (Guj) to contend that before determining the income which could be actually applied or accumulated for the purpose of the trust all outgoings including income-tax must be deducted. He contended that what assessee did not incur as an expenditure cannot be allowed. He contended that assessee is claiming notional expenditure which has not been incurred, therefore, the same cannot be allowed. 2. CIT vs. Rao Bahadur Calawala Cunnan Chetty Charities wherein it has been held that computation under different categories or heads arises only for the purpose of ascertaining the total income for the purpose of change and this provision cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is for the purpose of exemption under Chapter-III. Thus he pleaded that assessee's claim for 1/5th of income on account of repairs is not in accordance with law and, therefore, has rightly been disallowed by AO and learned CIT(A) has rightly upheld the disallowance. 14. As regards depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing happened for the asst. yr. 1972-73 also. After both the appeals were dismissed, the Revenue applied to the Tribunal for raising the above two questions and referring the same to this Court. 3. What is urged by learned counsel appearing for the Revenue is that ss. 22 to 27 of the Act are specific provisions providing for computation of income and, therefore, the Tribunal committed an error in holding that the income of the assessee as contemplated by s. 11(1)(a) of the Act was required to be computed not in accordance with those provisions but in accordance with the normal rules of accountancy under which depreciation is always taken into account for finding out the real income. 4. Whether depreciation has to be allowed as a necessary deduction for computing the income of a charitable institution was the question which came up before the Karnataka High Court in CIT vs. Society of the Sisters of St. Annie (1984) 39 CTR (Kar) 9 : (1984) 146 ITR 28 (Kar). Noticing the difference between the word 'income' and the expression 'total income' and the necessity for providing depreciation in order to maintain correct accounts, the High Court held that the amount of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or denying deductions and computation under the different categories or heads arises only for the purpose of ascertaining the total income for the purpose of charge. Thus their Lordships have recognised that the income which falls under s. 11 has to be arrived at in the normal commercial manner without classification under the various heads. Applying the said principle to the assessee-trust the income has to be computed as per normal commercial manner, thus there was no scope of granting deduction under s. 24(1)(i) by application of some artificial provisions classified under the various heads set out in s. 14. 17. It was mentioned in the grounds of appeal filed before CIT(A) that a sum of Rs. 4,41,530 was debited by the assessee in the income and expenditure account on account of depreciation for the year under consideration and copy of this income and expenditure account has been submitted before us at p. 69 of the paper book. Thus it is clear that assessee had shown the said sum as depreciation which is claimed as expenditure in the income and expenditure account. Though this claim was not raised before AO it was raised before CIT(A). The CIT(A) has denied this claim on the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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