9911796707
TMI Blog1981 (2) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... e determined on commercial principles which would take into consideration the depreciation admissible to it on the value of the assets owned by it. The ITO negatived the claim of the assessee on two grounds. He firstly held that the assessee was not carrying on any business and as the depreciation allowance was confined to only computation of income from business, the claim for deduction of depreciation was not tenable. He next pointed out that the assessee has been allowed full deduction in respect of the capital expenditure incurred on purchase of jeeps, furniture and fixtures. Therefore, the claim for depreciation was not admissible. 2. Being aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals). Relying upon various decisions of the Tribunal on identical issue, it was claimed that the assessee's claim for depreciation in computing its income must be upheld. This contention found favour with the Commissioner (Appeals) who observed that section 11 provides for exemption of income derived from property held under trust only for charitable or religious purpose to the extent to which such income is applied to such purposes in India. The income refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined the said income, it also provides that such income, if it is applied towards the objects of the trust or is accumulated is not exigible to tax. The claim for depreciation, therefore, falls for consideration when the income of the trust is required to be determined. The determination of income, therefore, has not to be confused with the application of income which is altogether a different concept and would come into play after the income is determined. Again section 11 speaks of determination of income of the trust which is different from computation of total income under the provisions of the Act. Thus, the claim for depreciation which may not be allowable in computing the total income would still be an outgoing when the income of the trust has to be determined on commercial principle. So far as the allowance of claim for depreciation is concerned, the decision cited by Shri Dastur fully supports the contention of the assessee. Therefore, in our opinion, there is no infirmity in the conclusion reached by the Commissioner (Appeals) that the claim for depreciation must be allowed in computing the income of the trust. We, therefore, decline to interfere with his decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals). The ITO, in our opinion, has proceeded on an erroneous basis holding that the surplus as determined for the year under appeal was only utilised for the purpose of making various investments. In fact, the accumulation has started right from the assessment year 1974-75 and so long as the surplus earned during the year is found to be deposited with the scheduled bank, which fact has not been disputed on behalf of the revenue, the basis adopted by the ITO by setting off the expenditure incurred during the year against the surplus cannot be accepted. Therefore, in our opinion, the Commissioner (Appeals) was justified in coming to the conclusion, as he did, that the assessee was entitled to deduction under section 11(2) of the entire surplus as determined on the basis of the audited statement. 7. Now, we turn to the cross-objection filed by the assessee which reads as under: "That an amount of Rs. 10,50,311 received as grant from Government and local authorities should not be considered as income. That, on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in considering grants from Government and local authorities amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the corpus of the trust or institution." According to section 12 as amended with effect from 1-4-1972, voluntary contributions received by a trust created wholly for charitable or religious purposes shall for the purpose of section 11 be deemed to be income derived from the property held under trust wholly for charitable or religious purposes. There is an exception in-built in the said section which excludes from the said deeming provisions the said contributions which are made with a specific direction that they shall form part of the corpus of the trust. Thus, voluntary contributions by fiction of law have to be treated as income of the trust. Section 2(24)(iia) provides that the expression "income" would include voluntary contributions received by the trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes other than contributions made with a specific direction that they shall form part of the corpus of the trust or the institution. It is in the light of these provisions that we have to consider whether the grant-in-aid received from Government or local authorities is hit by the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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