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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri Amarjit Singh
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This assessee’s appeal for A.Y. 2015-16, arises from order of the CIT(A)-9, Ahmedabad dated 30-05-2018, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
The assessee has raised following grounds of appeal:- “1. The Ld. CIT(A) is unjustified, erred in law and fact by confirming the disallowance of deduction claimed u/s 24(a) of Rs. 54,000/- by AO from the rent income on the erroneous
I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 2 ground that income from property held under trust has to be arrived in normal commercial manner without considering the provisions of section 14. 2. Ld. CIT(A) has erred in law & unjustified in confirming the disallowance of depreciation of Rs. 22,44,353/- on assets of trust, made by AO presuming that expenditure on asset creation/acquisition has been allowed as application of income, without giving any finding about such allowance in any of the past years. The trust has never claimed acquisition/ creation of assets as application of income in past yrs.
1 The Ld. CIT(A) has erred in law & unjustified in confirming above additions by passing non-speaking order.
2 The Ld. CIT [A] is unjustified in not dealing with the ground no 3 raised in appeal before him that addition was made by AO without issue of show cause notice.”
The fact in brief is that assessee trust had filed return of income for the year under consideration on 27th Sep, 2015 declaring total income at Rs. nil. The case was selected for scrutiny and notice u/s. 143(2) was issued on 29th July, 2016. The assessment u/s. 143(3) of the act was finalized on 23rd August, 2017. The remaining facts of the case are discussed while adjudicating the two grounds of appeal filed by the assessee as under:-
Ground No. 1 (Disallowance of deduction claimed u/s. 24(a) of Rs. 54,000/-)
At the time of assessment, the assessing officer noticed that assessee has claimed standard deduction at 30% of the rent income amounting to Rs. 54,000/-. The assessing officer has disallowed the claim of standard deduction stating that the income from the house property held under the trust have to be arrived in the normal commercial manner without reference to provision of section 14 of the I.T. Act. The assessing officer has also placed reliance on the decision of Hon’ble Madras High Court in the case of Rao Bahahur Calavala Cunnan Chetty Charities ( 135 ITR 485) (Madras).
I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 3 as per section 11 of the Act. We have gone through the provisions of section 11 of the act and it is observed that definition of total income u/s. 2(45) is inclusive in nature and it includes various kinds of income whereas Sec. 11(1) refer to income and not total income. Sec. 11(1)(a) deals with the income from property held under the trust. Therefore, in case of trust the term income cannot be assigned the meaning of the term total income. ITR 215 (Cal), it was observed that application of sec. 14 to charitable organization was not possible. The income from property held for charitable or religious purposes cannot therefore be equated with the income which is computed under the general provision of the Act. The chargeability of income to tax arise only when the trust is not able to apply 85% of its income for charitable purpose or loses exception on compliance of the provisions. CIT Estate of V.L. Ethiraj (1982) 136 ITR 12 (Mad)
I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 4 CBDT Circular No. 5-P (LXX-6) dt. 19-06-1968 which was referred in the case of DIT (Exemption) Vs. Girdharilal Shewnarain Tantia Trust (1993) 99 ITR 215 (Cal.) at para 2 it is stated that Section 11(1) provides that subject to the provisions of section 60 to 63 the following income shall not be included in the total income of the previous year. The reference in sub- section (1)(a) is invariably to income and not total income. At para 4 of the said circulars it is stated that “where the trust derives income from house property, interest on securities, capital gains, or other sources, the word income should be understood in its commercial sense i.e. book income after adding back any appropriations or applications thereof towards the purpose of the trust or otherwise and also after adding back any debits made for capital expenditure for the purposes of the trust or otherwise.” We have also gone through the decision of Hon’ble Gujarat High Court in the case of CIT vs. Seth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598 (Guj.) wherein the Hon’ble High Court has referred the case of I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 5 In the light of the above facts and judicial findings on this issue, we consider that deduction u/s. 24(a) is not available where the assessee is charitable trust and its income is exempt u/s. 11 of the Act. Therefore, any part of the income received by the assessee from house property is applied for maintenance of the same house property the same is allowed as application u/s. 11 and actual expenditure of maintenance shall be allowed as deduction u/s. 11 of the Act. Therefore, we do not find any infirmity in the decision of the lower authority stating that the income from the house property held under charitable trust has to be arrived in the normal commercial manner without reference to provision of section 14 of the Act.
Ground No. 2 (Disallowance of depreciation of Rs. 22,44,353/- on assets of trust)
During the course of assessment the assessing officer has noticed that assessee trust has debited total depreciation of Rs. 22,44,353/- stating that I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 6 In the case of the assessee in the preceding assessment year 2014-15 the claim of the assessee on the similar ground has been allowed by the ld. CIT(A) after placing reliance on the decision of Hon’ble Gujarat High Court in the case of CIT vs. Seth Manilal Ranchhoddas Vishram Bhavan Trust 198 ITR 598 (Guj). Considering the similar facts and issue involved in the case of the assessee for the year under consideration and following the judgment of Hon’ble High Court supra, we do not find any merit in the decision of ld. CIT(A) as the amendment referred by ld. CIT(A) in section 11(6) is applicable w.e.f. 01-04-2005, therefore, the appeal of the assessee on this issue is allowed.
Ground no. 3.1 & 3.2 are general grounds of appeal which were not contested at the time of appellate proceedings with any relevant material, therefore, the same stands dismissed.
In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 22-06-2020 (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 22/06/2020
I.T.A No. 1576/Ahd/2018 A.Y. 2015-16 Page No 7 आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद