THE COMMISSIONER OF INCOME TAX (EXCEMPTION) vs. CHARUTAR AROGYA MANDAL

This appeal is filed by the Revenue challenging the   judgment   of   the   Income   Tax   Appellate   Tribunal raising following questions for our consideration: “(A) Whether,   on   the   facts   and   in   the circumstances of the case and in law, the Appellate Tribunal was justified in allowing relief   of   undisclosed   interest   income   of Rs.23,08,970/­   as   per   26AS   data   which   was not   included   in   total   interest   offered   by the assessee

The   issue   pertains   to   the   assessment   year 2010­11. The first question relates to the mismatch in   the   accounts   of   the   assessee   concerning   its C/TAXAP/1091/2018 ORDER interest income. Commissioner of Income Tax (Appeals) however, noted that the assessee had offered larger interest   income   which   would   subsume   the   error component of interest income of Rs.23,08,970/­.  The Tribunal   confirmed   this   view.    No   question   of   law arises.

The   second   question   relates   to   the   assessee's claim of depreciation under section 35AC of the  the Income   Tax   Act,   1961   ('the   Act'   for   short)  in relation to assets purchased for its cardiac center out   of   the   grants   received   which   were   covered   for exemption under section 35AC of the Act.  The stand of the Assessing Officer was that on such grants, the donees   would   claim   exemption   in   terms   of   section 35AC.   The   assessee   therefore   cannot   claim depreciation on the same asset or else it will amount to double deduction.

The Commissioner of Income Tax (Appeals) and the Tribunal reversed such decision.  Reliance was placed on   a   decision   of   this   Court   in   case   of  Ahmedabad South   Indian   Association   Charitable   Trust  in   Tax Appeal No.933 of 2010 and allied matters, in which, C/TAXAP/1091/2018 ORDER in context of section 11 of the Act, it was held that even   if   assets   purchased   by   the   Trust   are   allowed deduction as applicable under income, while working out taxable income of the Trust, the depreciation has to be allowed on the value of such assets.  Reliance was also placed on the decision of the Supreme Court in case of  Commissioner of Income­Tax v. Rajasthan and   Gujarati   Charitable   Foundation reported   in [2018] 402 ITR 441 (SC), in which, the Supreme Court confirmed the decision of the Bombay High Court and various other High Courts granting depreciation to a Trust   even   though   the   Trust   was   eligible   for exemption under section 11 of the Act.  The income of the Trust was eligible for exemption under section 11 of the Act.

Learned   counsel   for   the   Revenue   however submitted that in the present case, we are concerned with   the   deduction   under   section   35AC   of   the   Act, which   the   donor   of   the   funds   would   receive.     The respondent

In   our   opinion,   the   logic   adopted   in   case   of Rajasthan and Gujarati Charitable Foundation (supra) would substantially apply.  In terms of section 35AC of the Act, the assessee who incurs expenditure by way   of   payment   directly   on   eligible   project   or   a scheme,   would   enjoy   exemption   of   such   expenditure during   the   relevant   year.     This   exemption   however would not cast any shadow on the assessee claiming any depreciation under section 32 of the Act which is allowable   in   respect   of   any   building,   machinery, plant or furniture being tangible assets owned wholly or   partly   by   the   assessee   and   for   the   purpose   of business or profession at the specified rates.   The requirements thus, are of the assessee owning wholly or partly any building, machinery, plant or furniture being tangible assets and having used them for the purpose   of   business   or   profession.     Indisputably, these conditions are satisfied in the present case.

In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH