ST.PETERS INSTITUTE OF HIGHER vs. THE DEPUTY DIRECTOR OF

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TCA/674/2016HC Madras28 August 2025Bench: Honourable The CHIEF JUSTICE4 pages
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What did the High Court hold?

The High Court, after hearing the parties and considering the Supreme Court's decision in Commissioner of Income Tax-III, Pune vs. Rajasthan & Gujarati Charitable Foundation Poona, decided to answer questions of law Nos. 2 and 3 in favour of the assessee and against the Revenue. The Court found that the Supreme Court's ruling directly addressed the issues concerning the disallowance of depreciation in tax exemption computation under Section 11 of the Act and the impact of the amendment to Section 11(6). The reasoning was that the Supreme Court had held against the Revenue on these points. Consequently, the disallowance of depreciation was deemed incorrect for the assessment years in question. The first question of law was not pressed by the assessee. The appeal was therefore partly allowed, with no order as to costs.

What were the facts?

The assessee, St.Peters Institute of Higher Education Research, filed an appeal before the High Court of Judicature at Madras against an order of the Income Tax Appellate Tribunal (ITAT), Madras Bench. The appeal challenged the ITAT's decision which sustained the Revenue's action in bringing to tax cash found during a survey and disallowing depreciation for tax exemption computation under Section 11 of the Income Tax Act. The procedural history involves the framing of substantial questions of law by the High Court at the time of admission of the appeal. The assessment year(s) are not explicitly stated but are implied to be prior to the prospective amendment of Section 11(6) of the Act.

What were the issues?

The High Court was called upon to decide three substantial questions of law: 1. Whether the Appellate Tribunal was correct in sustaining the Revenue's action in taxing cash found during a survey, despite an explanation for its source, based on perverse factual findings, under Section 69A of the Act. 2. Whether the Appellate Tribunal was correct in sustaining the disallowance of depreciation in tax exemption computation under Section 11 of the Act, based on a wrong presumption of double deduction, overlooking binding decisions. 3. Whether the Appellate Tribunal was correct in reversing the First Appellate Authority's decision on depreciation disallowance by overlooking the prospective amendment to Section 11(6) of the Act, thereby confirming the eligibility for depreciation claims in earlier assessment years. Assessee's contentions: The assessee did not press question of law No.1. For questions 2 and 3, the assessee relied on the principle that depreciation is allowable for tax exemption under Section 11, and that the amendment to Section 11(6) was prospective. Revenue's contentions: The Revenue, through its Senior Standing Counsel, conceded that the issue in questions 2 and 3 had been decided by the Supreme Court in favour of the assessee in the case of Commissioner of Income Tax-III, Pune vs. Rajasthan & Gujarati Charitable Foundation Poona.

Which sections of the Income-tax Act were involved?

Section 11,Section 11(6),Section 69A

AI-generated summary — verify with the full judgment below

TCA No.674 of 2016 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.08.2025 CORAM THE HON'BLE MR.MANINDRA MOHAN SHRIVASTAVA, CHIEF JUSTICE AND THE HON'BLE MR.JUSTICE SUNDER MOHAN TCA No.674 of 2016 St.Peters Institute of Higher Education Research, No.621, 1st Floor, Sire Mansion, Anna Salai, Thousand Lights, Chennai 600 006 : Appellant versus The Deputy Director of Income Tax (Exemptions) I, Nungambakkam, Chennai : Respondent Prayer: Appeal filed against the order of the Income Tax Appellate Tribunal, Madras “A” Bench, Chennai, in ITA No.2264/Mds/2013 dated 06.01.2016. For Appellant : Mr.A.S.Sriraman For Respondent : Ms.V.Pushpa, Senior Standing counsel JUDGMENT (Delivered by the Hon'ble Chief Justice) At the time of admission of this appeal, the following substantial questions of law were framed for consideration of this Court: Page 1 of 4 https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/09/2025 08:56:53 pm ) TCA No.674 of 2016 “1.Whether the Appellate Tribunal is correct in law in sustaining the action of the respondent in bringing to tax the cash found at the time of survey for making assessment despite the explanation offered for the source while recording perverse factual findings? 2.Whether the Appellate Tribunal is correct in law in sustaining the disallowance of depreciation in the tax exemption computation under Section 11 of the Act on the wrong presumption of double deduction in overlooking binding decisions rendered in relation thereto? 3.Whether the Appellate Tribunal is correct in law in reversing the decision of the First Appellate Authority on the correctness of the issue relating to the disallowance of depreciation in the tax exemption computation by overlooking the prospective amendment brought-in in Section 11(6) of the Act with effect from 1.4.2015 thereby confirming the eligibility of making such claim of depreciation in the earlier assessment years including the assessment year under consideration?” 2. At the outset, learned counsel for the appellant would submit that out of the three questions of law framed for being answered by this Court, he does not wish to press question of law No.1. At this stage, learned counsel for the Revenue would fairly submit that as far as question of law Nos.2 and 3 are concerned, the issue arising therein has already been decided by the Hon'ble Supreme Court in the case of Page 2 of 4 https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/09/2025 08:56:53 pm ) TCA No.674 of 2016 Commissioner of Income Tax-III, Pune vs. Rajasthan & Gujarati Charitable Foundation Poona, [2018] 89 taxmann.com 127 (SC); wherein the Supreme Court has held against the Revenue and in favour of the assessee . 3. Having heard the learned counsel for the parties and on going through the judgment in Rajasthan & Gujarati Charitable Foundation Poona (supra), this Court is inclined to answer question of law Nos.2 and 3 in favour of the assessee and against the Revenue. Accordingly, questions of law Nos.2 and 3 are answered in favour of the assessee and against the Revenue. 4. The appeal stands partly allowed. There will be no order as to costs. (MANINDRA MOHAN SHRIVASTAVA, CJ.) (SUNDER MOHAN, J.) 28.08.2025 Index : Yes/No Neutral Citation : Yes/No tar Page 3 of 4 https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/09/2025 08:56:53 pm ) TCA No.674 of 2016 THE HON'BLE CHIEF JUSTICE AND SUNDER MOHAN

, J.

(tar) To 1.The Deputy Director of Income Tax (Exemptions) I, Nungambakkam, Chennai 2.The Income Tax Appellate Tribunal, Madras “A” Bench, Chennai TCA No.674 of 2016 28.08.2025 Page 4 of 4 https://www.mhc.tn.gov.in/judis ( Uploaded on: 03/09/2025 08:56:53 pm )

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