ADHIKAR,BHUBANESWAR vs. ITO, WARD-2(1), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA No.255/CTK/2017 Assessment Year : 2012-2013

Adhikar , Plot No.- Vs. Income Tax Officer, Ward- 113/2524, Khandagiri Vihar, 2(1), Bhubaneswar Khandagiri, Bhubaneswar. PAN/GIR No. AAATA 3160 D (Appellant) .. ( Respondent)

Assessee by : Shri S.C.Bhadra, AR Revenue by : Shri Subhendu Datta, DR

Date of Hearing : 05/09/ 2018 Date of Pronouncement : 27 /09/ 2018

O R D E R Per N.S.Saini, AM The appeal filed by the assessee is directed against the

order of the CIT(A)-3, Bhubaneswar dated 29.3.2017 for the

assessment year 2012-2013.

erred in confirming the disallowance of depreciation of

10,39,569/- and addition of Rs.7,96,911/- being transfer to

general fund, Rs.72,29,426/- advances and Rs.35,56,860/-

liabilities.

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disallowed depreciation of Rs.10,39,569/- to the assessee on the

ground that in the computation, the assessee has claimed both

purchase of fixed assets and depreciation as utilisation of income.

Officer on the ground that the assessee has claimed cost of assets

as capital expenditure in earlier years and, therefore, depreciation

is not allowable during the year under appeal as it will amount to

double deduction to the assessee.

Supreme Court in the case of Rajasthan and Gujrati Charitable

and Foundation Poona, reported in 402 ITR 441 (SC), wherein, it

has been held that in the case of CIT vs. Institute of Banking

Personnel and Selection (IBPS), 131 Taxman 386 (Bom), it was

held that section 11 makes provisions in respect of computation of

income of the the trust from property held for charitable or

religious purposes and it also provides for application and

accumulation of income. On the other hand, section 28 of the

Income-tax Act deals with chargeability of income from profits and

gains of business and section 29 provides that income from profits

and gains of business shall be computed in accordance with

P a g e 2 | 7 section 30 to section 43C. That, section 32(1) of the Act provides

for depreciation in respect of building, plant and machinery owned

by the assessee and used for business purposes. It further

provides for deduction subject to section 34. In that matter also, a

similar argument, as in the present case, was advanced on behalf

of the Revenue, namely, that depreciation can be allowed as

deduction only under section 32 of the Income-tax Act and not

under general principles. The court rejected this argument. It was

held that normal depreciation can be considered as a legitimate

deduction in computing the real income of the assessee on general

principles or under section 11(1)(a) of the Income-tax Act. The

court rejected the argument on behalf of the Revenue that section

32 of the Income-tax Act was the only section granting benefit of

deduction on account of depreciation. It was held that income of a

charitable trust derived from building, plant and machinery and

furniture was liable to be computed in a normal commercial

manner although the trust may not be carrying on any business

and the assets in respect whereof depreciation is claimed may not

be business assets. In all such cases, section 32 of the Income-tax

Act providing for depreciation for computation of income derived

from business or profession is not applicable. However, the

income of the trust is required to be computed under section 11

P a g e 3 | 7 on commercial principles after providing for allowance for normal

depreciation and deduction thereof from gross income of the trust.

In view of the aforesaid judgment of the Hon’ble Bombay High

Court, the Hon’ble Supreme Court answered the question No.1 in

the affirmative in favour of the assessee and against the revenue.

Respectfully following the above quoted decision of Hon’ble

Supreme Court, we set aside the orders of lower authorities and

direct the Assessing Officer to allow depreciation of

Rs.10,39,569/- to the assessee.

we find that the Assessing Officer has disallowed the same on the

ground that the amounts were not utilized during the year for the

objects of the charitable trust, which was confirmed in appeal by

the CIT(A).

included as part of expenses claimed under development fund of

Rs.57,61,323/-, which fact has not been disputed by the assessee.

He held that such transfer to general fund cannot be treated as

expenditure and, accordingly, added the same while computing

the income of the assessee.

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Officer.

has claimed advance of Rs.72,29,426/-. The Assessing Officer

observed that the advance included Rs.20,58,314/- towards

community diary project, Rs.17,33,943/- towards purchase of

fixed asset, Rs.2,08,500/- towards rent advance, Rs.2,50,606/-

towards staff advance and Rs.3,73,022/- towards staff vehicle

loans. The Assessing Officer observed that various expenses are

additionally claimed through schedule to the financial statement

from where the surplus or loss from various funds and project are

taken to income and expenditure account. He observed that these

aspects have not been disputed by the assessee. Therefore, he

held that the expenses which have been additionally claimed in

the shape of advance through schedule was disallowed.

Officer.

has shown liabilities of Rs.35,56,860/- towards expenses in the

P a g e 5 | 7 balance sheet. He observed that the assessee contended that

balance sheet item cannot be treated as disallowance. The

Assessing Officer rejected the contention of the assessee as not

tenable on the ground that if any expenditure remains outstanding

in the books of account, it only reflects that the cash flow on

account of that expenditure has not happened.

Officer.

Assessing Officer and the CIT(A) by bringing any relevant and

cogent material on record. In absence of the same, we find no

good reason to interfere with the orders of lower authorities.

Hence, the order of the CIT(A) is confirmed with regard to the

addition of Rs.7,96,911/- transfer to general fund, Rs.72,29,426/-

towards advance and Rs.35,56,860/- towards liabilities.

Order pronounced on 27/09/2018. Sd/- sd/- (Pavan Kumar Gadale) (N.S Saini) JUDICIALMEMBER ACCOUNTANT MEMBER Cuttack; Dated 27 /09/2018 B.K.Parida, SPS

P a g e 6 | 7 Copy of the Order forwarded to : 1. The Revenue: ITO, Ward 2(1), Bhubaneswar.

Sr. Pvt. Secretary, ITAT, Cuttack

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