M/S BANKURA UNNAYANI INSTITUTE OF ENGINEERING,BANKURA vs. ACIT CIRCLE - BANKURA, BANKURA, BANKURA

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ITA 547/KOL/2017Status: DisposedITAT Kolkata24 August 2018AY 2008-093 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that normal depreciation can be considered a legitimate deduction in computing the real income of a charitable trust for application of income. The Supreme Court's decision in CIT vs. Rajasthan & Gujarati Charitable Foundation Poona was followed.

What were the facts?

The assessee, a charitable institution registered under Section 12A and engaged in education, appealed an order confirming the denial of capital asset acquisition as application of income. This denial was based on depreciation being claimed and allowed.

What were the issues?

Whether the acquisition of capital assets can be considered as application of income when depreciation has been claimed and allowed on those assets.

Which sections of the Income-tax Act were involved?

Section 11,Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH “B”, KOLKATA

Before: SH. J.SUDHAKAR REDDY & SH. S.S.VISWANETHRA RAVI

Hearing: 10.07.2018Pronounced: 24.08.2018

PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER

1.

This appeal filed by the assessee against the order dated 20.01.2017 passed by Ld. CIT(A)-Durgapur for AY 2008-09.

2.

The assessee is a charitable institution and is registered u/s 12A of the Income Tax Act, 1961 (in short “Act”). The assessee is in the field of education. The only issue that arises for adjudication is as follows:-

6. “For that the Ld. CIT(A) erred in confirming the action of the AO in not allowing the benefits of acquisition of capital assets as application of income on the ground that depreciation had been claimed and allowed when the appellant was entitled to the said application as per the law prevailing for the assessment year in question.”

3.

Though the assessee has raised total 10 grounds of appeal, none of them were pressed except Ground No.6 which is extracted above. Thus, we dismissed all these grounds other than Ground No.6 as not pressed.

Year: 2008-09] 4. After hearing rival contentions, we find that the issue that arises in Ground No.6 is covered by the decision of Hon’ble Supreme Court in the case of CIT-III, Pune vs Rajasthan & Gujarati Charitable Foundation Poona dated 19.12.2017 wherein it is held as follows:-

“............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 Charitable Trust derived from building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed by 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 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforesaid judgement of the Bombay High Court, we answer question no.1 in the affirmative i.e., in favour of the assessee and against the Department.”

5.

Respectfully following the same, we allow this ground of the appeal of the assessee.

6.

In the result, the appeal of the assessee is allowed in part.

Order pronounced in the open court on 24.08.2018.

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