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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Hon’ble Shri A.T. Varkey, JM ]
ORDER Per J.Sudhakar Reddy, AM
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-25, Kolkata [in short the ld CITA] dated 22.08.2017 against the order passed by the JDIT(E), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 27.12.2013 for the Assessment Year 2011-12.
The assessee is a trust and is entitled to deduction and is registered u/s 12A of the Act. It is not disputed that the assessee is entitled to deduction u/s 11 of the Act.
Himadri Memorial Cancer Welfare Trust A.Yr.2011-12 3. The issue before us is whether the assessee is entitled to claim the capital expenditure incurred by it as application of income, for the purpose of u/s 11(1) of the Act and at the same time claim depreciation on the capital assets created by this capital expenditure, for the purpose of computing the net surplus earned during the year.
The Ld. AO as well as Ld. CIT(A) applied the decision of the Hon’ble Kerala High Court in the case of Liseie Medical Institution vs. CIT, Kochi pronounced on 17.02.2012 and held that this is a double deduction. Aggrieved the assessee is in appeal before us on the following grounds:
1. For that the Ld. CIT(A), erred in law in upholding the action of the assessing officer in disallowing depreciation amounting to Rs. 22,16,754/- claimed by the appellant on its fixed assets, when, the appellant was entitled to such claim as the denying provisions enacted u/s 11(6) of the Income Tax Act, 1961 are effective from the assessment year 2015-16 only, i.e., from a subsequent assessment year.
2. For that without prejudice to the above, the Ld. CIT(A), was unjustified in upholding the decision of the assessing officer to disallow the claim of the appellant for depreciation amounting to Rs. 22,16,754/- on its fixed assets, when, such claim for depreciation up to the assessment year 2014-15 has been held allowable in the decision of the jurisdictional High Court at Kolkata, in the case of CIT vs. Siliguri Regulated Market Committee (2014) 366 ITR 51 (Cal).
After hearing the rival submissions. We find that the issue in question is covered the decision of the jurisdictional High Court in the case of CIT vs. Siliguri Regulated Market Committee dated 13.02.2014 reported in [2014]366 ITR 51(Cal) wherein it is held as under: 5. To sum up, the business income of the trust as disclosed by the accounts plus its other income computed as above, will be the "income" of the trust for purposes of section 11 (1). Further, the trust must spend at least 75 per cent., of this income and not accumulate more than 25 per cent., thereof. The excess accumulation, if any, will become taxable under section 11 (1).' 2
Himadri Memorial Cancer Welfare Trust A.Yr.2011-12
This circular makes it clear that the word "income" in section 11 (1)(a) must be understood in a commercial sense. The entire income of the trust in the commercial sense, has been spent for the purpose of charity. There is no reason to deny the benefit of exemption granted by section 11 to that portion of the income which has been taken away by deduction at source on the ground that the amount has not been spent or accumulated for the purpose of charity."
Mr. Khaitan submitted that this court has already expressed the opinion that the income from properties held under a trust would have to be calculated in the commercial manner. He submitted that once the aforesaid process of computation is permitted, the claim for depreciation has to be allowed.
Mr. Bhowmick, learned advocate replied by stating, that in the case of CIT v. Bhoruka Public Welfare Trust, a Division Bench of this court has expressed some reservations with regard to the aforesaid view as regards computation of income in a commercial manner, and, therefore, the matter should be referred to a larger Bench.
We have considered the submissions and perused the judgments of the Punjab and Haryana High Court and the Bombay High Court as also the judgment of this court in the case of CIT v. Jayashree Charity Trust and in the case of CIT vs. Bhoruka Public Welfare Trust. We are of the opinion that the views expressed in the case of CIT vs. Jayashree Charity Trust are logical and in consonance with common sense. The object of section 11 of the Income Tax Act, 1961, is to feed the public charity. By permitting computation of income in a commercial manner, the object of feeding the public charity is achieved. The amount deducted by way of depreciation is in that case is ploughed back for user on account of charity. It cannot be disputed that a building used for the purpose of charity diminishes in value over the time like any other building. Therefore, providing for such diminution of value would keep the corpus of the trust intact otherwise the corpus of the trust itself in course of time may get dissipated.
We are, as such, in agreement with the views expressed in the case of CIT vs. Jayashree Charity Trust. There is, as such, no reason why the matter should be referred to any larger bench, as submitted by Mr. Bhowmick. In the result, the appeal fails. Both the questions are answered in the affirmative and in favour of the assessee. This is thus disposed of.
Himadri Memorial Cancer Welfare Trust A.Yr.2011-12 We record our deep sense of appreciation for the assistance rendered by Mr. J.P. Khaitan, Learned Senior Advocate in resolving the question of law raised in this matter.”
Recently the Hon'ble Supreme Court in the case of CIT vs. Rajasthan & Gujrat Charitable founder judgment dated 13.12.2017 approved this proposition of law laid down by the Hon’ble Calcutta High Court, as well as in the judgment of the Hon’ble Bombay High Court in the case of “Institute of Personal Selection (IBPS)”. Respectfully following the binding decision of Hon’ble Supreme Court we allow the ground of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 12.01.2018