ITO(E), WD-1(3),KOLKATA,KOLKATA vs. SRI AUROBINDO INSTITUTE OF CULTURE, KOLKATA

This appeal is preferred by the revenue against the order of Ld. CIT (Appeals) – 25, Kolkata dated 07.11.2016 for the A.Y. 2012-13.

Facts or in brief that the assessee is a society registered under section 12A of the Income Tax Act. It has filed return of income declaring total income at Rs. Nil by claiming exemption under section 11 of the Income Tax Act. In the assessment order, the A.O. has disallowed the exemption amount of Rs. 32,68,920/- claimed by the assessee for the reason that the cost of concerned fixed assets was also claimed as an application of income in the relevant previous year. In the assessment order, he has noted that it is seen from the assessee’s income and expenditure account that the assessee has Assessment Year: 2012-13 Aurobindo Institute of Culture debited depreciation amount to Rs. 32,68,920/- but in the computation it has not claimed. Over the years, the assessee acquired different assets. The assessee has claimed the entire expenditure incurred for acquisition of capital assets and the same was treated as application of income for charitable purposes under section 11(1)(a) of the Income Tax Act, in respective years in which such assets were procured. He further observed that when capital expenditure is treated as application of income for the purpose of charitable purposes, the assessee enjoys a 100% write off of the cost of assets. In other words, when acquisition of assets is treated as application of income for charitable purposes, the value of assets stands fully written off and over and above, if depreciation is allowed, the same will be result in double deduction of capital expenditure leading to violation of provisions of section 11(1) which requires availability of actual income for charitable purpose. 3. On appeal, the Ld. CIT(A) by following the decision of the Hon’ble Jurisdictional High Court of Kolkata in the case of Commissioner of Income Tax vs Siliguri Regulated Market Committee (2014) 51 taxman.com 455 Kolkata. Directed the A.O. to allow the depreciation claimed made by the assessee. 4. On being aggrieved revenue carried the matter before the Tribunal. 5. The learned DR has submitted that he has relying on the orders passed by the A.O. on the other hand, the learned counsel for the Assessment Year: 2012-13 Aurobindo Institute of Culture assessee has relied on the orders passed by the CIT(A) and also Jurisdictional High Court in the case of Siliguri Regulated Market Committee (supra).

We have heard both the sides perused the material available on record to the authorities below. The only issue involved in this appeal whether the assessee entitled to claim depreciation or not. According to the A.O. the claim of the assessee is amounting to double deduction and which is not allowable as per Income Tax Act.

On appeal, the Ld. CIT(A) by following the decision of the Hon’ble Kolkata High Court in the case of Siliguri Regulated Market Committee (supra) allowed the appeal filed by the assessee. The Hon’ble Jurisdictional High Court as considered the issue and held that depreciation is to be allowed on assets of cost of which already been as an application of income for charitable purpose. Therefore, we respectfully follow the judgement of the Hon’ble Jurisdictional High Court, we find no infirmity in the order passed by the Ld. CIT(A). Therefore, thus this ground of appeal

The Ld. CIT(A) relied on the decision of Bangalore Bench in the case of Sevasadan Orphanage and Training Institute vs DCIT in dated 10.11.2015 wherein the Hon’ble Tribunal has observed as under: “It is clear from the relevant portions of the aforesaid decisions of the Hon'ble High Court of Bombay (supra) and the co-ordinate bench of the ITAT, Bangalore (supra) extracted above that the income of charitable trusts is required to be computed on commercial principles. The concept of application of the income for the year in which the income has arisen is not found in Section 11(1)(a) of the Act. No limitation to the above effect is found in the language of the section. It merely requires application of the income that has arisen from the property held under trust. In this view of the matter, the principles relating to set off of losses, etc. is not of any relevance and therefore any excess application of income during the year can be regarded as application of the income of future years and can be adjusted. Therefore, in our view,' the claim of the assessee for carry forward of excess application is in accordance with the judicial precedents on the issue and the same is allowable.

On being aggrieved, the revenue has carried the matter before the Tribunal. The learned DR relied on the order passed by the A.O. on the other hand, the Ld. CIT(A) relied on the order passed by the CIT(A).

We have heard both the sides perused the material available on record to the authorities below. The only issue for consideration is whether the excess expenditure incurred by the assessee in earlier years i.e. 2011-12 can be considered against the income received for the assessment year 2012-13 as an application or not. In this case, the assessee has incurred an amount of Rs 52,08,440/-, in the assessment year 2011-12 out of which to the extent of available surplus at Rs.