DY. DIT vs. KARNATAKA JESUIT EDUCATION SOCIETY,

These cross appeals are preferred by the revenue and the assessee against the respective orders of the CIT(Appeals). Since the appeals were heard together, these are being disposed of through this consolidated order. We, however, prefer to adjudicate them one after the other.

In these appeals, the revenue has assailed the order of the CIT(Appeals) that the CIT(A) has not followed the order of the Tribunal in the case of M/s. C M R Janardhana Trust in & 643/Bang/2008 dated 24.12.2008 in which it was held that if the entire amount of capital asset purchased during the year is treated as application of income, then no further deduction can be allowed for depreciation as the value of entire capital asset is treated as application of income and the CIT(A) has allowed the appeal of the assessee after holding that the assessee is entitled for depreciation.

During the course of hearing, the ld .counsel for the assessee has invited our attention with the submission that the impugned issue is squarely covered by the judgment of the Hon'ble jurisdictional High Court in ITA Nos.485, 486, 307 & 308/Bang/2013 Page 3 of 9 the case of Al-Ameen Charitable Fund Trust in and various orders of the Tribunal in the case of Karnataka Reddy Janasangha v. DIT, in ITA No.220/Bang/2011 and DDIT v. International Institute of Information Technology in ITA No.396/Bang/2013 in which it has been held that assessee is entitled for depreciation, despite application of entire amount. While holding so, they have taken into account the decision of the Tribunal in the case of M/s. C M R Janardhana Trust (supra).

The ld. DR placed reliance upon the order of the Assessing Officer.

Having carefully examined the orders of the authorities below in the light of the judgments referred to by the parties, we find that the Tribunal has taken a consistent view, following the judgment of Hon'ble High Court of Karnataka that assessee is entitled for depreciation in such circumstances. The relevant observations of the Tribunal in the case of International Institute of Information Technology (supra) are extracted hereunder for the sake of reference:-

In these appeals, the assessee has assailed the order of the CIT(Appeals) inter alia on the following common grounds. For the sake of reference, the grounds raised in are extracted hereunder:-

For these and any other grounds that may be urged before the Hon'ble ITAT, it is prayed that the Hon'ble ITAT may allow the appeal with cost.”

Ground No.1 in both the appeals relate to independent accumulation of income u/s. 11(2), besides accumulation of profit u/s. 11(1)(a) of the Act.

During the course of hearing of the appeals, it has been brought to our notice from the details of application of funds in both the assessment years with the submission that application of fund is already more than 85%, therefore the issue of accumulation of fund u/s. 11(2) becomes academic and does not require any adjudication, as the CIT(Appeals) has already allowed the accumulation of fund as per the provisions of section 11(1)(a) of the Act. Therefore, we do not find it necessary to give a specific finding on a issue, whether accumulation of fund is further permissible after allowing accumulation of fund u/s. 11(1)(a) of the Act.

So far as ground No.2 in both the appeals is concerned, we find that the CIT(Appeals) has approved the action of the AO by holding that investment in fixed deposits cannot be the object of the assessee trust or for the purpose of the trust for which the trust was created. In this regard, the ld. counsel for the assessee has contended that for making fixed deposits may not be the object of the assessee trust, but for accumulating the fund for a particular purpose, certain investments in FDRs are required.

The ld. DR, on the other hand, has placed reliance upon the orders of CIT(Appeals).

Having heard the rival submissions and from a careful perusal of the orders of authorities below, we find that the mode of investment is given in sub-section (5) of section 11 for accumulating the fund. Investment or deposits of money can be made as per sub-section (5) of section 11 of the Act and clause (iii) says that for the purpose of sub-section (2), deposits can be made in any account of the Scheduled Bank or co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); meaning thereby, if the assessee makes investments or deposits in the scheduled bank and claims the deposits as accumulated for the purpose of section 11(1)(a) or 11(2), the investment or deposit cannot be disallowed only for the reason that application of money was not for the object of the society.

The next ground relates to non-application of accumulation of fund within a specified period. In this regard, the CIT(Appeals) has categorically observed that the accumulated fund was not applied for the objects of the society and if not applied, it is to be liable to be taxed in the previous year immediately following the previous year in which it was derived where it could not be applied to the specified purposes and the CIT(Appeals) has given directions that the said amount will be taxable in A.Y. 2009-10 and not in the current year. The CIT(Appeals) has taken into account the , 486, 307 & 308/Bang/2013 Page 9 of 9 provisions of the Act and having noted that the accumulated fund was not applied for the specified purposes, he directed that this amount be taxed in the A.Y. 2009-10. Since we do not find any infirmity in the order of CIT(Appeals), we confirm the same.

In the result, the appeals of the Revenue are dismissed, and that of the assessee are partly allowed.