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Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
In this appeal filed by the assessee, it is aggrieved that it was denied exemption claimed u/s.11 of the Income Tax Act, 1961 (in short ‘’the Act’’). One other ground raised by the assessee is on disallowance of claim of depreciation of �2,00,167/-. Depreciation was disallowed for a reason that cost of the assets on which such ITA No. 2818/Mds/2016 :- 2 -: depreciation was charged was claimed as application of income in earlier years.
Appeal has been filed with a delay of 212 days. Assessee has filed a petition seeking condonation of delay. What has been stated in the application is reproduced hereunder:-
‘’The said order of the Commissioner of Income Tax (Appeals) was received by the office of the petitioner on 13.11.2014. It is pertinent to consider the fact that the petitioner trust being a religious organization managed by the board members comprising of pastors, christian priests and retired Bible College teachers(Theologians) with limited exposure to the provisions of Income tax or Company law affairs. Further during the period under question there was a change in the office of the general secretary of the petitioner. Rev. M. Benjamin Inbaraj took charge as the new General Secretary on 01.06.2014. With the change in the General Secretary, the newly appointed General Secretary and other Board members were completely engrossed in the religious· activities of the petitioner trust and its administration proceedings. The president of the petitioner trust is by way of traditional practice the Bishop of Madras. The President during the said year, Rev Or V Devasahayam who was the Bishop in Madras also retired in August 2014 and the new Bishop was elected and consecrated only in March 2016. Although Rev Or V Devasahayam continued as the president of the petitioner trust during the interim period no major decisions or action was initiated until the new Bishop took charge. During the year 2014-15 there was also a change in the auditor of the petitioner trust when CA John Ravindran was appointed as the auditor of the petitioner trust for financial year 2013-14.
ITA No. 2818/Mds/2016 :- 3 -:
As mentioned earlier since the General Secretary and the other Board members had no exposure to facing Income Tax appeal proceedings or the procedure involved therein, the fact of pending appeal proceedings in respect of earlier years and the status thereof was not brought to the notice of the newly appointed auditor, CA John Ravindran until in March 2016 during the assessment proceedings for AY 2013- 14. Thereafter CA John Ravindran with great efforts culled out the details of the pending appeal proceedings of the earlier years and the status thereof. The entire process involved communicating with the previous auditor and the previous General Secretary and culling out the necessary correspondences in this regard. Finally in July 2016 CA John Ravindran convened the meeting of the General Secretary and the board members to formulate the future course of action in respect of the pending appeals for the earlier years. CA John Ravindran also advised that they would take the counsel of CA T.Banusekar in this regard. Thereafter in the second week of August, 2016 the board membersd alongwith CA John Ravindran met CA T. Banusekar.
During the meeting, CA T.Banusekar had sought for details from the petitioner which could not be collated by the petitioner immediately. With great efforts CA John Ravindran collated all the details sought for by CA T.Banusekar and approached him during the second week of September, 2016. Thereafter CA T.Banusekar drafted the appeal and sent them to the petitioner trust for obtaining signature of the trustee on 26.09.2016. The papers were signed and sent to the office of CA T.Banusekar on 27.09.2016 and the appeal was finally filed on 28.09.2016 with a delay of 626days. There was hence a delay in filing the appeal by the petitioner. The petitioner most humbly submits before this Hon'ble Income Tax Appellate Tribunal that the delay was purely inadvertent. There was no intention to delay the filing of appeal. No benefit was sought to ITA No. 2818/Mds/2016 :- 4 -: be derived by the delay in filing’’.
Ld. Departmental Representative did not raise any serious objection on the condonation petition. I also find that the delay was caused due to justifiable reasons. Delay is condoned. Appeal is admitted.
Facts apropos are that assessee a company registered u/s.25 3. of the Companies Act, 1956 was claiming exemption u/s.11 of the Act by virtue of a registration u/s.12A(a) of the Act, granted by ld. Commissioner of Income Tax vide his order granted in C.No.212(431)/73, dated 21.09.1973. During the course of assessment proceedings for the impugned assessment year, ld. Assessing Officer after considering the objects of the assessee, came to a conclusion that majority of them were in the nature of general public utility. As
per ld. Assessing Officer intention of the assessee was to publish and sell literature, religious, books, treatise etc and to do allied work like printing, book binding, selling of stationery and akin activities.
According to the ld. Assessing Officer, objects of the assessee did not prohibit it from carrying on an exclusive business in printing, publishing and sale of books. Further, as per ld. Assessing Officer major source of its income were from sale of books. Ld. Assessing Officer put the assessee on notice as why it should not be denied
ITA No. 2818/Mds/2016 :- 5 -: exemption claimed by it u/s.11A of the Act. Though the assessee submitted before ld. Assessing Officer that it was a Christian Religious Society publishing and selling Christian literature to the public, and other activities were only ancillary and incidental to this, it was not accepted by the ld. Assessing Officer. According to the ld. Assessing Officer, assessee was not only selling religious books, but also other books like dictionaries, books on social science, books on history etc.
Further, as per ld. Assessing Officer there was no particular religious activity carried on by the assessee except selling of religious books.
According to him, assessee could not be classified as a Religious society but only as an entity carrying on objects of general public utility. As per the ld. Assessing Officer, receipts of the assessee from its business activities while pursuing the objects of general public utility exceeded the limits specified in second proviso to Sec. 2(15) of the Act.
Ld. Assessing Officer also took cue from an exemption application filed by the assessee before the Chief Commissioner of Income Tax seeking exemption u/s.10(23C) ( v) of the Act. As per ld. Assessing Officer assessee had made amendments to its object clause, without seeking prior approval of the authority which had granted it registration u/s. 12A(a) of the Act. Relying on the judgment of ITA No. 2818/Mds/2016 :- 6 -:
Hon’ble Jurisdictional High Court in the case of Sakthi Charities vs. CIT 182 ITR 483, ld. Assessing Officer held that no modification could be made in the objects clause of a trust and hence assessee’s endeavour to modify its objects fell foul of law. Reliance was also placed on the judgment of High Court in the case of Sakthi Charities vs. CIT 149 ITR 624 for taking a view that object clause of a trust could not be amended. As per ld. Assessing Officer, judgment of Hon’ble Apex Court in the case of CIT vs. Palghat Shadi Mahal Trust (2002) 254 ITR 212 Taxman 889 and Yogiraj Charity Trust vs. CIT 103 ITR 777, fortified his view that objects of a trust could not be changed.
Ld. Assessing Officer also noted that audited accounts of the assessee carried a qualification regarding account of Cochin and Trivandrum branches of the assessee being not incorporated in its final accounts. According to ld. Assessing Officer profits of Cochin and Trivandrum branches having not been included in the accounting results, assets and liabilities of the assessee were not fully and truly disclosed. For all these reasons, ld. Assessing Officer declined to give the assessee the exemption claimed by it under section 11 of the Act.
While completing assessment ld. Assessing Officer also noted that depreciation of �2,00,167/- claimed by the assessee were on ITA No. 2818/Mds/2016 :- 7 -:
assets, cost of which was already allowed as application of income.
Relying on the judgment of Apex Court in the case of Escorts Ltd and Another vs. Union of India and Others 199 ITR 43, he denied claim of such depreciation.
Aggrieved, assessee moved in appeal before ld. 7.
Commissioner of Income Tax (Appeals). Argument of the assessee was that publishing and selling of religious books was a public religious activity, and for this it relied on the judgment of Hon’ble Andhra Pradesh High Court in the case of Arsha Vijinanna Trust vs. DIT (Exemptions) 295 ITR 437. As per the assessee selling religious books could not be construed as an activity in the nature of trade, commerce or business. Further, as per the assessee it’s main activity was distribution of religious books and tracts and only a small part of the books sold, dealt with subjects of History, Social Science and Literature. Contention of the assessee was that such secular books were displayed to attract attention of the pubic to the Christian literature. As per the assessee its activities were not in the nature of public utility, but were purely religious. Contention of the assessee was that even if some of the objects in its memorandum enabled it to do activities that could benefit general public, its actual activities were confined to printing and distributing religious books. According to the ITA No. 2818/Mds/2016 :- 8 -: assessee it was not hit by substituted Sec. 2(15) which came into effect on 01.04.2009.
In so far as non incorporation of results of its Cochin and Trivandrum branches were concerned, submission of the assessee was that its Trivandrum branch was incurring loss continuously and CSI Diocese of South Kerala had undertook to run the Trivandrum shop for a small profit share of 25%. Further, as per the assessee there were no profit whatsoever earned by the Trivandrum branch. As for the Cochin branch, explanation of the assessee before ld. Commissioner of Income Tax (Appeals) was that one Mrs. Rachel Paul who was the manager of the said branch, claimed ownership, to said branch. As
per the assessee, it had filed a suit in Sub –Court Ernakulam numbered as O.S.No.612 of 2009 against Mrs. Rachel Paul. Assessee also produced a brief note on the said case from its advocates M/s. Joseph & Kuriyan, Cochin.
As for the amendment to the object clause was concerned, submission of the assessee before ld. Commissioner of Income Tax (Appeals) was that there were no new clause added to its objects. As per the assessee, the amendments were carried out on 16th September, 1954 much earlier to the registration u/s.12A(a) of the Act which was granted on 21.09.1973.
ITA No. 2818/Mds/2016 :- 9 -:
In so far as disallowance of depreciation was concerned, assessee submitted that income for the purpose of application of section 11(1)(a) of the Act had to be computed in accordance with general commercial principles.
Ld. Commissioner of Income Tax (Appeals) after going 11. through the submissions of the assessee held that sale of Christian literature did not amount to any charitable or religious activity.
According to him, it could at best be considered only as an aid to religious activity. Further, according to him, after substitution of Sec.
2(15) of the Act by Finance Act, 2008 which came into effect on 01.04.2009, definition of charitable activity underwent a sea change and activities of the assessee would be covered by the residual clause ‘’advancement of any other object of general public utility’’. Further, according to him, observations of the ld. Assessing Officer with regard to amendment to the objects without prior approval of the CIT and non incorporation of accounts of Trivandrum and Cochin branches were also justified. He thus held that assessee was rightly denied the claim of exemption under section 11 of the Act. On the aspect of disallowance of depreciation also ld. CIT(A) upheld the view of the ld. Assessing Officer. According to him, Hon’ble Delhi High Court in the case of DIT (E) vs. Charanjiv Charitable Trust, (2014) 102 DTR 0001
ITA No. 2818/Mds/2016 :- 10 -: had held that depreciation could not be granted where value of the concerned asset was treated as application of income.
Now before me, the ld. Authorised Representative strongly assailing the orders of the lower authorities reiterated the contentions taken by the assessee before the lower authorities. According to her, assessee was a company registered u/s.25 of the Act and not a trust.
Further, according to ld. Authorised Representative assessee’s activities squarely fell within the meaning of ‘religion’. It was not a case of general public utility. Relying on the judgment of Hon’ble Andhra Pradesh in the case of Arsha Vijinanna Trust (supra), ld. Authorised Representative submitted that selling books relating to Ramayana and Mahabharata were considered as a religious activity.
According to her, publication and sale of biblical books could not be considered as trade, commerce or business.
In so far as non incorporation of Trivandrum and Cochin 13. accounts were concerned, ld. Authorised Representative submitted that such non inclusion was not willful. According to her, this did not affect the surplus of the assessee since both these branches were continuously incurring loss. Ld. Authorised Representative also pointed out that accounts of both Trivandrum and Cochin branches were not being incorporated since last very many years due to internal
ITA No. 2818/Mds/2016 :- 11 -: problems in such branches. According to her, in the earlier years this position was accepted by the Revenue in scrutiny assessments.
In so far as claim of depreciation was concerned, ld. Authorised Representative relying on sub section (6) to Section 11 of the Act inserted through Finance No.2 Act 2014, submitted that prior to the insertion of this clause which came into effect on 01.04.2015, such claim had to be allowed, even when cost of the assets were allowed as application of income.
Per contra, ld. Departmental Representative strongly supporting the orders of the authorities below submitted that selling of religious books cannot be treated as an activity which was religious in nature. According to him, it was only a business activity. The objects of the assessee’s as per ld. Departmental Representative were more in the nature of general public utility than religious. Thus, according to him, lower authorities were justified in going by Sec.
2(15) of the Act and denying exemption claimed by the assessee u/s.11 of the Act, relying on first proviso to Sec. 2(15) of the Act. Ld. Departmental Representative also pointed out that assessee had made amendments to its objects without getting prior sanction of the ld. CIT and had also failed to incorporate the results of its Cochin and Trivandrum branches, thereby vitiating the reliability of its final
ITA No. 2818/Mds/2016 :- 12 -: accounts statements. Thus, according to him, assessee was not eligible to claim exemption u/s.11 of the Act.
I have considered the rival contentions and perused the orders of the authorities below. First question is whether activities of the assessee society could be classified as one of general public utility or as religious. Objects clause of the Memorandum of Association of the assessee has been reproduced by the ld. Assessing Officer at page 1 & 2 of the assessment order. This is reproduced hereunder once again for better understanding the nature of such objects. a.‘’To take over the whole or any part either absolutely or in trust or as lessess of the immovable and movable property in India belonging to the United Society for Christian Literature whose head officers are situated at 4 Bouveries Street in the city of London, England.
b.To promote the circulation, gratuitously and otherwise of religious tracts, books and treatises. c.To make grants of money, paper and literature to Protestant Christian Churches, Missions, Missionaries and other throughout India d.To carry on business as proprietors and publishers of newspapers, journals, magazines, books and other literary works and undertaking of a religious. educational or useful character. e.To carry on business as printers, booksellers, bookbinders, paper makers, stationers; engravers, photographers, photographic printers, stereotypers, electrotypers, lithographers. mechanists or mechanical engineers, ink manufacturers, and any other business or manufacture that may seem for or conducive to the objects of the Association.
ITA No. 2818/Mds/2016 :- 13 -: i.To subscribe or guarantee money for charitable or benevolent objects or for any exhibition for any public, general or useful object in India. m.To borrow or raise money at interest on the issue of or upon bonds, debentures, debenture stock, bills of exchange, promissory notes, or other obligations or securities of the Association or upon mortgage or charge of the property of the Association or otherwise in such manner as may seem expedient. n.To undertake and execute any trust or any agency business which may seem directly or indirectly conducive to any of the objects of the Association’’. o. To invest and deal with any money of the Association not immediately required for any of the objects aforesaid in such names and in such manner as the Association may deem fit.
The crux of the dispute between assessee and the Revenue is regarding the nature of the objects and activities carried on by the assessee. As per Revenue, objects of the assessee were more in the nature of general public utility than religious. As against this, submission of the assessee is that its objects were religious in nature.
It is not disputed by the Revenue that assessee was publishing and distributing Christian religious books and tracts. It is also an admitted position that alongwith such religious books, assessee was also distributing dictionaries, books on history and social science and literature, though as per the assessee, realizations from the latter, were significantly lower than the former. At this juncture, it is interesting to note the argument advanced by the assessee as to why
ITA No. 2818/Mds/2016 :- 14 -: it was distributing books other than religious ones. As per the assessee such books were displayed so as to attract general public to the Christian religious books. It is not disputed by either party that major receipts of the assessee came from distribution of Christian religious books, though this was supplemented by realizations from sale of other books. In my opinion sale of other books in the nature of dictionaries, history, social science, literature etc can only be considered as incidental to its major activity which was publishing and distributing religious books and tracts. Such incidental activity alone, in my opinion cannot jacket the assessee as one pursuing an object, different from distribution of religious books. Thus, the claim of the assessee that it’s main activity was confined to object clauses (b) and (c), in my opinion carries much strength. Object clause (d) onwards can be considered only as incidental to clause (b) and (c).
Now the question is whether circulation and grant of 17. religious books and tracts, or in other words, publication and distribution of religious books can be considered a religious activity. It is here the judgment of Hon’ble Andhra Pradesh High Court in the case of Arsha Vijinanna Trust (supra) comes to the aid of the assessee.
There the question was whether an assessee which was selling texts of all Vedas, Vedangas, Upangas and leading Darshanas, Ithihasaas
ITA No. 2818/Mds/2016 :- 15 -: and books like Ramayana, Mahabharatha and Bhagavatham, and works on Indian philosophy, lectures, art and all works on Indian culture, would be eligible for recognition under section 80G(5) of the Act. Assessee while seeking recognition u/s.80G of the Act had claimed that it was not a religious trust. However, Hon’ble Andhra Pradesh High Court held that publication of such books was only a religious activity. Their Lordship held that concerned assessee was a religious trust. In the same vein, in my opinion, printing and publishing of Christian books can only be considered as a religious activity. That the activity pursued by the assessee was intended to promote Christian religion has not been disputed. Requirements that are to be satisfied for an organization to be considered as religious have been set out by Hon’ble Apex Court in the case of Radhasoami Satsang vs. CIT 193 ITR 321. Their Lordships after considering the judgment in the case of Acharya jagdishwaranand Avadhuta & Ors. Vs. CIT (1983) 4 SCC 522 had held as under;
‘’ The words ‘religious denomination in Art. 26 of the Constitution must take their colour from the word ‘religion’ and if this be so, the expression ‘religious denomination’ must also satisfy three conditions:
(i) It must be a collection of individuals who have a system of belief’s or doctrines which they regard as conducive to their spiritual well-being, that is, a common faith; (ii) Common organization; and ITA No. 2818/Mds/2016 :- 16 -:
(iii) Designation by a distinctive name’’.
Thus the publishing and distributions Christian books by an organization which satisfy the criteria of a religious denomination, will be a religious activity.
A reading of section 11 of the Act, clearly indicate that 18. exemption is available to both public religious and public charitable institutions. Once an organization is classified as a religious one, in my opinion the question whether its activities come within the purview of definition of charitable purpose u/s.2(15) of the Act becomes irrelevant. Though Act has defined ‘’charity’’ it has left the term ‘religion‘ undefined, probably considering the contours given to it by the Constitution. Only reasonable conclusion that can be drawn is that any institution formed to encourage religious activity has to be understood as a religious one. Title to Sec.11 of the Act itself reads "Income from property held for charitable or religious purposes".
Sec. 11(1)(a) of the IT Act exempts income derived from property held under trust wholly for charitable or religious purposes. Since the connecting word is ‘’or’’, there can be no objection to grant of such exemption to a public religious institution Sec. 13(1)(b), does, provide that in the case of a trust for charitable purpose or a charitable institution established
ITA No. 2818/Mds/2016 :- 17 -: after the commencement of the 1961 Act, its income, if it is for the benefit of any particular religious community or caste will be ineligible from claiming the exemption. But it is pertinent to note that section 13(1)(b) talks about "trust for charitable purposes or charitable institution which is for the benefit of any particular religious community or caste’’. A public religious institution cannot be treated on par with a charitable institution or trust which confines its charity only for the benefit of any particular religious community or caste’’. In other words, Section 13(1)(b) covers only such charitable institutions where the benefit is confined to people of a particular religion or caste. This interpretation is quite possible because the words used in s. 13(1)(b) refers to "trusts for charitable purposes" while a distinction is noted in other provisions like s. 13(1)(c), which refers to a "trust for charitable or religious purposes". There is similar reference under s.
13(1)(d) as well. Hence the prohibition under cl. (b) cannot possibly cover religious institutions. It stands to reason that a religious institution, even if public, may not be able to avoid the brand of a particular religion. In other words, when public religious institutions are exempt, it cannot possibly mean that they should not be of any particular religion. As said earlier, there is no definition of the term 'religion' or 'religious purpose' under ITA No. 2818/Mds/2016 :- 18 -: the Act. A religion generally has its basis in a system of beliefs and doctrines, which are regarded by those who profess that religion to be conducive to their spiritual well-being. In a sense, 'religious purpose' can be said to be wider in its meaning than the words 'charitable purpose'. When it is used in the context of gifts of property, it means all acts of piety and benevolence. Under the Hindu law, 'charity' whether secular or religious, is a part of the 'Dharma'. In Christianity also charity has no outer parameters, for the good Samaritan, in the most quoted parable of Bible was not a Christian.
It may be true that many activities prompted by religious 19. faith and beliefs can come under the phrase "any other object of general public utility" in the definition of 'charitable purpose' in section 2(15) of the Act. Examples could be establishment of gaushalas and punjrapoles [Vallabhdas Karsondas Natha vs. CIT (1947) 15 ITR 32 (Bom) and CIT vs. Swastik Textile Trading Co. (P) Ltd. 1977 CTR (Guj) (1978) 113 ITR 852 (Guj)]; repairs and maintenance of samadhis of gurus held in reverence by people at large who pay homage and worship at such samadhis and holding of fairs [CIT vs. Guryani Brij Balabh Kaur Trust (: (1980) 125 ITR 381 (P&H)]; promotion of unity and brotherhood
ITA No. 2818/Mds/2016 :- 19 -: amongst members of a community [CIT vs. Ahmedabad Rana Caste Association (1983) 140 ITR 1 (SC)]. Such activities prompted by religious sentiments have been held to be pursuance of a charitable purpose. But overlapping of charity in a religion will not convert a religious activity to one of ‘’general public utility’’.
In the Indian Constitution, the word 'religion' has been used in many places. Terms like 'religion', 'religious denomination', 'matters of religion', 'religious', appear in various Articles. Article 25(1) of the Constitution confers freedom of conscience and the right freely to profess, practice and propagate religion, subject to public order, morality, health, etc. Articles 26, 27 and 28 also cover other aspects relating to religion. A fundamental change concerning religion was brought about in the Constitution by the 42nd Amendment Act, 1976, which inserted in the Preamble the words 'Socialist Secular' before the words 'Democratic Republic'.
This amendment serves no other purpose than making explicit what was already provided in the Constitution. The traditional word 'secular' is intended only to reconfirm the position in regard to the secular character of the State, i.e., the State will have no religion of its own. In Keshavanand Bharti vs. State of Kerala AIR
ITA No. 2818/Mds/2016 :- 20 -:
1973 SC 1461, Khanna, J. said (in para 1437) that the word 'secular' implies that, "the State shall not discriminate against any citizen on the ground of religion only". In Indira Nehru Gandhi vs. Raj Narain AIR 1975 SC 2299, Chandrachud, J. explained the basic feature of secularism saying that "the State shall have no religion of its own" and all persons shall be equally entitled to the freedom of conscience and the right to freely profess, practice and propagate religion. Thus pursuing a religious purpose through printing and distribution of religious books, of a religion of choice, can in no way be considered as a taboo or against public policy.
This raises the issue whether a public religious 21. institution, which is printing and distributing religious books can be discriminated against, on the ground of religion. As already mentioned, 'Religion' in its broadest sense includes all forms of belief in the existence of superior beings capable of exercising power over the human race. As commonly accepted, it means the formal recognition of a universal God. It does not mean mere fundamentalism. The Supreme Court in the case of Commissioner, Hindu Reglious Endowments vs. Sri Lakshmindra Thirtha Swamiar of Shirur Math AIR 1954 SC 282, has discussed the meaning and concept of 'religion' saying that religion is a matter of faith with ITA No. 2818/Mds/2016 :- 21 -: individuals or communities and it is not necessarily theistic. A religion undoubtedly has its basis in a system of beliefs or doctrines, which are regarded by those, who profess that religion as conducive to their spiritual well-being. A religion may not only lay down a code of ethical rules for its followers to accept, it might prescribe rituals and observances, ceremonies and modes of worship, which are regarded as integral parts of religion, and these forms and observances might extend even to matters of food and dress. Their Lordship in this case made the following pertinent observation.
"Freedom of religion in our Constitution is not confined to religious beliefs only; it extends to religious practices as well subject to the restrictions, which the Constitution itself has laid down. Under Article 26(b), therefore, a religious denomination or organization enjoys complete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the religion they hold and no outside authority has any jurisdiction to interfere with their decision in such matters".
Thus, in my opinion assessee which was pursuing printing, publishing and distribution of Christian literature and tracts as its main activity, could be considered only as a religious one. In my opinion lower authorities fell in error by applying section 2(15)
ITA No. 2818/Mds/2016 :- 22 -: to it, when said Section has no applicability on religious institutions.
Coming to the question regarding amendments to the objects, admittedly, assessee was a company incorporated u/s.25 of the Companies Act, 1956. When an association is incorporated as a company under Companies Act, 1956, it is governed by the said Act and cannot be equated to a trust as such. Amendments to objects clause of a Company registered in accordance to Sec. 25 of the Companies Act, 1956, necessarily has to follow the requirements under the said law. Assessee never claimed itself as a trust. It was granted registration u/s.12A(a) of the Act in its status as a company registered under section 25 of the Companies Act. Sec. 11(1) of the Act does not say that only a trust is be eligible for claiming exemption mentioned therein. It only say that income should be derived from property held under trust. There is no case for the Revenue that the property held by assessee in the status of the company u/s.25 of the Act was not under trust. Therefore the case laws relied on by the lower authorities for coming to a conclusion that no amendments could have been made to the objects of the assessee have no applicability. These case laws are relevant only for a trust. Assessee being a company u/s.25 of the Act, it could change its objects as per
ITA No. 2818/Mds/2016 :- 23 -: the prescription under the Companies Act. Even otherwise letter dated 21.09.1973 issued by CIT, intimating acceptance of assessee’s application for registration u/s.12A(a) of the Act does not contain in it any condition requiring the assessee to obtain a prior permission before amending its objects.
Coming to the question, whether the failure of the assessee to incorporate the results of its two branches in Cochin and Trivandrum would be fatal to its claim for exemption, what I find is that in respect of Cochin branch, there was a suit filed by the assessee against its Manager who claimed ownership to the said branch. As for the Trivandrum branch, assessee had entrusted its operation to CSI Diocese of South Kerala through an MOU dated 01.04.2004. It has also not been disputed by the Revenue that the said branch was running in a loss. In any case accounts of these branches were not incorporated since 31.03.2005 and the position continued so since many years. In other words, Revenue had accepted the factual position with regard to these branches in the earlier years and the claim for exemption u/s.11 of the Act was granted to the assessee in such earlier despite similar comments in the audit report. In any case non incorporation of the accounts of the ITA No. 2818/Mds/2016 :- 24 -:
branches was not due to any fault of the assessee but due to factors beyond its control.
Coming to the aspect of claim of depreciation, what I find is that there are judgments of various High Court in favour of the assessee as well as against assessee. Hon’ble Kerala High Court in the case of Lissie Medical Institutions vs. CIT (2012) 348 ITR 344 as well as Hon’ble Delhi High Court in the case of Charanjiv Charitable Trust (supra) had taken a view claim of depreciation on assets, value of which was allowed as application of income could not be allowed. As against this Hon’ble High Courts of Madhya Pradesh, Karnakata, Punjab & Haryana and Bombay in CIT vs. Raipur Pallattine Society 180 ITR 579, CIT vs. Society of the Sisters of St. Anne 146 ITR 28, CIT vs. Market Committee, Pipli 330 ITR 16 and CIT vs. Institute of Banking 264 ITR 110, respectively, had held that such a claim was allowable. Hon’ble P & H High Court had held so, after considering the Apex Court judgment in the case of Escorts Ltd and Another vs. Union of India and others 199 ITR 43 relied on by the ld. Departmental Representative. Further, I find that Hon’ble Apex Court has granted leave of appeal to the assessee, against the judgment of Hon’ble Delhi High Court in the case of Charanjiv Charitable Trust (supra) (2015)
228 Taxmann 58. Neither Revenue or assessee was able to point out
ITA No. 2818/Mds/2016 :- 25 -: before me, any judgment of Hon’ble Jurisdictional High Court directly on this aspect. I am therefore of the opinion that assessee can take advantage of judgments which went in its favour. Claim of depreciation has to be allowed.
In the result, I set aside the orders of the lower authorities 25. and direct that the assessee be granted exemption claimed by it u/s.11 of the Act and also allowed depreciation.
In the result, appeal of the assessee stands allowed. 26.
Order pronounced on Friday, the 21st day of April, 2017, at Chennai.