COMMISSIONER OF INCOME TAX (EXEMPTION) vs. FASHION DESIGN COUNCIL OF INDIA

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ITA/375/2016HC DelhiDLHC01115715201629 May 2017Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE CHANDER SHEKHAR3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that the assessee was entitled to depreciation on assets whose cost was allowed as application of income. It also held that the assessee had not violated Section 11(2) regarding income accumulation, as a specific project was not required if the purpose was within the trust's objects.

What were the facts?

The Revenue appealed against the ITAT's decision regarding depreciation on assets allowed as application of income and the validity of income accumulation under Section 11(2). The assessee argued that a general resolution for accumulation was sufficient, while the Revenue contended it was vague.

What were the issues?

Whether depreciation is allowable on assets whose cost is treated as application of income, and whether income accumulation under Section 11(2) requires a specifically stated project.

Which sections of the Income-tax Act were involved?

Section 11(2)

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Cases cited in this judgment(4)Show list

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4 $~ * IN THE HIGH COURT OF DELHI AT NEW DELHI 18 + ITA 375/2016 COMMISSIONER OF INCOME TAX (EXEMPTION) Appellant Through: Ms. Lakshmi Gurung, Advocate versus FASHION DESIGN COUNCIL OF INDIA Respondent Through: Mr. Prakash Kumar and Ms. Rashmi Singh, Advocates CORAM: JUSTICE S.MURALIDHAR JUSTICE CHANDER SHEKHAR ORDER % 29.05.2017 1. There are two issues raised in the present appeal filed by the Revenue against the order dated 30"^ October, 2015 in ITA No. 979/T)EL/20Il DATED for Assessment Year 2007-08. 2. The first question is whether the Tribunal was right in law in holding that the Assessee was entitled to depreciation on the assets, the cost of which has been allowed as deduction as application of income. 3. This question has been answered in favour ofthe Assessee and against the Revenue by judgment of this Court in DIT(E) vs. Indraprastha Cancer Society (2015) 53 taxman.com 463 (Del). Accordingly, the Court declines to frame a substantial question as far as the above question is concerned. ITA No. 375/2016 • Page I of 3 Digitally Signed By:AMULYA Signature Not Verified

4.

Second question urged is whether on the facts and in the circumstances of the casethe Tribunal was right in law in holding that there was no violation of the conditions laid down in section 11(2) of the Income Tax Act, 1961 in 'respect ofthe accumulation of income in excess of 15%. \ 5. In support of the above contention, Ms. Lakshmi Gurung, learned counsel for the Revenue has drawn the attention of this Court to the extract of the resolution passed in the meeting of the Trustee of the Fashion Design Council of India held on 25^ October, 2007 where it has been stated that "such part of the income, if any, of the accounting year 2006-07 as has not been applied to the extent of 85% for the objects and purpose of the trust during the year be accumulated and set apart for the, following: To promote the fashion industry etc. andTotake such other steps as the trustee consider as being in tune withthe aforesaid objective of the trust." 6. Relying on the decision of the Calcutta High Court in DCIT (Exe) v. Trustees of Singhania Charitable Trust (1993) 199 ITR 819 (Cal), it is submitted by Ms. Gurung that above resolution is vague and general and does not satisfy the legal requirement for the purposes of claiming exemption under Section 11 (2) of the Act. It is urged that a specific purpose in the form of a project for which the funds are earmarked must be indicated. 7. On the other hand, learned counsel for the Assessee has drawn our attention to the judgment of this court Director of Income Tax v. Mitsui and Co. Environmental Trust (2008) 303ITR 111 (Del) where a similar issue was considered by this Court. A reference was made to the earlier ITA No. 375/2016 Page 2of3

decision in CIT v. Hotel and Restaurant Association (2003) 261 ITR 190 (Del) and it was lield as under: "7. This court rejected the contention and held that the purpose or purposes to be specified cannot be beyond the objects of the trust. Plurality of purposes for accumulation is not precluded. In other words, it need not necessarily be specifically stated for which puipose the accumulation is sought. 8. While we reiterate the view already taken by this court, we may mention that the Calcutta High Court had taken a different view in DIT (Exemption) v. Trustees ofSinghania Charitable Trust [1993] 199 ITR 819." 8. It is clear that as far as this Court is concerned, it has not agreed with the view of the Calcutta High Court. In the present case, given its objects, the Court is unable to agree with the stand of the Revenue that the Assessee has to state specifically the purpose for which the income is to be applied for availing exemption under Section 11 (2) ofthe Act. 9. No substantial question of law arise, the appeal is therefore dismissed. MAY 29, 2017 b S.MURALIDHAR, J chan!^^shekhar,J ITA No. 375/2016 Page 3 of3

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