ITO, COIMBATORE vs. M/S. RANGANATHAN RAJESWARI CHARITABLE TRUST, COIMBATORE

आदेश /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the Revenue is directed against the order of

the Commissioner of Income Tax (Appeals) –I, Coimbatore, dated

04.09.2013 and pertaining to assessment year 2009-10. The

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assessee has filed cross-objection against the same order of the

CIT(Appeals). Hence, we heard both the appeal and the cross-

objection together and disposing of the same by this common order.

submitted that the assessee - charitable institution was registered

under Section 12A of the Income-tax Act, 1961 (in short 'the Act').

During the year under consideration, according to the Ld. D.R., the assessee disclosed a gross receipt of `3,79,46,888/-. The

assessee claimed before the Assessing Officer that a sum of `8,25,99,229/- was applied for charitable purpose. Out of this

amount of `8,25,99,229/-, the assessee claimed `72,12,041/-

towards depreciation on the value of asset on which the assessee

claimed exemption under Section 11 of the Act. The Assessing

Officer found that the depreciation was claimed by the assessee on

the asset, which was allowed earlier as application of income for

charitable purpose. Therefore, the Assessing Officer found that the

claim of depreciation in respect of the asset on which the

expenditure was already allowed as application of income amounts

to double deduction. Accordingly, by placing reliance on the

judgment of Apex Court in Escorts Ltd. v Union of India (199 ITR

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43), the Assessing Officer disallowed the claim of the assessee. On

appeal by the assessee the CIT(Appeals), however, allowed the

claim of the assessee. According to the Ld. D.R., the assessee is

not carrying on any business activity. Section 32 of the Act is

applicable only in respect of computing the income from business

and profession. The activity of the assessee is charitable nature.

Therefore, according to the Ld. D.R., the exemption claimed by the

assessee has to be considered under Section 11 of the Act. Hence,

the provisions applicable for computing the income from business

and profession cannot be applied for computing the income of the

charitable institution. According to the Ld. D.R., the matter may be

different if the assessee was not claiming exemption under Section

11 of the Act. The Ld. D.R. placed his reliance on the order of this

Tribunal in Anjuman-E-Himayath-E-Islam v. ADIT in I.T.A.

No.2271/Mds/2014 dated 02.06.2015.

for the assessee, submitted that the assessee is admittedly a

charitable institution, which claimed depreciation on the capital

asset. The Ld. representative clarified that the amount invested in

the capital asset was claimed as application of income under

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Section 11 of the Act. However, the capital asset acquired by the

assessee on application of its income was used for carrying on the

charitable object of the trust, therefore, the same is eligible for

depreciation. On enquiry from the Bench, the Ld. representative

clarified that the assessee is not carrying on any business activity.

perused the relevant material available on record. The assessee is

admittedly a charitable institution registered as such under Section

12A of the Act. The assessee acquired the capital asset by utilizing

the income of the trust. In respect of the investments made by the

assessee on the capital asset, the assessee claims the same as

application of income under Section 11 of the Act. It is also an

admitted fact that the claim made by the assessee on the

investments made on the capital asset was allowed as application

of income. Now the assessee claims depreciation on the capital

asset, which was acquired by the assessee by the income which

was allowed as application of income under Section 11 of the Act.

The question arises for consideration is when the cost of the asset

was allowed as application of income under Section 11 of the Act,

whether the assessee is entitled for depreciation on the very same

5 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13

asset? This Tribunal examined this issue in The Anjuman-E-

Himayath-E-Islam (supra) and found that the assessee is not

eligible for depreciation under Section 32 of the Act. In fact, this

Tribunal placed its reliance on the judgment of Kerala High Court in

Lissie Medical Institution v. CIT (2012) 348 ITR 344.

Act, 1961. Chapter III of the Act provides for method of computation

of income which do not form part of total income. Section 11 of the

Act, which falls in Chapter III of the Act, clearly says that the income

derived from the property held under trust, for charitable or religious

purpose, shall not be included in the total income to the extent to

which the income is applied to such purposes in India. The

assessee, in fact, applied the income of the assessee, which was

derived from the property held under trust, for acquiring the capital

asset. Therefore, the income to the extent to which it was applied

for acquiring the capital asset, was excluded already from the total

income of the assessee. Section 32 of the Act, which provides for

depreciation, falls under Chapter IV of the Act which provides for

computation of business income. Admittedly, the assessee is not

carrying on any business activity. If the assessee claims that it was

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carrying on business activity, then in view of the proviso to Section

2(15) of the Act, it has to loose its character as charitable institution.

So long as the assessee claims that it is a charitable institution, the

provisions of Chapter IV of the Act which provides for computation

of business income, cannot be applied to the assessee. This

Tribunal is of the considered opinion that since the assessee is

carrying on charitable activity and not business, the provisions of

Section 32 of the Act which provides for depreciation, is not

applicable to the assessee-trust.

under Chapter IV of the Act, cannot override Section 11 of the Act

which falls under Chapter III of the Act. When the Parliament in

their wisdom provides method of computation in respect of different

kind of assessees with reference to their activity, this Tribunal is of

the considered opinion that the charitable institution cannot claim

depreciation under Section 32 of the Act. When an individual

assessee is computing its taxable income, he cannot claim

depreciation under Section 32 of the Act in respect of the asset,

which was not used in the business. In the case before us,

admittedly, the asset on which the depreciation was claimed under

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Section 32 of the Act, is not used for any business activity at all. Therefore, there is no question of allowing any depreciation to the assessee under Section 32 of the Act. A similar view was taken by this Tribunal in The Anjuman-E-Himayath-E-Islam (supra). In view of the above, this Tribunal is unable to uphold the order of the lower authority. Accordingly, the order of the lower authority is set aside and that of the Assessing Officer is restored.

Order pronounced on 7th October, 2016 at Chennai. sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद�य/Accountant Member �या�यक सद�य/Judicial Member चे�नई/Chennai, �दनांक/Dated, the 7th October, 2016. Kri.

आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त (अपील)/CIT(A)-I, Coimbatore 4. आयकर आयु�त/CIT-I, Coimbatore 5. �वभागीय ��त�न�ध/DR 6. गाड� फाईल/GF.