Nirma University, Ahmedabad vs Assessee
- CitationITA.No.1216/Ahd/2011
Ratio decidendi
The rule this decision rests on
Depreciation claimed by a charitable trust in computing income for the purposes of the exemption under the Income-tax Act is allowable as a deduction, because the income of a charitable institution, for the purpose of determining the income applicable to charitable purposes, is to be computed in the normal commercial manner in which depreciation is debited to the accounts, and not by reference to the artificial computation under the heads of income applicable to determining total income; the Escorts Ltd. decision, which concerned a company and not a charitable trust, is therefore not applicable. Interest under section 244A on a refund is payable only for the period specified in the statute, and where the Assessing Officer has granted interest up to the date specified and the CIT(A) has confirmed that determination with reasons, no interference is warranted; the claim for interest for the further nine-month period on the ground that the refund was issued later is rejected as the reasoned finding of the lower authority stands.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
अपीलाथȸ कȧ ओर से /By Appellant : Shri S. N. Soparkar, A.R. ू×यथȸ कȧ ओर से/By Respondent : Shri Subhash Bains, CIT D.R. सुनवाई कȧ तारȣख/Date of Hearing : 22.01.2015 घोषणा कȧ तारȣख/Date of Pronouncement : 29.01.2015 I.T.A. No. 1216/Ahd/2011 A.Y. 2008-09 (Nirma Unive rsity vs. DDIT(E xe mp.) Page 2
ORDER
PER SHAILENDRA KUMAR YADAV, J.M:
This appeal has been filed by the assessee against the order of Commissioner of Income Tax (Appeals)-XXI, Ahmedabad, dated 16.03.2011 for A.Y. 2008-09 on the following grounds:
"1) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in points of law and facts.
2) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in confirming disallowance of depreciation of Rs.6,47,32,014.
3) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground that the ld. A.O. has grossly erred in allowing less interest u/s.244A.
4) In law and in facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in dismissing appellant's ground that the ld. A.O. has grossly erred in not allowing interest on interest."
2. Assessee trust is a Charitable Trust registered with Income-tax Department. Assessing Officer rejected the claim of depreciation. He relied on decision of Hon'ble Supreme Court in case of Escorts Ltd. vs. Union of India (1993) 199 ITR 43 (SC). However, facts of Escorts Ltd. are not applicable to assessee. Escorts Ltd is not a Charitable Trust. In view of above, CIT(A) allowed depreciation. Same has been opposed before us. In this regard, learned Authorized Representative relied on the decision of Hon'ble Gujarat High Court in Tax I.T.A. No. 1216/Ahd/2011 A.Y. 2008-09 (Nirma Unive rsity vs. DDIT(E xe mp.) Page 3
Appeal No. 933 of 2010 with 934 to 936 of 2010 in case of Director of Income Tax (Exemption) vs. Ahmedabad South Indian Association Charitable Trust, wherein Assessing Officer disallowed the depreciation. Matter travelled up to Tribunal, wherein following decision of Hon'ble Gujarat High Court in case of Commissioner of Income-Tax vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust reported in (1992) 198 ITR 598 (Guj.) decided the issue in favour of assessee. We find that in Sheth Manilal Ranchhoddas Vishram Bhavan Trust (supra) in which Court had followed earlier decision of Karnataka and Madhya Pradesh High Courts in case of CIT vs. Society of the Sisters of St. Anne (1984) 146 ITR 28 (Kar.) and CIT vs. Raipur Pallottine Society (1989) 180 ITR 579 (MP) have decided the issue in favour of assessee by observing as under:
"Whether depreciation has to be allowed as a necessary deduction for computing the income of a charitable institution was the question which came up before the Karnataka High Court in CIT v. Society of the Sisters of St. Anne (1984) 146 ITR 28. Noticing the difference between the word "income" and the expression "total income" and the necessity for providing depreciation in order to maintain correct accounts, the High Court held that the amount of depreciation debited to the accounts of the charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes. Same view has been taken by the Madhya Pradesh High Court in CIT v Raipur Pallottine Society (1989) 180 ITR 579.
"In CIT v. Rao Bahadur Calavala Cunnan Chetty Chanties (1982) 135 ITR 485, the Madras High Court was required to consider whether, for the purpose of computing accumulation in excess of 25 per cent as laid down in section 11(1)(a) of the Act, "income" has to be computed under the various heads enumerated in the Income-tax Act.
I.T.A. No. 1216/Ahd/2011 A.Y. 2008-09 (Nirma Unive rsity vs. DDIT(E xe mp.) Page 4
It held that the income from the properties held under trust would have to be arrived at in the normal commercial manner without classification under the various heads set out in section 14. It held that the expression "income" has to be understood in the popular or general sense and not in the sense in which the income is arrived at for the purpose of assessment to tax by application of some artificial provisions either giving or denying deduction. It observed that the computation under the different categories or heads arises only for the purposes of ascertaining the total income for the purposes of charge. Those provisions cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income is, for the purpose of the exemptions under Chapter III.
"We are in respectful agreement with the view taken by the Karnataka, Madhya Pradesh and Madras High Courts. We, therefore, answer both the questions referred to us in the affirmative and against the Revenue. No order as to costs. "
Following the same Hon'ble Gujarat High Court in Ahmedabad South Indian Association Charitable Trust (supra) has decided the issue in favour of assessee. Thus, the issue before us i.e. allowability of depreciation of Rs.6,47,32,014/- is decided in favour of assessee.
2.1 Next issue is with regards to allowing interest u/s. 244A. Interest for the months of August and September, 2008 was not granted. According to assessee, interest u/s.244A should be granted till the date of issue of refund i.e. upto 31st December, 2010, whereas same was granted till 31st March, 2010. Therefore, interest from April, 2010 to December, 2010 (nine months) was requested. Accordingly to the order of Assessing Officer on the issue was confirmed. This reasoned I.T.A. No. 1216/Ahd/2011 A.Y. 2008-09 (Nirma Unive rsity vs. DDIT(E xe mp.) Page 5
finding of CIT(A) needs no interference from our side. We uphold the same.
3. In the result, appeal filed by the assessee is partly allowed.
Pronounced in the open Court on this the 29th day of January, 2015.
Sd/- Sd/- (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy S.K.SINHA
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. राजःव / Revenue
2. आवेदक / Assessee
3. संबिं धत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
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