GKR Charities v. Deputy Director of Incometax

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The Tax Publishers2012 TaxPub(DT) 2261 (Chen-Trib) : (2012) 047 (II) ITCL 0581 : (2012) 051 SOT 0538 INCOME TAX ACT, 1961 --Charitable trust--Application of income vis-a-vis depreciation Scope--Assessee-trust filed return of income admitting NIL income after claiming deduction under section 11. AO while calculating the application of 85 per cent of the trust's income excluded assessee's claim of depreciation as the entire capital expenditure itself was treated as application of income. It observed that allowance of depreciation under section 11(1)(a) amounted to double deduction. Held: Section 11 provided that the income of the trust was to be computed on commercial basis, i.e., as per normal accounting principles. Normal accounting principles clearly provided for deducting depreciation to arrive at income. Income so arrived at (after deducting depreciation) was to be applied for charitable purpose. Capital expenses was application of the income so determined. So there was no double deduction of the same amount as application. Thus, depreciation was to be deducted to arrive at income and it was not application of income. Income Tax Act, 1961 Sections 11 & 32 IN THE ITAT, CHENNAI BENCH CN.S. SAINI, A.M. & VIKAS AWASTHY, J.M. GKR Charities v. Dy. DIT IT Appeal No.1812 (Mds.) of 2011 A.Y. 2007-08 30 April 2012 ORDER *N.S. Saini, A.M.* This is an appeal filed by the assessee against the order of the learned Commissioner (Appeals)-XII, dated 22-9-2011. 2. The sole grievance of the assessee in this appeal is that the learned Commissioner (Appeal's) erred in confirming the disallowance of depreciation of Rs. 34,38,417 made by the assessing officer while computing the income of the assessee-trust. 3. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. In the instant case, the assessee filed return of income for assessment year 2007-08 admitting NIL income after claiming deduction under section 11 of the Act. The assessing officer, in his order under section 143(3), while calculating the application of 85% of the trusts income, excluded the assessee's claim of depreciation as the entire capital expenditure itself was treated as application of income. He observed that allowance of depreciation under section 11(1)(a) amounts to double deduction. Since the revenue expenditure after excluding the depreciation claim of the assessee and deferred revenue expenditure together with the capital expenses were more than 85% of the trusts income as per the provisions of section 11(1)(a) of the Act, the assessing officer allowed the assessees claim being exemption of income and determined the taxable income at Rs. NIL. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2261 (Chen-Trib) : (2012) 047 (II) ITCL 0581 : (2012) 051 SOT 0538

INCOME TAX ACT, 1961

--Charitable trust--Application of income vis-a-vis depreciation Scope--Assessee-trust filed return of income admitting NIL income after claiming deduction under section 11. AO while calculating the application of 85 per cent of the trust's income excluded assessee's claim of depreciation as the entire capital expenditure itself was treated as application of income. It observed that allowance of depreciation under section 11(1)(a) amounted to double deduction. Held: Section 11 provided that the income of the trust was to be computed on commercial basis, i.e., as per normal accounting principles. Normal accounting principles clearly provided for deducting depreciation to arrive at income. Income so arrived at (after deducting depreciation) was to be applied for charitable purpose. Capital expenses was application of the income so determined. So there was no double deduction of the same amount as application. Thus, depreciation was to be deducted to arrive at income and it was not application of income.

Income Tax Act, 1961 Sections 11 & 32

IN THE ITAT, CHENNAI BENCH

CN.S. SAINI, A.M. & VIKAS AWASTHY, J.M.

GKR Charities v. Dy. DIT

IT Appeal No.1812 (Mds.) of 2011

A.Y. 2007-08

30 April 2012

ORDER

N.S. Saini, A.M.

This is an appeal filed by the assessee against the order of the learned Commissioner (Appeals)-XII, dated 22-9-2011.

2. The sole grievance of the assessee in this appeal is that the learned Commissioner (Appeal's) erred in confirming the disallowance of depreciation of Rs. 34,38,417 made by the assessing officer while computing the income of the assessee-trust.

3. We have heard the rival submissions and perused the orders of the lower authorities and materials available on record. In the instant case, the assessee filed return of income for assessment year 2007-08 admitting NIL income after claiming deduction under section 11 of the Act. The assessing officer, in his order under section 143(3), while calculating the application of 85% of the trusts income, excluded the assessee's claim of depreciation as the entire capital expenditure itself was treated as application of income. He observed that allowance of depreciation under section 11(1)(a) amounts to double deduction. Since the revenue expenditure after excluding the depreciation claim of the assessee and deferred revenue expenditure together with the capital expenses were more than 85% of the trusts income as per the provisions of section 11(1)(a) of the Act, the assessing officer allowed the assessees claim being exemption of income and determined the taxable income at Rs. NIL.