{"id":9782,"date":"2015-03-11T22:27:53","date_gmt":"2015-03-11T16:57:53","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=9782"},"modified":"2015-03-11T23:08:08","modified_gmt":"2015-03-11T17:38:08","slug":"digest-of-important-case-laws-november-2014","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-november-2014\/","title":{"rendered":"Digest Of Important Case Laws &#8211; November 2014"},"content":{"rendered":"<div class=\"clock\">\n<table border=\"0\">\n<tr>\n<td colspan=\"2\"><strong>Digest of important case law &#8211; November 2014 (Compiled by KSA Legal &#038; AIFTP)<\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"264\" rowspan=\"2\" valign=\"top\">\n<script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<\/td>\n<td width=\"271\" valign=\"top\">\n<script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\"><\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1368\" target=\"_blank\">Download <strong>Monthly<\/strong> November 2014 Digest in pdf format <\/a><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1369\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2014 to November 2014) in pdf format<\/a><\/a> <\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1357\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2013 to December 2013) in pdf format<\/a><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1087\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2012 to December 2012) in pdf format<\/a> <\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/digest-of-important-case-laws-october-2014\/\">Looking for the Previous Month&#8217;s digest? Click here.<\/a><\/div>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\n<p><script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_728x90 *\/\ngoogle_ad_slot = \"3275635396\";\ngoogle_ad_width = 728;\ngoogle_ad_height = 90;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script><\/p>\n<div class=\"journal\">\n<p><strong>Journals Referred <\/strong>: BCAJ, CTR, DTR, ITD, ITR, ITR (Trib),  Income Tax Review, SOT, Taxman, Taxation, TLR, TTJ, BCAJ, ACAJ,  www.itatonline.org\n <\/div>\n<div>\n<div style='float:left; margin-top:5px ; margin-left:5px ; margin-right:10px ; margin-bottom:5px ;'>\n<\/div>\n<p><strong>S.2(22)(e):Deemed  dividend-Loans or advances to shareholders-Money lending is not business of  assesse company-Loan assessable as deemed dividend-Reassessment was held to be  valid.[S.147, 148]<\/strong><br \/>\n  Assessee  received advance from company in which he was Managing Director. Company was  fully engaged in activities other like investing in shares and debentures and  earned income by way of interest and dividend. During relevant time, company  had not given any loan to any other person than managing director .In  subsequent year, certain loans were given to some other persons who were all  employees, i.e., connected with company . Money lending was not business of the  company. Loan assessable as deemed dividend. Reassessment also held to be  valid.(AY. 2003-04)<br \/>\n  <strong>Thankamma  Oommen (Smt.) v. <\/strong><strong>ACIT<\/strong><strong> (2014) 366 ITR 542 \/ 103 DTR 348 (Ker.)(HC)<\/strong> <\/p>\n<p><strong>S.  4 :<\/strong><strong>Charge of income-tax &ndash;Capital  or revenue-Damages- Capital receipt.<\/strong><br \/>\n  Assessee,  a non-resident, received certain amount of compensation from his power of  attorney holder towards damages for breach of trust in respect of sale of  shares of Indian companies, said amount being in nature of capital receipt,  could not be brought to tax. (AY. 2005-06) ( ITA No 2551(Mum) of 2008 dt.  12-09- 2014) <br \/>\n  <strong>ITO  v. Vinay P. Karve&nbsp; (2014) <\/strong><strong>52 taxmann.com 24 \/ <\/strong><strong>(2015) 152 ITD 58 \/<\/strong><strong> (Mum)(Trib) <\/strong><strong> <\/strong><\/p>\n<p><strong>S.  4 : <\/strong><strong>Charge of income-tax &ndash;Method  of accounting-Amount- Wrongly shown&nbsp; in  P&amp; Loss account as income &ndash;Claim made in the course of assessment-Claim not  made in the revised return-Claim was assessee was rightly rejected.[S.139(5),143(3)  145 ]&nbsp;&nbsp; <\/strong><br \/>\n  It  is during course of assessment, assessee pleaded to exclude income shown in the  P &amp; L A\/c. on ground that (i) such sum was shown in books of account only  as provision and nothing was in fact received, (ii) Malaysian company was  liable to deduct withholding tax and (iii) as per Double Taxation Avoidance  Agreement with Malaysia, such sum could not be considered as a part of income  in India. Tribunal held that since these were all new pleadings made during  course of assessment proceedings and claim having not been made through a  revised return, same could not be accepted and, therefore, same was rightly  rejected . (AYs. 2002-03, 2003-04, 2005-06, 2006-07, 2007-08 &amp;  2008-09)(ITA Nos .782 to 787 &amp; 869 to 874 (Mds) of 2012 dt 21-0-2-2013)<br \/>\n  <strong>Metal  Powder Co. Ltd. .v. <\/strong><strong>ACIT<\/strong><strong> (2014) 26  ITR 759\/ <\/strong><strong>51  taxmann.com 304<\/strong><strong> \/ (2015)  152 ITD 144 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.  9(1)(i): <\/strong><strong>Income deemed to accrue  or arise in India&#8211;<\/strong><strong>Business connection -Sale of shares- Cannot be assessed as capital gains- DTAA-India-France[  S. 45,90, Art, 14(6)] <\/strong><br \/>\n  Income  earned by assessee, a French resident, from sale of shares of Indian companies,  could not be taxed under head &#8216;capital gain&#8217; due to benefit conferred in terms  of article 14(6) of India-France DTAA. (AY. 2005-06)(( ITA No 2551(Mum) of 2008 dt.  12-09- 2014)&nbsp;&nbsp; <br \/>\n  <strong>ITO  .v. Vinay P. Karve (2014) <\/strong><strong>52 taxmann.com 24 \/<\/strong><strong> (2015) 152  ITD 58 (Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S. 9(1)(i): Income deemed  to accrue or arise in India-Business connection -Shipping and air  transport-Operation of ships-Benefit of DTAA&nbsp;  cannot be denied-India-Malaysia[Art .8]<\/strong><br \/>\n  The assessee was a company incorporated  under the laws of Malaysia and was also a tax resident of Malaysia, engaged in the business of shipping in  international traffic and was also the owner of ships either owned by it or  taken on lease. The assessee had appointed an agent for booking of freights of  cargo for transportation from one destination to other in international  traffic. The assessee sought for double tax relief as per Article-8 of  India-Malaysia DTAA.Para 2 of article 8 of DTAA categorically envisages that  for the purpose of said article of DTAA profits from the operation of ships in  the international traffic means, profit derived by an enterprise from the  transportation by sea of goods carried on by the &quot;owner&quot; or  &quot;lessee&quot; or &quot;charterer&quot; of ships. Thus, the profits from  the &quot;operation of ships&quot; have been qualified by the words carried on  by the &quot;owner&quot; or &quot;lessees&quot; or &quot;charterer&quot;. This  meaning assigned to operation of ships in the India-Malaysia treaty is in  contra-distinction with OECD model convention, where the operation of ships has  not been defined. <br \/>\n  Therefore, where in case of assessee, a  Malaysian Company, voyage between Indian port to hub port through feeder vessel  and from hub port to final destination port through mother vessel owned\/leased  by assessee were inextricably linked, entire profits derived from transportation  of goods was to be treated as profits from operation of ships and, therefore,  benefit of article 8 of DTAA, could not be denied to assessee on part of  freight received in respect of voyage by feeder vessels.(AYs. 2004&ndash;05&nbsp; to 2007-08 &amp; 2009-10)<br \/>\n  <strong>MISC Berhad .v. ADIT (IT)  (2014) 150 ITD 213 \/ 165 TTJ 185 (Mum)(Trib.)<\/strong><\/p>\n<p><strong>S.9(1)(vi):Income deemed to  accrue or arise in <\/strong><strong>India<\/strong><strong>-Royalty-  Income received was held to be not taxable in <\/strong><strong>India<\/strong><strong>-DTAA-India-  Germany.[Art 7, 12]<\/strong><br \/>\n  Tribunal held that consideration received  as fee would be chargeable as royalty and 80 percent would be taxable. On  reference the assesse contended that tribunal ought to have held that such  consideration receivable were industrial or commercial profits within the  meaning of DTAA and impugned consideration would not&nbsp; be taxable in India as the assesse company had no PE in India. Following the decision of earlier year in  assesses own case the question was answered in favour of assesse.(AY 1981-82)<br \/>\n  <strong>Fag Kugelfischer Georg  Schafer KCAA v. CIT ( 2014) 227 Taxman 256(Mag.) (Bom)(HC)<\/strong><\/p>\n<p><strong>S. 9(1)(vi): <\/strong><strong>Income deemed to accrue or arise in  India-Royalty-Design engineering services and  technical know-how for erection of plant &ndash;Not royalty-Technical and process-know how services &ndash;DTAA-India-  Israel.[S.9(1)(i), 195(2), Art 12, 13]<\/strong><br \/>\n  Assessee  entered into a Technology License agreement with a foreign company.&nbsp; Agreement envisaged payment to said company  for providing design engineering services and technical know-how for erection  of plant, providing of commercial services, and providing of technical and  process know-how to enable assessee to manufacture products. Since assessee was  granted a permanent right to use and exploit design engineering, to extent  agreement envisaged payment for obtaining plant know-how, i.e., designing,  characterization of plant and machinery, etc. same could not be considered as  payments falling within purview of &#8216;royalty&#8217;, whereas technical and  process-know how services provided under agreement were clearly covered by  definition of &#8216;Royalty&#8217;. (AY. 1996-97) (ITA nos 350 to 352 of 1988 dt. 10  10- 2014)<br \/>\n  <strong>Finoram Sheets Ltd. .v. ITO (2014) 52 taxmann.com 206 \/ (2015) 152 ITD 77 (Pune)(Trib.)<\/strong><\/p>\n<p><strong>S. 9(1)(vii):Income deemed to accrue or arise in  India &ndash; Royalty &ndash;&nbsp; Commission paid by  resident assessee to its foreign agent for arranging of export sales and  recovery of payments cannot be treated as fee for technical services u\/s.&nbsp; 9(1)(vii)<\/strong><br \/>\n  The assessee paid a certain  amount as commission for arranging export sales and realising payments to a  non-resident company registered in Liechtenstein. The AO held that the  commission payment was taxable as a &#8216;fee for technical service&#8217; under  sub-clause (b) to S. 9(1)(vii) and, thus, the assessee was liable to deduct tax  at source while making the said payments. The CIT(A), however, reversed this  finding, which was upheld by the Tribunal. <\/p>\n<p>On the Revenue&rsquo;s appeal, the  High Court specifically dealt with three categories of technical services in  accordance with <em>Explanation<\/em> 2 to S. 9(1)(vii), i.e. managerial services,  technical services and consultancy services on the facts of the assessee&rsquo;s  case.<br \/>\n  As regards the &lsquo;managerial  service&rsquo; the High Court held that the procurement of export orders, etc.,  cannot be treated as management services provided by the non-resident to the  respondent-assessee since the non-resident was not acting as a manager or  dealing with administration. It was not controlling the policies or  scrutinizing the effectiveness of the policies. It did not perform, as a  primary executor, any supervisory function whatsoever. The non-resident was  appointed as a commission agent for sale of products within the territories  specified and subject to and in accordance with the terms set out, which the  non-resident accepted. The non-resident, therefore, was acting as an agent for  procuring orders and not rendering managerial advice or management services. <br \/>\n  As regards the &lsquo;technical  service&rsquo;, the High Court held that in the facts of the instant case the  non-resident had not undertaken or performed &#8216;technical services&#8217;. <br \/>\n  As regards &lsquo;consultancy  service&rsquo; the High Court held that the non-resident had not rendered any  consultation or advice to the respondent-assessee, thus the commission paid for  arranging of export sales and recovery of payments cannot be regarded as a  consultancy service rendered by the non-resident. The non-resident no doubt had  acquired skill and expertise in the field of marketing and sale of automobile  products, but, on the facts, as noticed by the Tribunal and the CIT(A), the  non-resident did not act as a consultant, who advised or rendered any  counselling services. It was a case of self-use and benefit, and not giving  advice or consultation to the assessee on any field, including how to procure  export orders, how to market their products, procure payments, etc. The assessee upon receipt of  export orders manufactured the required articles\/goods and then the goods  produced were exported. There was no element of consultation or advice rendered  by the non-resident to the respondent-assessee. In view of the above, it was  held that the commission paid to the non-resident for procuring export orders  was not a fee for technical services u\/s.9(1)(vii).&nbsp; (AY. 2010-11)<br \/>\n  <strong>DIT(IT).v.  Panalfa Autoelektrik Ltd. (2014) 49 Taxmann.com 412\/227 Taxman 351 (Delhi) (HC)<\/strong><\/p>\n<p><strong>S.9(1)(vii):Income deemed to accrue or arise in  India- Fees for technical services &#8211; Where a Singapore company rendered  services to the assessee, without making available to the assessee its  technical knowledge, experience or skill, there was no liability to deduct tax  at source from payments made for the services in  question-DTAA-India-Singapore.[S. 195,Art. 7, 12]<\/strong><br \/>\n  The assessee entered into a  logistics services agreement with its associated enterprise, namely &#8216;S&#8217;  Singapore.&nbsp; Under the terms of the  agreement, &#8216;S&#8217; Singapore was required to provide distribution management and  logistics services to the assessee-company &#8216;S&#8217; India, and such services included  providing spare management services, provision of buffer stock, defective  repair services, managing local repair centres, business planning to address  service levels, etc. &#8216;S&#8217; Singapore did not have any place of business or  permanent establishment in India. The entire services were rendered by &#8216;S&#8217;  Singapore from outside India. &#8216;S&#8217; Singapore was not engaged in the business of  providing logistic services in India. The material on record did not disclose  that &#8216;S&#8217; Singapore had made available to the assessee its technical knowledge,  experience or skill. Under these circumstances, the Tribunal held &#8216;S&#8217; Singapore  was not taxable in view of articles 7 and 12 of the DTAA between India and  Singapore. <\/p>\n<p>On  appeal, the High Court held that &lsquo;S&rsquo; Singapore has not made available to the assessee the technology  or the technological services required to provide the distribution, management  and logistic services. That is a finding of fact recorded by the Tribunal on  appreciation of the entire material on record. When once factually it is held  technical services have not been made available, then in view of the law  declared in <em>CIT<\/em> v. <em>De Beers India Minerals (P) Ltd. <\/em><a href=\"..\/..\/hiralid726\/AppData\/Local\/AppData\/Local\/Microsoft\/Windows\/Temporary%20Internet%20Files\/Content.IE5\/40EIXA8D\/fileopen.aspx%3fid=101010000000036102&amp;source=link\">[2012] 346 ITR  467\/208 Taxman 406\/21 taxmann.com 214 (Kar.)<\/a>,  there is no liability to deduct tax at source and therefore the finding  recorded by the Appellate Authority cannot be found fault with. Given that view  of the matter, the substantial question of law is answered in favour of the  assessee and against the Revenue. (AY. 2005 -06)<br \/>\n    <strong>DIT .v. Sun  Microsystems <\/strong><strong>India<\/strong><strong>. (P) Ltd. (2014) 369 ITR 63\/ 227 Taxman 117(Mag)(Karn) (HC) <\/strong><\/p>\n<p><strong>S. 10(15) : Exempt income &#8211; Interest on  external commercial borrowings loan being exempted by CBDT under section  10(15)(iv)(c), no TDS liability would arise . [S.40(a)(193, 195)]<\/strong><br \/>\n  Assessee made a  borrowing of US $ 40 million from abroad in March, 1997 by way of external  commercial borrowing (ECB) from a consortium of foreign banks syndicated by Bayerische    Landesbank, Singapore.&nbsp; Utilisation of ECB was for purchase outside India raw materials,  components or plant and machinery and CBDT had granted approval in respect of  ECB. The Assessee paid interest on the said borrowing. As the interest income  was not taxable in hands of recipient and was exempted by Government of India,  the question of TDS on interest paid by assessee did not arise. (AY. 2001-02)<br \/>\n  <strong>Dy. CIT .v. Essar Steel Ltd.(2013) 26 ITR  623\/ 40&nbsp; taxmann.com 537\/ (2014) 61 SOT  39 (URO)(Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S. 10A :<\/strong><strong>Free trade zone-Turn over- Export turn  over &ndash;Foreign exchange-Excluded from export turnover has also to be reduced  from total turnover. <\/strong><br \/>\n  While  computing exemption under section 10A, expenditure on telecommunication,  insurance and other heads incurred in foreign exchange excluded from export  turnover has also to be reduced from total turnover.(ITA No. 454  (MDS.) of 2014  dt 8-8-2014) (AY. 2006-07)<br \/>\n  <strong>ACIT<\/strong><strong> <\/strong><strong>v.Think Soft Global Services (P.) Ltd. (2014)  34 ITR 633 \/&nbsp; 52 taxmann.com 109 \/ (2015)  152 ITD 246 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S. 10A : Free trade zone  &ndash;Amounts not deductible-Amount of statutory disallowance u\/s. 40(a)(ia) and 43B  has to be considered as business profit eligible for deduction u\/s.  10A[S.40(a)(ia), 43B]<\/strong><br \/>\n  It is the well-established fact that as  per the provisions of s. 10B recomputed profits shall be considered for the  purpose of computation of deduction u\/s 10B. The disallowances of expenditure  should be computed for the purpose of deduction u\/s 10B accordingly if the  AO&nbsp; recomputes the profit from eligible  business by disallowing certain expenditure and liability u\/s 40(a) (ia) and  43B, such recomputed profit shall be considered for the purpose of deduction  u\/s 43B. The amount of statutory disallowance has to be considered as business  profit eligible for deduction u\/s. 10A. Whether where communication charges,  insurance charges and reimbursement of expenses attributable to delivery of  computer software outside India, are to be reduced from export turnover then  same should as well be reduced from total turnover while computing deduction  under section 10A. (AY. 2008-2009)<br \/>\n  <strong>Virtusa (<\/strong><strong>India<\/strong><strong>)  (P.) Ltd. .v. Dy. CIT (2014) 150 ITD 278 (Hyd.)(Trib.)<\/strong><\/p>\n<p><strong>S. 10B : Export oriented  undertaking-Customized electronic data- &#8216;Ready to print books&#8217; exported by  assessee in form of a CD or e-mail are customized electronic data eligible for  claiming benefit of deduction.<\/strong><br \/>\n  Applicability of s. 10B(2)(i), which is  the subject matter of dispute in the instant case it is admitted by both the  parties that all other conditions relevant to applicability of section 10B are  being satisfied by the taxpayer. In the instant case, the intention of the  Legislature is to provide benefit of deduction to enterprises which are not  simply engaged in manufacture or produce any article or thing, but even to  those assessees whose end product is any customized electronic data. Benefit of  deduction under section 10B is also available on rendering of any of the  services as notified by the Board like the item (ii) in the notification  wherein even call centres, animation, etc. which are brought in the sweep of  any product or services stated in clause (b) of item (i) of Explanation 2 to  section 10B. Therefore, the submissions made by assessee that the restricted  scope of the meaning of the phrase &#8216;manufacture or produce&#8217;. Irrespective of  form in which input data is, so long as end product is in form of electronic  data which is customised by assessee for end use of a particular customer,  benefit of deduction u\/s. 10B cannot be denied.(AY.2006 &#8211; 2007)<strong><\/strong><br \/>\n  <strong>Kiran Kapoor .v. ITO (2014)  150 ITD 237 \/ 164 TTJ 157 (<\/strong><strong>Delhi<\/strong><strong>)(Trib.)<\/strong><\/p>\n<p><strong>S.11: Property held for  charitable purposes &ndash;Charitable purpose-Impart of education-Capital  expenditure-Surplus was utilised for infrastructure development-Eligible for  exemption.[S.2(15), 12A]<\/strong><br \/>\n  Main object of the assesse trust is to  impart education, therefore when the surplus is utilised for educational  purpose, i.e. for infrastructure development it cannot be said that the  institution was having object to make profit. Surplus used for management and  betterment of institution could not be termed as profit. Surplus was used for  management and betterment of institution could not be termed as profit. Capital  expenditure incurred by an educational institution is the basic necessity if  such expenditure promotes the object of the Trust. Accordingly capital&nbsp; expenditure incurred by a trust for acquiring  \/construction capital asset would be application of money and the assesse would  be entitled to exemption under section 11(1)(AY. 2007-08)<br \/>\n  <strong>CIT .v. Silicon Institute  of Technology ( 2014) 272 CTR 319\/112 DTR 233 (Orissa)(HC) <\/strong><\/p>\n<p><strong>S. 11 : Property held for  charitable purposes-Charitable purpose-Pre &ndash;Sea and Post-Sea training for ships  and maritime industry- Educational- Trust entitle to exemption.[S. 2(15)]<\/strong><br \/>\n  The assesse trust was established with  the purpose of administering and maintaining technical training institutions at  various places in India for pre sea and post sea training for ships and  maritime industry as a public charitable institution for education for officers  , both on the deck and engine side.AO held that the assesse was not entitled  exemption but CIT(A) and Tribunal held that it was entitled exemption. On  appeal by revenue dismissing the appeal the Court held that the assesse Trust  is eligible to exemption.(AY. 2007-08)<br \/>\n  <strong>DIT .v. Samudra Institute  of Maritime Studies Trust (2014) 369 ITR 645 (Bom)(HC)&nbsp;&nbsp; <\/strong><\/p>\n<p><strong>S.11:<\/strong><strong> Property held for  charitable purposes- Depreciation  &ndash;&nbsp; Income of a trust registered u\/s. 12A  has to be computed on commercial principles and in doing so depreciation on  fixed assets utilised for charitable purposes is allowable.[S. 12A, 32]&nbsp; <\/strong><br \/>\n  The assessee was a society  registered under the Societies Registration Act, 1860. While computing its  income, the assessee had declared gross receipts on account of donations,  profit on sale of land and bank interest. Against the gross receipts, the  assessee claimed depreciation based on commercial principles and claimed the  balance amount as exempt u\/s 11. The AO denied this allowance of depreciation;  however, it was allowed by the CIT(A) as well as by the ITAT. The Revenue  preferred an appeal before the High Court. <br \/>\n  The High Court dismissed the  appeal of the Revenue after relying on&nbsp;  various case laws where it was held that in computing the income of a  charitable institution\/trust, depreciation of assets owned by the trust\/institution  is a necessary deduction on commercial principles. (AY. 2006-07)<br \/>\n  <strong>DIT .v. Vishwa  Jagriti Mission (2013) 262 CTR 558\/ (2014)227 Taxman 144(Mag) (<\/strong><strong>Delhi<\/strong><strong>.) (HC)<\/strong><\/p>\n<p><strong>S. 11 :<\/strong><strong>Property held for charitable or religious  purposes &ndash;Additional evidence- Giving contract to a company in which the  trustee had substantial interest-Matter remanded [S. 13].<\/strong><br \/>\n  The  assessee-trust ran a school.AO disallowed exemption under section 11  on ground that assessee trust had given contract for construction of school  building to company in which one trustee was having substantial interest. CIT  (A) placing reliance on photocopy of annual report filed with ROC held that  said trustee was only holding 4 per cent of equity shares of company and  therefore it could not be said that he was holding substantial interest in  company and thus allowed deduction. However, no evidence in respect of this  document being filed before AO. Since CIT(A) had given relief to assessee by  admitting and relying on additional evidence which was not before AO, matter  was to be restored back to file of AO.(AY. 2008-09 and 2009-10)( ITA&nbsp; Nos 1190&amp; 1320(Ahd) of 2011 &amp;  2591(Ahd) of 2012 dt 20-06-2014)<br \/>\n  <strong>DIT(E)  .v. Shree Nirman Foundation Charitable Trust<\/strong><strong>(2014) 33 ITR 56 \/51  taxmann.com 303\/<\/strong><strong>(2015) 152  ITD 33&nbsp; <\/strong><strong>(Ahd.)(Trib.)<\/strong><\/p>\n<p><strong>S. 11 : Property held for charitable  purposes &#8211; Assessee acquired shares in co-operative banks as a pre-condition  for raising loans to be used for furtherance of its objects &ndash; Cannot be said to  be an &#8216;investment&#8217; within meaning of section 13(1)(d) read with section 11(5) &ndash;  Denial of exemption unjustified. [S. 13]<\/strong><br \/>\n  Shares of  co-operative banks acquired as a pre-condition for raising loans to be used in  furtherance of objects, cannot be considered as an &#8216;investment&#8217; within meaning  of section 13(1)(d) read with section 11(5) to disallow exemption under section  11. (AY. 2008-09)<br \/>\n  <strong>Dr. Vikhe Patil Foundation .v. ITO(2013)  155 TTJ 176\/39&nbsp; taxman.com 179\/ (2014) 61  SOT 42 (URO)(Pune)(Trib.)<\/strong><br \/>\n  Editorial:The  abovementioned case has been affirmed by the Hon&#8217;ble Bombay High Court. Please  refer [2014] 222 Taxman 104 (Bom)(HC).<\/p>\n<p><strong>S.  11:<\/strong><strong>Property held for charitable or  religious purposes &ndash;Voluntary contribution-No disallowance of depreciation  could be made.[S. 32]<\/strong><br \/>\n  Where voluntary contributions are made with a  specific direction that it shall form part of corpus of trust, said amount  cannot be treated as income of trust even if purpose for which such donation is  given has not been specified. While working out application of income as  prescribed in relation to purposes\/objectives of a trust in terms of section  11(1)(a) in computation of taxable income, no disallowance of depreciation  could be made.(AY.  2009-10)(ITA Nos . 1796&amp;1819 (Mds) of 2012 dt 20-12-2013)&nbsp; <br \/>\n  <strong>Jt.  CIT (OSD) (E) .v. Bhaktavatsalam Memorial Trust<\/strong><strong>(2014) 30 ITR 264\/51  taxmann.com 248 \/<\/strong><strong>(2015) 152  ITD 48 (Chennai)(Trib.)<\/strong><\/p>\n<table border=\"1\" cellspacing=\"0\" cellpadding=\"5\">\n<tr>\n<td width=\"90%\" valign=\"top\">The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. 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