Certain petitions and appeals were filed by the Income Tax\u00a0 Department against\u00a0\u00a0 the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the assessees. All the assessees were charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as \u2018Act\u2019).\u00a0 In the previous year to the year with which the Court was concerned and\u00a0\u00a0\u00a0 in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under Section 11(1)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of\u00a0\u00a0\u00a0 the Act was that once the capital expenditure is treated as application of income\u00a0 for charitable purposes, the assessees had virtually enjoyed a 100 per cent write\u00a0\u00a0 off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. In most of these cases, the CIT (Appeals)\u00a0\u00a0\u00a0 had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT\u00a0 thereby dismissing the appeals of the Income\u00a0 Tax Department. From the judgments of the High Courts, it was discerned that the High Courts have primarily followed the judgment of the Bombay High Court in \u2018Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS)\u2019 [(2003) 131 Taxman 386 (Bom)(HC)] <\/em><\/strong>which was in favour of the Assessee.<\/p>\n The Court was of the opinion that the view taken by the Bombay High Court correctly stated the principles of law and there is no need to interfere with the same. It was mentioned that most of the High Courts had taken the aforesaid\u00a0 view with only exception by the High Court of Kerala which has taken a contrary view in \u2018Lissie Medical Institutions v. Commissioner of Income Tax\u2019<\/em><\/strong>. It was further observed by the Court that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide <\/em>Finance Act No. 2\/2014 which became effective\u00a0 from the Assessment Year 2015-2016. The Court affirming the view observed that the Delhi High Court had rightly held that the said amendment is prospective\u00a0\u00a0\u00a0 \u00a0in nature. It was specifically stated that once assessee is allowed depreciation,\u00a0\u00a0\u00a0\u00a0\u00a0 he shall be entitled to carry forward the depreciation as well. The Court thus confirmed the view of the High Courts and dismissed departmental appeals.<\/p>\n However, an application was filed by the Income-tax Department wherein it was stated that one CA No. 5171 of 2016 was tagged with other appeals and the batch matters were decided by Supreme Court via above judgement on 13-12-2017. However, one questions was left out with regards to excess expenditure being set\u00a0 off in subsequent year.<\/p>\n The issue of depreciation was already decided by the Court vide its judgement\u00a0\u00a0 date 13-12-2017. The only issue raised in the miscellaneous application was whether any excess expenditure incurred by\u00a0 the trust\/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years by invoking Section 11 of the Income-tax Act, 1961.<\/p>\n Though the Supreme Court accepted that there was mistake and the issue was not address in the earlier decision. However, after hearing on the issue, the Court did not find any merit and hence dismissed the miscellaneous application.<\/p>\n Affirming Delhi High Court\u2019s view, in\u00a0 Subros Educational\u00a0 Society (IT No.\u00a0 382 of 2015 dt. 23rd September 2015), that any excess expenditure incurred by the trust\/charitable institution in earlier assessment year could be allowed to\u00a0 be\u00a0 set off against income of subsequent years, the Supreme Court dismissed the Miscellaneous Application of the Revenue. (MA No. 941\/2018 (CA No. 5171\/2016 dt. 16-4-2018)<\/p>\n Editorial<\/em><\/strong>: The ratio of judgment was followed by the Tribunals in the following;<\/p>\n In CIT v. Rajasthan & Gujarati Charitable Foundation Poona [2018] 89 taxmann.com 127\/253 Taxman 165\/402 ITR 441 (SC), <\/em><\/strong>the Supreme Court held\u00a0 that even though expenditure incurred for acquisition of capital assets was treated<\/p>\n as application of income for charitable purposes under section 11(1)(a), yet depreciation would be allowed on assets so purchased. The Supreme Court also observed as follows, \u201cIt also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well\u201d<\/em><\/p>\n Thus, the above observation suggests that it is possible for the charitable institution to carry forward deficit to subsequent years. The decision of the Supreme Court was also followed in J.R.D. Tata Trust (supra) and Medical Trust\u00a0 of Seventh DayAdventists v. Dy. DIT [IT Appeal No. 1708 (Chny) of 2015, dated 4-9-2018].<\/em><\/strong><\/p>\n \u201cMany people, especially ignorant people, want to punish you for speaking the truth, for being correct, for being you.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n \u00a0<\/em><\/strong><\/p>\n \u00a0<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" S. 11: Property held for charitable purposes \u2013 Application of income \u2013 Any excess expenditure incurred by the trust\/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years. [S.11(1)(a)]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13288","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3sk","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13288","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13288"}],"version-history":[{"count":2,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13288\/revisions"}],"predecessor-version":[{"id":29174,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13288\/revisions\/29174"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13288"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13288"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13288"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Issue<\/h3>\n
View<\/h3>\n
Held<\/h3>\n
(a)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 ITO v. Shri Sushilaben Ramniklal Jhaveri Charitable Trust [IT Appeal No. 4131 (Mum.) of 2017, order dt. 28-9-2018];<\/h4>\n
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(c)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Dy. CIT v. J.R.D. Tata\u00a0 Trust\u00a0 [IT Appeal No. 7122 (Mum.) of\u00a0 2017,\u00a0 dt. 13-2-2019];<\/h4>\n
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