M/s Karnataka State Muslim Federation, Bangalore v. DIT, Bangalore

ITA 37/BANG/2013 | 2009-2010
Pronouncement Date: 09-10-2013 | Result: Allowed

Appeal Details

RSA Number 3721114 RSA 2013
Assessee PAN AAATK5933C
Bench Bangalore
Appeal Number ITA 37/BANG/2013
Duration Of Justice 9 month(s)
Appellant M/s Karnataka State Muslim Federation, Bangalore
Respondent DIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 09-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-10-2013
Date Of Final Hearing 09-10-2013
Next Hearing Date 09-10-2013
Assessment Year 2009-2010
Appeal Filed On 09-01-2013
Judgment Text
ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE ABENCH BANGALORE BEFORE SHRI N. BARTHVAJASANKAR VICE PRESIDENT AND SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NO.37/BANG/2013 (ASSESSMENT YEAR: 2009-10) KARNATAKA STATE MUSLIM FEDERATION NO.22/1 ARABIC COLLEGE POST NAGAWARA BANGALORE 560 045 PAN: AAATK 5933C VS. DIRECTOR OF INCOME TAX (EXEMPTION) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI C.R.NULVI CA DEPARTMENT BY: SHRI G.V.GOPALA RAO DR DATE OF HEARING: 09/10/2013 DATE OF PRONOUNCEMENT: 09/10/2013 O R D E R PER GEORGE GEORGE K. J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE DIT (E)DATED 21.12.2012 PASSED U/S 263 OF THE ACT. 2. THE ASSESSEE THOUGH IN ITS MEMORANDUM OF APPE AL HAS RAISED SIX GROUNDS THE ISSUES ARE CONFINED TO THE JURISDICTION OF THE DIT (E) IN PASSING THE ORDER U/S 263 OF THE ACT AND SETTING ASIDE THE CLAIM OF DEPRECIATION FOR APPLICATION OF INCOME. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 2 OF 10 THE ASSESSEE IS A TRUST ENGAGED IN EDUCATIONAL ACT IVITIES. FOR THE ASSESSMENT YEAR 2009-10 RETURN OF INCOME W AS FILED ON 25.09.2009 DECLARING NIL INCOME. THE ASSESSMENT WA S COMPLETED U/S 143(3) OF THE ACT ON 28.01.2011 DETERMINING THE TOTAL INCOME AT RS.2 13 92 226. 3.1 SUBSEQUENTLY THE DIT (E) ON PERUSAL OF THE ASS ESSMENT RECORDS NOTICED THAT THE ASSESSEE HAD CLAIMED CAPIT AL EXPENDITURE OF RS.1 78 87 478 AND ALSO CLAIMED DEPR ECIATION ON ASSETS AMOUNTING TO RS.1 13 93 492 AS APPLICATION O F FUNDS TOWARDS THE OBEJCTS OF THE TRUST. THE DIT (E) WAS O F THE VIEW THAT THIS AMOUNTS TO DOUBLE DEDUCTION AND FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LT D & ANR. V/S UNION OF INDIA (199 ITR 43) SET ASIDE THE ASSESSME NT PASSED U/S 143(3) OF THE ACT AND DIRECTED THE ASSESSING OFFICE R TO DISALLOW THE DEPRECIATION AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. THE REASONING OF THE CIT FOR HOLDING SO R EADS AS FOLLOWS: THE CONTENTIONS/SUBMISSIONS OF THE ASSESSEE TRUST ARE CAREFULLY CONSIDERED AND ARE NOT ACCEPTABLE FOR THE FOLLOWING REASONS: A) THE DECISIONS RELIED ON BY THE ASSESSEE AS DETAI LED IN PARA NO.2 (A) ABOVE ARE DISTINGUISHABLE. THE ISSUE OF DOUBLE DEDUCTION WAS NOT BEFORE THESE HIGH COURTS. THEREFORE THE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE CASE OF CIT VS SOCIETY OF THE SISTERS OF.ANNE 1.46 ITR 28 (KAR) ALSO THE ISSUE I NVOLVED WAS WHETHER THE TRIBUNAL WAS CORRECT IN HOLDING THA T THE AMOUNT OF DEPRECIATION DEBITED TO ACCOUNTS OF A CHA RITABLE INSTITUTION IS TO BE DEDUCTED TO ARRIVE AT THE INCO ME AVAILABLE FOR APPLICATION TO CHARITABLE AND RELIGIO US PURPOSES. AS SUCH THE ISSUE OF DOUBLE DEDUCTION WA S NOT CONSIDERED BY THE JURISDICTIONAL HIGH COURT AND HOT ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 3 OF 10 APPLICABLE. B) IN RESPECT OF DELHI HIGH COURT DECISION IN THE C ASE OF DIT VS. VISWA. JAGRUTHI MISSION IN ITA NO.140/2012 DATE D 29/03/2012 ON WHICH RELIANCE IS PLACED BY THE ASSES SEE AND WHEREIN THE DELHI HIGH COURT HAS HELD THAT INCO ME OF CHARITABLE TRUST/INSTITUTIONS SHOULD BE COMPUTED ON COMMERCIAL PRINCIPAL AND DEPRECIATION IS TO BE ALLO WED I AM OF THE CONSIDERED VIEW THAT IF THE INCOME HAS TO BE COMPUTED ON THE COMMERCIAL PRINCIPLES AND DEPRECIAT ION SHOULD BE ALLOWED IN THE ASSESSEES CASE THE COST OF THE ASSETS ON WHICH DEPRECIATION IS CLAIMED WOULD BE NI L AS THE ENTIRE INVESTMENT ON THE ASSETS HAVE BEEN ALLOW ED AS . DEDUCTION. WHEN THE COST OF ASSETS IS NIL THE DEPR ECIATION ALLOWABLE AS WILL ALSO BE NIL. IN THIS RESPECT RELI ANCE IS PLACED ON THE BANGALORE ITAT BENCH B IN ITA NOS 642&643/BANG/08 DATED 24-12-2008 IN THE CASE OF CMR JANARDHARA TRUST BANGALORE WHEREIN THE BANGALORE I TAT VIDE PARA NO.3.5 HAS HELD AS UNDER: IF THE ENTIRE AMOUNT OF THE CAPITAL ASSET PURCHASE D DURING THE. YEAR IS TREATED AS APPLICATION OF THE INCOME THEN NO FURTHER DEDUCTION CAN BE ALLOWED FOR DEPRECIATION A S THE VALUE .OF ENTIRE CAPITAL ASSET IS TREATED AS APPLIC ATION OF INCOME.. FURTHER IN PARA 3.6 OF THE SAID ORDER THE ITAT HAS ALSO OBSERVED AS. UNDER: COMPUTATION OF INCOME U/S 11 IS DISTINCT FROM ASCERTAINING AS TO WHETHER SECTION 11 IS APPLICABLE OR NOT. WHILE SEEING THE APPLICABILITY OF SECTION 11 ONE HAS TO ASCERTAIN THE EXPENDITURE WHETHER REVENUE. OR CAPI TAL APPLIED FOR THE OBJECTS OF THE TRUST THE ASSESSING OFFICER V IN HIS ORDER HAS CLEARLY MENTIONED THAT THE ASSESSE E HAS ALSO CLAIMED DEPRECIATION AS WELL AS CAPITAL EXPEN DITURE AS EXPENDITURE TOWARDS APPLICATION OF EXPENDITURE T OWARDS THE OBJECTS OF THE TRUST. THIS DEFINITELY AMOUNTS T O DOUBLE DEDUCTION WHILE SEEING THE APPLICABILITY OF SECTION 11. C) THE RELIANCE IS ALSO PLACED ON THE KOCHI ITAT DECIS ION IN THE CASE OF DDIT (E) RANGE-2 ERNAKULAM VS LISSIE MEDICAL INSTITUTIONS KOCHI IN ITA NO.1O10/COCIR/2OO8 A CO NO.6/COCH/2O9 DATED 26.10.2010. THE KERALA HIGH COU RT IN THE ABOVE CASE VIDE ITS ORDER IN ITA NO.42 OF 20 11 DATED 17-02-2012 HAS CONFIRMED THE ORDER OF KOCHI ITAT AN D HAS DEALT WITH THE ISSUE OF DEPRECIATION IN DETAIL. THE HONBLE KERALA HIGH HAS HELD THAT THE VARIOUS DECISIONS OF THE ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 4 OF 10 OTHER HIGH COURTS HAVE NOT DEALT WITH THE ISSUE OF DOUBLE DEDUCTION AND HAS UPHELD THE VIEW OF THE DEPARTMENT . BEFORE THE HONBLE KERALA HIGH COURT THE DEPARTMEN TS STANDING COUNSEL HAS ALSO PRODUCED CLARIFICATION IS SUED BY THE CBDT WHICH IS AS UNDER: THE CENTRAL BOARD OF DIRECT TAXES IS OF THE CONSID ERED VIEW THAT WHERE AN ASSESSEE HAS ACQUIRED AN. ASSET THROUGH APPLICATION OF INCOME AND HAS ALSO CLAIMED THIS AMOUNT AS EXPENDITURE IN ITS INCOME EXPENDITURE ACC OUNT DEPRECIATION ON SUCH ASSET WOULD NOT BE ALLOWABLE T O THE ASSESSEE. SUCH NOTIONAL STATUTORY DEDUCTIONS LIKE DEPRECIATION IF C(AIMED AS DEDUCTION WHITE COMPUTI NG THE INCOME OF THE THE PROPERTY HELD UNDER TRUST UNDER THE RELEVANT HEAD OF INCOME IS REQUIRED TO... BE ADDED BACK WHITE COMPUTING :THE INCOME OR THE PURPOSE OF APPLI CATION IN THE INCOME EXPENDITURE ACCOUNT. THIS WOULD IMPLY THAT A CORRECT FIGURE OF SURPLUS FROM THE TRUST PROPERTY IS REFLECTED IN THE INCOME AND EXPENDITURE ACCOUNT OF THE TRUST TO DETERMINE THE INCOME FOR THE PURPOSE OF APPLICATION UNDER SECTION 11 OF THE INCOME TAX ACT. THIS WOULD REDUC E THE POSSIBILITY OF REVENUE LEAKAGE WHICH MAY BE A CAUSE FOR GENERATION OF BLACK MONEY. D) IN THE CIRCUMSTANCES THE DECISION OF THE HON'BL E SUPREME COURTS IN THE CASE OF ESCORTS LIMITED & ANO THER VS. UNION. OF INDIA 199 ITR 43 IS SQUARELY APPLICAB LE TO THE FACTS .OF THE PRESENT CASE EVEN THOUGH THE ISSUE B EFORE THE APEX COURT WAS ALLOWANCE OF DEDUCTION U/S 35(2)(IV) AND U/S 32. THE HONBLE SUPREME COURT IN THE ABOVE DEC ISION HAS CATEGORICALLY HELD WHEN DEDUCTION U/S 35(2)(IV) IS ALLOWED IN RESPECT OF CAPITAL EXPENDITURE ON ASSETS FOR SCIENTIFIC RESEARCH NO DEPRECIATION IS ALLOWABLE U /S 32 ON THE SAME ASSETS. IN THIS EASE THE HONBLE SUPREME COURT HAS ALSO HELD AS UNDER: (I) IN THE ABSENCE OF CLEAR STATUTORY INDICATION TO THE CONTRARY THE STATUTE SHOULD NOT BE READ SO AS TO PERMIT AN ASSESSEE TWO DEDUCTIONS. THE MERE FACT THAT A BASELESS CLAIM WAS RAISED BY SOME OVER ENTHUSIASTIC ASSESSEE WHO SOUGHT A DOUBLE ALLOWANCE OR THAT SUCH CLAIM MAY PERHAPS HAVE BEEN ACCEPTED BY SOME AUTHORITIES IS NOT SUFFICIENT TO ATTRIBUTE ANY AMBIGUITY OR DOUBT AS TO THE TRUE SCOPE OF THE PROVISIONS AS THEY STOOD EARLIER ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 5 OF 10 4) BY ALLOWING THE DEPRECIATION IN ADDITION TO THE ALLOWANCE OF CAPITAL EXPENDITURE ON THE ASSETS AS APPLICATION THE ASSESSMENT ORDER U/S 143(3) OF TH E INCOME TAX ACT 1961 DATED 28-11-2011 IS ERRONEOUS. FURTHER AS THE DOUBLE DEDUCTION IS ALLOWED TO THE ASSESSEE BY WAY OF DEPRECIATION AS WELL AS CAPITAL EXPENDITU RE ON THE ASSETS THE ASSESSMENT ORDER IS ALSO PREJUDICIA L TO THE INTEREST OF THE REVENUE. IN THE CIRCUMSTANCES AND F OR THE: DETAILED REASONS MENTIONED ABOVE I SET-ASIDE THE ASSESSMENT ORDER J/S 143 (3) OF THE INCOME TAX ACT 1961 DATED 28-11-2011 WITH A DIRECTION TO THE ASSESSING OFFICER TO DISALLOW DEPRECIATION AFTER AFFORDING OPPORTUNIT Y OF BEING HEARD TO THE ASSESSEE. 4. THE ASSESSEE BEING AGGRIEVED BY THE ORDER PASSE D U/S 263 OF THE ACT IS IN APPEAL BEFORE US. THE LEARNED COU NSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE OF ALLOWANCE OF D EPRECIATION AS APPLICATION OF INCOME FOR THE OBJECTS OF THE TRUST IS NOW A SETTLED POSITION OF LAW IN VIEW OF THE DECISION OF THE BANG ALORE BENCH OF THE TRIBUNAL IN THE CASE OF KARNATAKA REDDY JANASAN GHA IN ITA NO.220/BANG/ 2011DATED 7.9.2012 AND IN THE CASE OF M/S CUTCHI MEMON UNION IN ITA NO.878/BANG/2012 DATED 14.8.2013. IT WAS SUBMITED THAT THE ABOVE TWO ORDER S OF THE TRIBUNAL AFTER HAVING CONSIDERED THE VARIOUS JUDGME NTS OF THE HIGH COURTS AND HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. THE LEARNED DR ON THE OTHER HAND STRONGL Y RELIED ON THE REASONING GIVEN BY THE DIT (E) IN PASSING HIS R EVISIONARY ORDER U/S 263 OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THE BANGALORE BENCH OF TH E TRIBUNAL IN THE CASE OF KARNATAKA REDDY JANASANGHA IN ITA NO.22 0/BANG/ 2011 (IN WHICH ONE OF US IS A PARTY) AFTER REFERRIN G TO THE ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 6 OF 10 PRECEDENT ON THE SUBJECT HAS DECIDED THE ISSUE IN F AVOUR OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE TRIBUNAL REA DS AS FOLLOWS: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE MATERIALS ON RECORD. THE INCOME OF THE TRUST IS REQUIRED TO BE COMPUTED UNDER SECTION 11 ON COMMERCIAL PRINCIPL ES WITHOUT REFERENCE TO THE HEADS OF THE INCOME SPECIF IED UNDER SECTION 14 OF THE ACT. IN OTHER WORDS IT IS TO BE C OMPUTED AS PER THE BOOK INCOME AND NOT TOTAL INCOME AS DEFINED IN SECTION 2(45) OF THE ACT. THIS PROPOSITION IS LAID DOWN BY VARIOUS JUDGEMENTS OF HON'BLE HIGH COURTS NAMELY (I) CIT V TRUSTEE OF H.E.H. NIZAM'S SUPPLEMENTAL RELIGIOUS ENDOWMENT TRUST 127 ITR 378 (AP); (II) CIT V RAO BAHADUR CALAVALA C UNNAN CHETTY CHARITIES 135 ITR 485 (MAD.) & (III) CIT V ES TATE OF V.L.ETHIRAJ 136 ITR 12 (MAD.). THIS POSITION IS ALS O CONFIRMED BY THE CBDT VIDE ITS CIRCULAR NO.5-P (LXX-6) DATED 19TH JUNE 1968. THE INCOME OF THE TRUST IS TO BE COMPUTED ON THE COMMERCIAL BASIS I.E. AS PER NORMAL ACCOUNTING. THE NORMAL ACCOUNTING PRINCIPLES CLEARLY PROVIDE FOR DEDUCTING DEPRECIATION TO ARRIVE AT INCOME. THE INCOME SO ARR IVED AT (AFTER DEDUCTING THE DEPRECIATION) IS TO BE APPLIED FOR CHARITABLE PURPOSE. CAPITAL EXPENSE IS APPLICATION OF THE INCO ME SO DETERMINED. THE APPLICATION OF THE INCOME SO DETERM INED CANNOT BE STATED TO BE A DEDUCTION TO ARRIVE AT THE INCOME. THE DEPRECIATION IS TO BE DEDUCTED TO DETERMINE THE INC OME UNDER SECTION 11 OF THE ACT AND IT IS NOT AN APPLICATION OF INCOME. THEREFORE THERE IS NO DOUBLE DEDUCTION AS CLAIMED BY THE DIT(E) IN HIS ORDER. 9.1 THE CONTROVERSY ACCORDING TO US IS SQUARELY C OVERED BY THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF CIT V INSTITUTE OF BANKING 264 ITR 110. THE HON'BLE BOMB AY HIGH COURT WAS CONSIDERING THE FOLLOWING QUESTION OF LAW :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEPRECIATION ON THE ASSETS THE COST OF WHICH HAS BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S 11 IN THE PAST YEARS? ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 7 OF 10 9.2 FOLLOWING ARE THE FACTS OF THE CASE CONSIDERED BY THE HON'BLE BOMBAY HIGH COURT:- THE ASSESSEE WAS A TRUST REGISTERED UNDER THE BOMBA Y PUBLIC TRUST ACT AND SECTION 12A OF THE I T ACT. THE OBJEC T OF THE ASSESSEE WAS CHARITABLE IN NATURE. THE INCOME OF TH E ASSESSEE WAS EXEMPT U/S 11 OF THE I T ACT. THE ASSESSEE HAD CLAIMED DEPRECIATION WHICH WAS REJECTED BY THE ASSESSING OF FICER ON THE GROUND THAT CAPITAL EXPENDITURE INCURRED DURING THE ACCOUNTING YEAR WAS ALLOWED AS A DEDUCTION FROM THE INCOME OF THE ASSESSEE. FURTHER THE ASSESSEE HAD CLAIMED DEPRECIATION ON FURNITURE AND FIXTURES TO THE TUNE OF RS.49 453/- AT 10% OF THE WRITTEN DOWN VALUE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAID ASSETS HAD BEEN RECEIVED BY THE ASSESSEE ON TRANSFER FROM NATIONAL INSTITUTE OF BANK MANAGEMENT. THAT INSTITUTE WAS A CHARITABLE TRUST. ITS INCOME WAS ALSO EXEMPT U/S 11 OF THE I T ACT. THE ASSESSIN G OFFICER DID NOT ALLOW DEPRECIATION ON FIXTURES AND FURNITURE ON THE GROUND THAT FULL DEDUCTION HAD BEEN ALLOWED IN RESPECT OF CAPITAL COST OF FURNITURE AND FIXTURES AND IF THE DEPRECIATION WAS ALLOWED AS CLAIMED BY THE ASSESSEE IT WOULD RESULT IN DOUBLE DEDUCTION. THE ASSESSEE CARRIED THE MATTER IN APPEAL AND THE A PPELLATE AUTHORITY DECIDED THE MATTER IN FAVOUR OF ASSESSEE. THE DECISION OF THE APPELLATE AUTHORITY WAS CONFIRMED BY THE TRI BUNAL. 9.3 ON REFERENCE THE BOMBAY HIGH COURT HELD 'THAT THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING THE ASSESSIN G OFFICER TO ALLOW DEPRECIATION ON THE ASSETS THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME UNDER SECTIO N 11 IN THE PAST YEARS'. 9.4 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT V SOCIETY OF THE SISTERS OF ST. ANNE 146 ITR 26 HAD CA TEGORICALLY HELD THAT THE AMOUNT OF DEPRECIATION DEBITED TO THE ACCOUNTS OF A CHARITABLE INSTITUTION IS TO BE DEDUCTED TO ARRIV E AT THE AVAILABLE INCOME FOR THE PURPOSE OF APPLICATION TO CHARITABLE AND RELIGIOUS PURPOSES. THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT HAS BEEN FOLLOWED BY THE HON'BLE ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 8 OF 10 MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V RAIP UR PALLOTTINE SOCIETY 180 ITR 579 AND BY THE HON'BLE M ADRAS HIGH COURT IN THE CASE OF GONVINDU NAICKER ESTATE V ASSI STANT DIRECTOR OF INCOME TAX AND ANOTHER 248 ITR 368. FURT HER IN THE CASE OF CIT V SHETH MANILAL RANCHHODDAS VISHRAM BHAVAN TRUST 198 IITR 598 IT WAS HELD BY THE HON'BLE GUJA RAT HIGH COURT THAT DEPRECIATION SHOULD BE ALLOWED WHILE COM PUTING THE INCOME UNDER SECTION 11(I)(A) OF THE ACT. 9.5 THE JUDGMENT OF THE HON'BLE APEX COURT RELIED O N BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) IS DISTINGUISHA BLE. THE ISSUE BEFORE THE HON'BLE SUPREME COURT WAS THAT WHE THER BOTH DEPRECIATION UNDER SECTION 32 AND CAPITAL EXPENDITU RE ON SCIENTIFIC RESEARCH UNDER SECTION 35(1)(IV) CAN BE CLAIMED AS DEDUCTION. IN THE CASE BEFORE THE HON'BLE SUPREME C OURT BOTH DEDUCTIONS WERE UNDER THE HEAD 'BUSINESS INCOME' WH EREAS IN THE CASE OF A CHARITABLE TRUST DEPRECIATION IS A D EDUCTION TO ARRIVE AT INCOME AND CAPITAL EXPENDITURE IS APPLICA TION OF SUCH INCOME. THE AFORESAID JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF ESCORTS LIMITED (SUPRA) CANNOT BE APPLI ED TO DETERMINE TAXABLE INCOME FOR A TRUST AS THE PROVIS IONS TO DETERMINE TAXABLE INCOME OF THE TRUST ARE TOTALLY D IFFERENT AND NORMAL PROVISIONS FOR COMPUTING INCOME UNDER THE FI VE HEADS CANNOT BE APPLIED. THOUGH THE COCHIN BENCH OF THE T RIBUNAL IS RENDERED ON IDENTICAL ISSUE WE WOULD PREFER TO FOL LOW THE JUDGMENTS OF VARIOUS HIGH COURTS (CITED SUPRA) IN PREFERENCE TO THE ORDER OF THE COCHIN BENCH TRIBUNAL. THEREFOR E WE HOLD THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEPRECIATION AND IT IS TO BE ALLOWED AS DEDUCTION IN ORDER TO ARRIVE AT THE INCO ME OF THE ASSESSEE-TRUST. IT IS ORDERED ACCORDINGLY. 5.1 A SIMILAR VIEW HAS BEEN HELD IN THE CASE OF DY . DIRECTOR OF INCOME TAX (EXEMPTION) VS. M/S CUTCHI MEMON UNION I N ITA NO.878/BANG/2012 (SUPRA). THE REASONING OF THE TRIB UNAL IN THE ABOVE SAID CASE READS AS FOLLOWS: ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 9 OF 10 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IF D EPRECIATION IS NOT ALLOWED AS A NECESSARY DEDUCTION FOR COMPUTI NG INCOME OF CHARITABLE INSTITUTIONS THEN THERE IS NO WAY TO PRESERVE THE CORPUS OF THE TRUST FOR DERIVING THE INCOME AS IT I S NOTHING BUT A DECREASE IN THE VALUE OF PROPERTY THROUGH WEAR DET ERIORATION OR OBSOLESCENCE. SINCE INCOME FOR THE PURPOSES OF S ECTION 11(1) HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IT WAS SO HELD BY THE HON'BL E KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SOCIETY OF SISTERS OF ST. ANNE 146 ITR 28 (KAR). IT WAS HELD IN CIT VS. TINY TOTS EDUCATION SOCIETY (2011) 330 ITR 21 (P&H) FOLLOWI NG CIT VS. MARKET COMMITTEE PIPLI (2011) 330 ITR 16 (P&H) : ( 2011) 238 CTR (P&H) 103 THAT DEPRECIATION CAN BE CLAIMED BY A CHARITABLE INSTITUTION IN DETERMINING PERCENTAGE OF FUNDS APPLIED FOR THE PURPOSE OF CHARITABLE OBJECTS. CLAI M FOR DEPRECIATION WILL NOT AMOUNT TO DOUBLE BENEFIT. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LT D. 199 ITR 43 (SC) HAVE BEEN REFERRED TO AND DISTINGUISHED BY THE HON'BLE COURT IN THE AFORESAID DECISIONS. 21. THE ISSUE RAISED BY THE REVENUE IN THE GROUND O F APPEAL IS THUS NO LONGER RES INTEGRA AND HAS BEEN DECIDED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. M ARKET COMMITTEE PIPLI 330 ITR 16 (P&H). THE HON'BLE PUN JAB & HARYANA HIGH COURT AFTER CONSIDERING SEVERAL DECISI ONS ON THAT ISSUE AND ALSO THE DECISION OF THE HON'BLE SUP REME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) CAME TO THE CONCL USION THAT DEPRECIATION IS ALLOWABLE ON CAPITAL ASSETS ON THE INCOME OF THE CHARITABLE TRUST FOR DETERMINING THE QUANTUM OF FUN DS WHICH HAVE TO BE APPLIED FOR THE PURPOSE OF TRUSTS IN TER MS OF SECTION 11 OF THE ACT. THE HON'BLE PUNJAB & HARYANA HIGH CO URT MADE A REFERENCE TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ESCORTS LTD. (SUPRA) AND OBSERVED THAT THE HON'BLE SUPREME COURT WAS DEALING WITH A CASE OF TWO DEDUCT IONS UNDER DIFFERENT PROVISIONS OF THE ACT ONE U/S. 32 FOR DEPRECIATION AND THE OTHER ON ACCOUNT OF EXPENDITUR E OF A CAPITAL NATURE INCURRED ON SCIENTIFIC RESEARCH U/S. 35(1)(IV) OF THE ACT. THE HON'BLE COURT THEREAFTER HELD THAT A T RUST CLAIMING DEPRECIATION CANNOT BE EQUATED WITH A CLAIM FOR DOU BLE DEDUCTION. THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF THE HONB'LE KAR NATAKA HIGH COURT IN THE CASE OF CIT V. SOCIETY OF SISTERS OF A NNE 146 ITR 28 (KAR) WHEREIN IT WAS HELD THAT U/S. 11(1) OF THE A CT INCOME HAS TO BE COMPUTED IN NORMAL COMMERCIAL MANNER AND THE AMOUNT OF DEPRECIATION DEBITED IN THE BOOKS IS DEDUCTIBLE WHILE COMPUTING SUCH INCOME. IN VIEW OF THE AFORESAID DEC ISION ON THE ISSUE WE ARE OF THE VIEW THAT THE ORDER OF THE CIT(A) ON THE ABOVE ISSUE DOES NOT CALL FOR ANY INTERFERENCE. ITA NO.37 OF 2013 KARNATAKA STATE MUSLIM FEDERATION BANGALORE PAGE 10 OF 10 6. SINCE THE FACTS IN THE INSTANT CASE ARE IDENTICA L TO THE FACTS CONSIDERED BY THE BANGALORE BENCH OF THE TRIBUNAL I N THE CASE OF KARNATAKA REDDY JANASANGHA IN ITA NO.220/BANG/2011 AND IN THE CASE OF M/S CUTCHI MEMON UNION IN ITA NO.878/BA NG/2012 WE FOLLOW THE COORDINATE BENCH AND DECIDE THE MATTE R IN FAVOUR OF THE ASSESSEE. THEREFORE THE ORDER PASSED U/S 26 3 BY THE DIT (E) IS QUASHED. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH OCTOBER 2013. SD/- SD/- (N. BARTHVAJASANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER BANGALORE DATED 9 TH OCTOBER 2013. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES BANGALORE