Along With Notice Issued By The First Respondentunder Section 148 Of The Act Dated 23.03.2016 v. Rajasthan,Gujarathi Charitable Foundation”, (2018) 89 Taxmann.com 127(Sc)/(2018) 300 Ctr 1 (Sc). The Learned Hon'ble Supreme Courtconsidered The Identical Issue

IN THE HIGH COURT OF JUDICATURE AT MADRAS M/s. Vasavi Vidhya Trust,Represented by its SecretaryMr. J. Rajendra Prasad,Vysya College Buildings,Masinaickanpatty, Ramakrishnapuram, Salem – 630 103. ... Petitioner Prayer: Petition filed under Article 226 of the Constitution ofIndia to issue a Writ of Certiorari, call for the records on thefile of the First Respondent and quash the impugned proceedingsin F.No. 74/AAATV1257G/ITO (E)/SLM/2016-2017 dated 17.08.2016along with notice issued by the First Respondent under Section148 of the Act dated 23.03.2016. The Petitioner has filed this writ petition, seekingfor issuance of a Writ of Certiorari, to call for the records onthe file of the First Respondent and quash the impugnedproceedings in F.No. 74/AAATV1257G/ITO (E)/SLM/2016-2017 dated 1/5 https://hcservices.ecourts.gov.in/hcservices/ 17.08.2016 along with notice issued by the First Respondentunder Section 148 of the Act dated 23.03.2016. 2. The learned counsel for the Petitioner states that theissue is covered by the decision of the Hon'ble Supreme Courtrendered in “Commissioner of Income Tax-III, Pune Vs Rajasthan,Gujarathi Charitable Foundation”, (2018) 89 taxmann.com 127(SC)/(2018) 300 CTR 1 (SC). The learned Hon'ble Supreme Courtconsidered the identical issue as in this writ petition. 3. The order of the Hon'ble Supreme Court is extractedbelow: “1. .....From the judgments of the High Courts,it can be discerned that the High Courts haveprimarily followed the judgment of the Bombay HighCourt in 'Commissioner of Income Tax v. Institute ofBanking Personnel Selection (IBPS)' [(2003) 131Taxman 386 (Bombay)]. In the said judgment, thecontention of the Department predicated on doublebenefit was turned down in the following manner: 3. As stated above, the first questionwhich requires consideration by this Court is:whether depreciation was allowable on theassets, the cost of which has been fullyallowed as application of income under section11 in the past years? In the case of CIT v.Munisuvrat Jain 1994 Tax Law Reporter, 1084the facts were as follows. The assessee was aCharitable Trust. It was registered as aPublic Charitable Trust. It was alsoregistered with the Commissioner of IncomeTax, Pune. The assessee derived income fromthe temple property which was a Trustproperty. During the course of assessmentproceedings for assessment years 1977-78,1978-79 and 1979-80, the assessee claimeddepreciation on the value of the building @2½%and they also claimed depreciation onfurniture @ 5%. The question which arosebefore the Court for determination was :whether depreciation could be denied to theassessee, as expenditure on acquisition of theassets had been treated as application ofincome in the year of acquisition? It was heldby the Bombay High Court that section 11 ofthe Income Tax Act makes provision in respectof C.A. No. 7186/ 2014 etc. computation of 2/5 3/5 2/5 3/5 income of the Trust from the property held forcharitable or religious purposes and it alsoprovides for application and accumulation ofincome. On the other hand, section 28 of theIncome Tax Act deals with chargeability ofincome from profits and gains of business andsection 29 provides that income from profitsand gains of business ahll be computed inaccordance with section 30 to section 43C.That, section 32(1) of the Act provides fordepreciation in respect of building, plant andmachinery owned by the assessee and used forbusiness purposes. It further provides fordeduction subject to section 34. In thatmatter also, a similar argument, as in thepresent case, was advanced on behalf of therevenue, namely, that depreciation can beallowed as deduction only under section 32 ofthe Income Tax Act and not under generalprinciples. The Court rejected this argument.It was held that normal depreciation can beconsidered as a legitimate deduction incomputing the real income of the assessee ongeneral principles or under section 11(1)(a)of the Income Tax Act. The Court rejected theargument on behalf of the revenue that section32of the Income Tax Act was the only sectiongranting benefit of deduction on account ofdepreciation. It was held that income of aCharitable Trust derived form building, plantand machinery and furniture was liable to becomputed in normal commercial manner althoughthe Trust may not be carrying on any businessand the assets in respect whereof depreciationis claimed may not be business assets. In allsuch cases, section 32 of the Income Tax Actproviding for depreciation for computation ofincome derived from business or profession isnot applicable. However, the income of theTrust is required to be computed under section11 on commercial principles after providingfor allowance for normal depreciation anddeduction thereof from gross income of theTrust. In view of the aforesatated judgment ofthe Bombay High Curt, we answer question No. 1in the affirmative i.e., in favour of theassessee and against the Department. 4. Question No. 2 herein is identical to thequestion which was raised before the BombayHigh Court in the case of Director of Income-tax (Exemption) v. Framjee Cawasjee Institute[1993] 109 CTR 463. In that case, the factswere as follows: The assessee was the Trust.It derived its income from depreciable assets.The assessee took into account depreciation onthose assets in computing the income of theTrust. The ITO held that depreciation couldnot be taken into account because, fullcapital expenditure had C.A. No. 7186/ 2014etc. been allowed in the year of acquisitionof the assets. The assessee went in appealbefore the Assistant Appellate Commissioner.The Appeal was rejected. The Tribunal,however, took the view that when the ITOstated that full expenditure had been allowedin the year of acquisition of the assets, whathe really meant was that the amount spent onacquiring those assets had been treated as'application of income' of the Trust in theyear in which the income was spent inacquiring those assets. This did not mean thatin computing income from those assets insubsequent years, depreciation in respect ofthose assets cannot be taken into account.This view of the Tribunal has been confirmedby the Bombay High Court in the abovejudgment. Hence, Question No. 2 is covered bythe decision of the Bombay High Court in theabove Judgment. Consequently, Question No. 2is answered in the Affirmative i.e., in favourof the assessee and against the Department.” 2. After hearing learned counsel for theparties, we are of the opinion that the aforesaidview taken by the Bombay High Court correctly statesthe principles of law and there is no need tointerfere with the same. 2. After hearing learned counsel for theparties, we are of the opinion that the aforesaidview taken by the Bombay High Court correctly statesthe principles of law and there is no need tointerfere with the same. 3. It may be mentioned that most of the HighCourts have taken the aforesaid view with onlyexception thereto by the High Court of Kerala whichhas taken a contrary view in 'Lissie MedicalInstitutions v. Commissioner of Income Tax'. 4. It may also be mentioned at this stage thatthe legislature, realising that there was no specific 4/5 https://hcservices.ecourts.gov.in/hcservices/ provision in this behalf in the Income Tax Act, hasmade amendment in Section 11(6) of the Act videFinance Act No. 2/2014 which became effective fromthe Assessment Year 2015-2016. The Delhi High Courthas taken the view and rightly so, that the saidamendment is prospective in nature. 4. The learned counsel for the Respondents fairly concedesthat the issue is now squarely covered by the above decision ofthe Hon'ble Supreme Court. In view of the same, this WritPetition stands allowed. No costs. Consequently, connectedwrit miscellaneous petition is closed. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To1. Income Tax Officer, Exemptions Ward No.3, Gandhi Road, Salem – 636 007. 2. Commissioner of Income Tax (Exemptions) 121, Mahatma Gandhi Road, Chennai – 600 034.+1cc to Mr.N.V.Balaji, Advocate sr.1840+1cc to Ms. Hema Muralikrishnan, Advocate sr.1664 5/5 https://hcservices.ecourts.gov.in/hcservices/