Chaman Vatika Educational Society v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 2236 (Chd-Trib) : (2013) 053 (II) ITCL 0560 : (2013) 145 ITD 0105 : (2013) 156 TTJ 0543 : (2013) 091 DTR 0387 Income Tax Act, 1961 --DepreciationAllowability Assets obtained by application of income, exempted under section 11--Assessee-society had claimed depreciation towards application of income for charitable purposes. Revenue had disallowed the claim of depreciation on the ground that the assets so obtained were the result of total exemption/deduction, and if depreciation was also allowed on these assets, it would definitely amount to double deduction. *Held:* While considering the income of the trust, the 'income' is not considered under any of the five heads prescribed in section14. Therefore, the provisions of section 145 could not apply as it applied to sections 28 and 56 and not to sections 11 and 12. Under sections 11 and 12 capital expenditure was the result of application of income, which was not allowable while dealing with business income where only business expenses were allowable. Sections 11, 12 and 13 of the Act were a complete code in itself, where no statutory deduction. In section 2(45) and section 14 the term 'total income' is used unlike 'income' used in sections 11 and 12. Thus, there is a schematic and conceptual difference and distinction between Chapter III and Chapter IV. Therefore, the claim of depreciation could not be disallowed on the premise that it would amount to double deduction. Income Tax Act, 1961 Section 32(1)(ii) Income Tax Act, 1961 Section 11(1)(a) Income Tax Act, 1961 --IncomeAccrual Interest accrued on FDRs and TDS receivable--Assessee had been regularly following the system of declaring interest when actually realized during the year as income and that yearly accrued interest on FDRs was calculated and was credited in the P&L a/c but while filing the return of income, an adjustment of actual interest realized during the year was made and total taxable income was computed accordingly. Assessing officer, however, noted that assessee had been following mercantile system of accounting, therefore, he added interest accrued on FDRs and TDS receivable in the assessable income filed by the assessee. *Held:* In earlier assessment years, assessing officer had accepted this method even while framing assessment order under section 143(3). The Revenue has not denied the claim of the assessee that it had been following a particular method of accounting for the interest on FDRs and TDS. Therefore, consistency had to be maintained and interest accrued on FDRs and TDS receivable was to be considered in the same manner as considered earlier. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2236 (Chd-Trib) : (2013) 053 (II) ITCL 0560 : (2013) 145 ITD 0105 : (2013) 156 TTJ 0543 : (2013) 091 DTR 0387

Income Tax Act, 1961

--DepreciationAllowability Assets obtained by application of income, exempted under section 11--Assessee-society had claimed depreciation towards application of income for charitable purposes. Revenue had disallowed the claim of depreciation on the ground that the assets so obtained were the result of total exemption/deduction, and if depreciation was also allowed on these assets, it would definitely amount to double deduction. Held: While considering the income of the trust, the 'income' is not considered under any of the five heads prescribed in section14. Therefore, the provisions of section 145 could not apply as it applied to sections 28 and 56 and not to sections 11 and 12. Under sections 11 and 12 capital expenditure was the result of application of income, which was not allowable while dealing with business income where only business expenses were allowable. Sections 11, 12 and 13 of the Act were a complete code in itself, where no statutory deduction. In section 2(45) and section 14 the term 'total income' is used unlike 'income' used in sections 11 and 12. Thus, there is a schematic and conceptual difference and distinction between Chapter III and Chapter IV. Therefore, the claim of depreciation could not be disallowed on the premise that it would amount to double deduction.

Income Tax Act, 1961 Section 32(1)(ii)

Income Tax Act, 1961 Section 11(1)(a)

Income Tax Act, 1961

--IncomeAccrual Interest accrued on FDRs and TDS receivable--Assessee had been regularly following the system of declaring interest when actually realized during the year as income and that yearly accrued interest on FDRs was calculated and was credited in the P&L a/c but while filing the return of income, an adjustment of actual interest realized during the year was made and total taxable income was computed accordingly. Assessing officer, however, noted that assessee had been following mercantile system of accounting, therefore, he added interest accrued on FDRs and TDS receivable in the assessable income filed by the assessee. Held: In earlier assessment years, assessing officer had accepted this method even while framing assessment order under section 143(3). The Revenue has not denied the claim of the assessee that it had been following a particular method of accounting for the interest on FDRs and TDS. Therefore, consistency had to be maintained and interest accrued on FDRs and TDS receivable was to be considered in the same manner as considered earlier.