IN INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA No.1995/Mds/2013 & C.O. No.194/Mds/2013 (in I.T.A. No.1995/Mds/2013) Assessment Year : 2009-10 Income Tax Officer, M/s Ranganathan Rajeswari Company Ward I, 1st floor, v. Charitable Trust, 63, Race Course, No.54-A, Lakshmanan Nagar, Coimbatore 641 018. Gandhipuram, Coimbatore 641 012. PAN : PAN : AABTR 2441 P (Appellant) (Respondent & Cross-objector) Appellant by : Shri A.B. Maurya, CIT Respondent by : Shri K.R. Ramasamy, FCA Date of Hearing : 30.08.2016 Date of Pronouncement : 07.10.2016 O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: This appeal of Revenue is directed against order of Commissioner of Income Tax (Appeals) I, Coimbatore, dated 04.09.2013 and pertaining to assessment year 2009-10. 2 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 assessee has filed cross-objection against same order of CIT(Appeals). Hence, we heard both appeal and cross- objection together and disposing of same by this common order. 2. Shri A.B. Maurya, Ld. Departmental Representative, submitted that assessee - charitable institution was registered under Section 12A of Income-tax Act, 1961 (in short 'the Act'). During year under consideration, according to Ld. D.R., assessee disclosed gross receipt of `3,79,46,888/-. assessee claimed before Assessing Officer that sum of `8,25,99,229/- was applied for charitable purpose. Out of this amount of `8,25,99,229/-, assessee claimed `72,12,041/- towards depreciation on value of asset on which assessee claimed exemption under Section 11 of Act. Assessing Officer found that depreciation was claimed by assessee on asset, which was allowed earlier as application of income for charitable purpose. Therefore, Assessing Officer found that claim of depreciation in respect of asset on which expenditure was already allowed as application of income amounts to double deduction. Accordingly, by placing reliance on judgment of Apex Court in Escorts Ltd. v Union of India (199 ITR 3 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 43), Assessing Officer disallowed claim of assessee. On appeal by assessee CIT(Appeals), however, allowed claim of assessee. According to Ld. D.R., assessee is not carrying on any business activity. Section 32 of Act is applicable only in respect of computing income from business and profession. activity of assessee is charitable nature. Therefore, according to Ld. D.R., exemption claimed by assessee has to be considered under Section 11 of Act. Hence, provisions applicable for computing income from business and profession cannot be applied for computing income of charitable institution. According to Ld. D.R., matter may be different if assessee was not claiming exemption under Section 11 of Act. Ld. D.R. placed his reliance on order of this Tribunal in Anjuman-E-Himayath-E-Islam v. ADIT in I.T.A. No.2271/Mds/2014 dated 02.06.2015. 3. On contrary, Shri K.R. Ramasamy, Ld. representative for assessee, submitted that assessee is admittedly charitable institution, which claimed depreciation on capital asset. Ld. representative clarified that amount invested in capital asset was claimed as application of income under 4 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 Section 11 of Act. However, capital asset acquired by assessee on application of its income was used for carrying on charitable object of trust, therefore, same is eligible for depreciation. On enquiry from Bench, Ld. representative clarified that assessee is not carrying on any business activity. 4. We have considered rival submissions on either side and perused relevant material available on record. assessee is admittedly charitable institution registered as such under Section 12A of Act. assessee acquired capital asset by utilizing income of trust. In respect of investments made by assessee on capital asset, assessee claims same as application of income under Section 11 of Act. It is also admitted fact that claim made by assessee on investments made on capital asset was allowed as application of income. Now assessee claims depreciation on capital asset, which was acquired by assessee by income which was allowed as application of income under Section 11 of Act. question arises for consideration is when cost of asset was allowed as application of income under Section 11 of Act, whether assessee is entitled for depreciation on very same 5 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 asset? This Tribunal examined this issue in Anjuman-E- Himayath-E-Islam (supra) and found that assessee is not eligible for depreciation under Section 32 of Act. In fact, this Tribunal placed its reliance on judgment of Kerala High Court in Lissie Medical Institution v. CIT (2012) 348 ITR 344. 5. We have carefully gone through scheme of Income-tax Act, 1961. Chapter III of Act provides for method of computation of income which do not form part of total income. Section 11 of Act, which falls in Chapter III of Act, clearly says that income derived from property held under trust, for charitable or religious purpose, shall not be included in total income to extent to which income is applied to such purposes in India. assessee, in fact, applied income of assessee, which was derived from property held under trust, for acquiring capital asset. Therefore, income to extent to which it was applied for acquiring capital asset, was excluded already from total income of assessee. Section 32 of Act, which provides for depreciation, falls under Chapter IV of Act which provides for computation of business income. Admittedly, assessee is not carrying on any business activity. If assessee claims that it was 6 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 carrying on business activity, then in view of proviso to Section 2(15) of Act, it has to loose its character as charitable institution. So long as assessee claims that it is charitable institution, provisions of Chapter IV of Act which provides for computation of business income, cannot be applied to assessee. This Tribunal is of considered opinion that since assessee is carrying on charitable activity and not business, provisions of Section 32 of Act which provides for depreciation, is not applicable to assessee-trust. 6. Moreover, provisions of Section 32 of Act, which falls under Chapter IV of Act, cannot override Section 11 of Act which falls under Chapter III of Act. When Parliament in their wisdom provides method of computation in respect of different kind of assessees with reference to their activity, this Tribunal is of considered opinion that charitable institution cannot claim depreciation under Section 32 of Act. When individual assessee is computing its taxable income, he cannot claim depreciation under Section 32 of Act in respect of asset, which was not used in business. In case before us, admittedly, asset on which depreciation was claimed under 7 I.T.A. No.1995/Mds/13 C.O. No.194/Mds/13 Section 32 of Act, is not used for any business activity at all. Therefore, there is no question of allowing any depreciation to assessee under Section 32 of Act. similar view was taken by this Tribunal in Anjuman-E-Himayath-E-Islam (supra). In view of above, this Tribunal is unable to uphold order of lower authority. Accordingly, order of lower authority is set aside and that of Assessing Officer is restored. 7. In result, appeal filed by Revenue is allowed and cross-objection filed by assessee is dismissed. Order pronounced on 7th October, 2016 at Chennai. sd/- sd/- (A. Mohan Alankamony) (N.R.S. Ganesan) Accountant Member Judicial Member Chennai, th Dated, 7 October, 2016. Kri. Copy to: 1. Appellant 2. Respondent 3. CIT(A)-I, Coimbatore 4. CIT-I, Coimbatore 5. DR 6. GF. Income Tax Officer, Company Ward I, Coimbatore v. M/s Ranganathan Rajeswari Charitable Trust