1 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved on : 23.11.2017 Pronounced on:08.08.2017 Coram Hon'ble Mr.Justice NOOTY. RAMAMOHANA RAO AND Hon'ble Dr. Justice ANITA SUMANTH TCA. Nos.844, 845, 848, 849, 1079 of 2010, TCA.Nos. 99 to 102, 118, 120, 125, 475 to 478 of 2011, TCA.Nos. 457 of 2012 & TCA.No.650 of 2014, TCA.Nos.498, 500, 509, 511, 530, 696, 727, 736, 739, 760, 993, 997, 1099 of 2015 & (TCA.Nos.949 of 2015 and 771 of 2016-Assessee's appeal) Tax Case (Appeal) No.844 of 2010: Director of Income Tax, Exemption-III, Chennai-34. Appellant Versus M/s.Medical Trust of Seventh Day Adventists, AA/148, Third Avenue, Anna Nagar, Chennai-40. Respondent Prayer: Tax Case Appeal filed under Section 260-A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal B Bench, Chennai dated 4.3.2010 in ITA.No.639/Mds/2009. http://www.judis.nic.in 2 TCA.Nos.844, 845, 848, 849 and 1079 of 2010 and TCA.Nos.120, 125 and 475 to 478 of 2011, TCA.457 of 2012 and TCA.No.650 of 2014, TCA.No.509, 739 of 2015 For appellant: Mr.J.Narayanasamy For Respondent: Mr.S.Sridhar TCA.Nos.99 to 102 of 2011: For appellant: Mr.J. Narayanasamy For respondent: M/s.Pushya Sitaraman, Senior Counsel TCA.Nos.118 of 2011: For appellant : Mr. J.Narayanasamy For respondent: Mr.N.Devanathan for Mr.S.Sridhar TCA.Nos.498, 993 of 2015: For appellant: Mr.J.Narayanasamy For respondent: Mr.R. Kumar TCA.No.500 of 2015: For appellant : Mr.J.Narayanasamy For respondent: Mr.J.Balachander Assisted by S.Indumathi. TCA.No.511, 1099 of 2015: For appellant: Mr.J.Narayanasamy For respondent: Mr.R.Vijayaraghavan for M/s.Subbaraya Iyer TCA.No.530 of 2015: For appellant: Mr.J.Narayanasamy For respondent: batta due TCA.No.696 of 2015: For appellant: Mr.J.Narayanasamy For respondent: served, name printed; TCA.No.727 of 2015: Forappellant: Mr.J.Narayanasamy For respondent Mr.Subbaraya Aiyar TCA.No.736 of 2015 For appellant: Mr.J.Narayanasamy Respondent: served, name printed. http://www.judis.nic.in 3 TCA.No.760 of 2015: For appellant:Mr.J.Narayanasamy For respondent: Mr.N.V.Balaji TCA.No.997 of 2015 For appellant: Mr.J.Narayanasamy TCA.No.949 of 2015 For appellant: Mrs.Pushya Sitaraman,Senior counsel For J.Sree Vidya For respondent: Mr.J.Narayanasamy TCA.No.771 of 2016 For appellant: Mr.R.Senniappan For M/s.H.Nazirudeen For respondent: Mr. J. Narayanasamy JUDGMENT (Judgment of this Court was delivered by ANITA SUMANTH, J.) These departmental appeals challenge orders of Income Tax Appellate Tribunal in respect of various assessment years. 2. In so far as issue is common across appeals, we set out below question of law in T.C.A.No.475 to 478 of 2011 as representative of issue involved in all appeals:- (a) Whether on facts and circumstances of case, Tribunal was right in allowing double deduction without considering principles laid down in 199 ITR 43(SC)? 3. issue before us relates to grant of depreciation to entity seeking exemption in terms of section 11 of Income Tax Act. (in short Act ) which deals http://www.judis.nic.in 4 with assessment of Income from property held for charitable or religious purposes. relevant parts of Section 11 read as follows:- 1. (1) Subject to provisions of sections 60 to 63, following income shall not be included in total income of previous year of person in receipt of income (a) income derived from property held under trust wholly for charitable or religious purposes, to extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to extent to which income so accumulated or set apart is not in excess of fifteen per cent of income from such property; ....... ....... (4) For purposes of this section "property held under trust" includes business undertaking so held, and where claim is made that income of any such undertaking shall not be included in total income of persons in receipt thereof, Assessing Officer shall have power to determine income of such undertaking in accordance with provisions of this Act relating to assessment; and where any income so determined is in excess of income as shown in accounts of undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of trust or institution, being profits and gains of business, unless business is incidental to attainment of objectives of trust or, as case may be, institution, and separate books http://www.judis.nic.in 5 of account are maintained by such trust or institution in respect of such business. (5) forms and modes of investing or depositing money referred to in clause (b) of sub-section (2) shall be following, namely : (i)...... (ii)...... ....... (6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as application of income under this section in same or any other previous year. 4. various sub-sections of section 11 stipulate methodology for computing income applied to charitable and religious purposes and 15% that may be accumulated or set apart. section also envisages inclusion of business undertaking in property held under trust and determination of income therefrom. Sub Section 5 sets out acceptable forms and modes of investment for purposes of proper application. Sub-section 6, inserted by Finance II Act, 2014 with effect from 1.4.2015, states that income to be determined for purposes of application or accumulation shall not include deduction or allowance by way of depreciation or otherwise in respect of any asset, http://www.judis.nic.in 6 acquisition of which has been claimed as application of income under provisions of section 11 in same or any other previous year. application of this sub-section retrospectively in regard to assessment years prior to 01.04.2015 is subject matter of challenge in TCA.No.949 of 2015 to which we shall advert presently. 5. Section 11 was inserted in Income Tax Act 1961 providing for exemption in respect of income from property held under trust wholly for charitable and religious purposes. Charitable purposes is defined in terms of section 2(15) of Act to mean relief of poor, education, medical relief and advancement of any other object of general public utility. clause has been modified over years such that in its present form, it includes within its ambit yoga and preservation of environment, monuments or places or objects of artistic or historic interest. object of Section 11 is thus laudable and seeks to extend benefit to entities engaging in activity of specified nature. In present batch of appeals there is no dispute in this regard. 6. We have heard Mr.J.Narayanaswamy appearing on behalf of Revenue and several counsels appearing on behalf of assesses and set out in brief submissions advanced. 7. Mr. J.Narayanaswamy would contend that provisions of section 32 granting depreciation have not been made specifically applicable to section 11. According to him, provisions of Section 11 extend benefit to assessee by http://www.judis.nic.in 7 way of exemption and granting depreciation in addition would amount to double benefit that has to be specifically conferred. He would rely on judgment of Supreme Court in case of Escorts Limited and another Vs. Union of India and others (SC) (1999 ITR 43) which deals with grant of depreciation to assessee also claiming weighted deduction under section 35(1) of Act in respect of expenditure incurred on scientific research. 8. provision, as it originally stood, placed no restriction on claim of weighted deduction simultaneous with claim of depreciation. While this is so, it was felt that such double claim was not intention of Legislature and provisions of Section 35(2) (iv) were amended to provide that where deduction was allowed for any previous year in terms of Section 35(1), no depreciation was liable to be allowed for same or any other previous year in respect of that asset. 10.The amendment was made to operate retrospectively with effect from 1.4.1962 and Supreme Court, while upholding retrospective application of provision states thus:- We think that all misconception will vanish and all provisions will fall into place, if we bear in mind fundamental, though unwritten, axiom that no Legislature could have at all intended double deduction in regard to same business outgoing; and if it is intended it will be clearly expressed. In other words, in absence of clear statutory indication to contrary, statute should not be read so as to permit assessee two deductions http://www.judis.nic.in 8 both under s.10(2)(vi) and s.10(2)(xiv) under 1922 Act or under s.32(1)(ii) and 35(2)(iv) of 1922 Act qua same expenditure. ...... ..... 15.For reasons discussed above, we are of view that, even before 1980-amendment, Act did not permit deduction for depreciation in respect of cost of capital asset acquired for purposes of scientific research to extent such cost has been written off under S.10(2) (xiv)/35 (1) & (2). Prior to 1968, such assets qualified for allowance of one-fifth of cost of asset in five previous years starting with that of its acquisition and during these years assessee could not get any depreciation in relation thereto. In respect of assets acquired in previous year relevant to assessment year 1968-69 and thereafter, their cost was written off in previous year of acquisition and no depreciation could be allowed in that year. This is clear from statute. Equally, it is not envisaged, and indeed, it would be meaningless to say, that depreciation could be allowed on them thereafter with further absurdity that it could be allowed starting with original cost of asset despite its user for scientific research and allowances made under 'scientific research' clause. In our view, there was no difficulty at all in interpretation of provisions. mere fact that baseless claim was raised by some over-enthusiastic assessees who sought double allowance or that such claim may perhaps have been accepted by some authorities is not sufficient to http://www.judis.nic.in 9 attribute any ambiguity or doubt as to true scope of provisions as they stood earlier. 10. Reliance was placed by Mr. Narayanaswamy on paragraph 7 of judgment that reads as follows:- I find it difficult to agree with reasoning of assessees. Acceding to it would amount to placing unreasonable interpretation upon relevant provisions and to negating intention of Parliament. I find it difficult to agree that Indian Legislature - as also Parliament made conscious departure from English Amendment with idea of providing additional benefit to induce Indian assessees to invest more in scientific research. I find argument rather convoluted. If intention of Legislature/Parliament was to provide more than 100% deduction, they would have said so, as they have done in cases where they provided for what is called weighted deduction'. (For example, See section 35(B) of 1961 Act). double deduction cannot be matter of inference, it must be provided for in clear and express language regard having to its unusual nature and its serious impact on Revenues of State. ........ ........ That Parliament never intended to provide for double deduction is also opinion of Direct Tax Law Committee. In its interim report, (December, 1977) Committee (popularly known as 'Choksi Committee') had this to say in para 3.29 of its report: http://www.judis.nic.in 10 "3.29.- Our attention has also been drawn to certain anomalous situations in matter of allowance of depreciation. In certain cases where full deduction has been allowed in relation to capital asset under other sections (as for example, section 35 which permits deduction in respect of capital expenditure for scientific research), tax payers have contended that such deduction is independent of allowance by way of depreciation. In our view, intention of legislature is not to allow double deduction (of 20%) in respect of same asset, once under section 35 and, again, by way of depreciation under section 35. If and to extent that there is any anomaly or contrary view possible on construction of section 35, we recommend that law should be clarified to provide that no depreciation under section 35 shall be allowable in respect of capital expenditure for scientific research qualifying for deduction under section 35. 11. He would argue that that granting depreciation simultaneous with exemption under section 11 would result in relief over and above 100 % of income which was not permissible under statute. 12. Our attention was drawn to decision of Kerala High Court in case of Lissie Medical Institutions Vs. Commissioner of Income Tax, Kochi, (348 ITR 344) which had concluded issue in favour of Revenue. Kerala High Court had this to say; In fact net effect is that after writing off full value of capital expenditure on acquisition of assets as application of income for charitable purposes and when assessee again claims same amount in form of depreciation, http://www.judis.nic.in 11 such notional claim becomes cash surplus available with assessee, which goes outside books of accounts of Trust unless it is written back which is not done. ......... ........... We have no doubt in our mind that business income of charitable trust also has to be computed in same manner as provided u/s 29 of Income Tax Act. However, issue that requires consideration is when expenditure incurred for acquisition of depreciable assets itself is treated as application of income for charitable purposes u/s 11(1)(a) of Act, should not cost of such assets to be treated as nil for assessee and in that situation depreciation to be granted turns out to be nil. However, if depreciation provided is claimed on notional cost after assessee claims 100% of cost incurred for it as application of income for charitable purposes, depreciation so claimed has to be written back as income available. In fact, going by several decisions of various High Courts, we are sure that based on these decisions all charitable institutions will be generating unaccounted income equal to depreciation amount claimed on year to year basis which is nothing but black money. This aspect is not seen considered in any of these decisions. 13. contentions of learned counsels for assessees are as follows: (i) Mr. Sridhar would state that in computing income of entity attracting provisions of section 11, principles of commercial accounting were liable to be followed. He would rely on decision of jurisdictional High Court in Commissioner of Income Tax Vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) (135 ITR 485) and Bombay High Court in Commissioner of Income http://www.judis.nic.in 12 Tax Vs. Institute of Banking Personnel Selection (2003) (264 ITR 110). distinction was sought to be made between computation in terms of Section 2(45) defining total income , and computation of income in terms of section 11 of Act. Referring to scheme of section 11, he would contend that provisions thereof constituted complete code which took into account application of depreciation as commercial principle and not necessarily one of accountancy. 14. Mr. J. Balachander would refer to decisions of Kerala High Court in Catholic Diocese of Tiruvalla V. State of Kerala (209 ITR 596) and Andhra Pradesh High Court in CIT v.Trustee of H.E.H.Nizamm's Supplemental Religious Endowment Trust (127 ITR 378), in support of his submission that commercial principles of accounting are to be applied in computing income for purposes of section 11. He would refer to Accounting Standards issued by Institute of Chartered Accountants of India (in short ICAI) to effect that depreciation was mandatory charge in computation of income of Trust. 15. Mr.N. Devanathan would distinguish facts of Escorts (supra) from present case on ground that by virtue of granting weighted deduction under section 35, asset itself was effaced which is not case in assessment under section 11 of Act. He would also point out that Department had filed petitions for Special Leave challenging decisions of Punjab and Haryana High Court favouring assessee that had been dismissed whereas, Special Leave Petitions filed by assessee challenging decision of Kerala High http://www.judis.nic.in 13 Court and other cases following decision of Kerala High Court in Lissie Medical Institutions (supra) had been admitted by Supreme Court. Thus according to him, Supreme Court had clearly recognized error in decision of Kerala High Court. 16. Mr. R. Kumar, appearing for assessee/respondent in TCA.No.993 of 2015 would point out that orders of Income Tax Appellate Tribunal in same assessee's case for previous years on identical issue, had considered judgment of Supreme Court in Escorts and had distinguished same. aforesaid orders of Tribunal dated 25.03.2011 have attained finality. Thus, while adopting arguments of other counsels, he would add that principle of consistency stood violated in his case. 17. Mr.N.V.Balaji, would address us specifically on Accounting Standard 6 dealing with Depreciation Accounting issued by Institute of Chartered Accountants of India and made mandatory on or after 1.4.1995 in following terms: reference to commercial, industrial or business enterprises in aforesaid paragraph is in context of nature of activities carried on by enterprise rather than with reference to its objects. It is quite possible that enterprise has charitable objects but it carries on, either wholly or in part, activities of commercial, industrial or business nature in furtherance of its objects. Board believes that Accounting Standards apply in respect of commercial, industrial or business activities of any http://www.judis.nic.in 14 enterprise, irrespective of whether it is profit oriented or is established for charitable or religious purposes. Accounting Standards will not, however, apply to those activities which are not of commercial, industrial or business nature, (e.g., activity of collecting donations and giving them to flood affected people.) It is also clarified that exclusion of entity from applicability of Accounting Standards would be permissible only if no part of activity of such entity was commercial, industrial or business in nature. For removal of doubts, it is clarified that even if very small proportion of activities of entity was considered to be commercial, industrial or business in nature, then it could not claim exemption from application of Accounting Standards. Accounting Standards would apply to all its activities including those which were not commercial, industrial or business in nature. 18. This was clarified by Technical Guide on Internal Audit for not-for- profit organizations issued by Internal Audit Standards Board of ICAI recommending that Accounting Standards setting out wholesome principles of accounting including depreciation should be followed by all non- profit organisations irrespective of whether any part of their activity might be commercial, industrial or business in nature. 19. We have heard arguments in detail and carefully perused documents relied upon as well as case law cited. 20. Depreciation, as defined in Spicer and Pegler's Book-Keeping and Accounts is measure of exhaustion of effective life of fixed asset http://www.judis.nic.in 15 owing to use or obsolescence during given period. It may be regarded as that part of cost of asset which will not be recoverable when asset is finally put out of use. object of providing for depreciation is to spread expenditure incurred in acquiring asset over its effective lifetime, and amount of provision made in respect of accounting period is extended to represent proportion of such expenditure which has expired during that period. 21. necessity of providing for depreciation emanates from fact that once asset ceases to be effective, it will have to be replaced. Providing for depreciation would ensure setting aside out of revenue of accounting period, estimated amount by which capital investment has expired during that period. This provision, incurred for use of that asset for purpose of earned profit should be charged against those profits as and when earned. Spicer, and Pegler, at page 45, states as follows:- If depreciation is not provided for, books will not contain true record of revenue or capital. If asset were hired instead of purchased, hiring fee would be charged against profits; having been purchased, asset is, in effect, then hired by capital to revenue, and true profit cannot be ascertained until analogous charge for use of asset has been made. Moreover, unless provision is made for depreciation, Balance Sheet will not present true and fair view of state of affairs, since assets will be shown at amount which is in excess of true amount of unexpired expenditure incurred on their acquisition. http://www.judis.nic.in 16 22. claim of depreciation is thus part of standard accounting practice which is required for fair presentation of company's financials. computation of income in case of entity to which section 11 is applicable would be in two stages. Firstly, determination of profit arrived at, which would be total receipts net of expenditure and depreciation incurred in earning receipts, and secondly stage of application to Charitable/Religious objects. two stages are distinct and are required to be complied with consecutively in order to determine correct income and its application. 23. question before Supreme Court in matter of Escorts related to duel claims under section 35 of Act in relation to same asset first, weighted deduction and second, depreciation. Thus, two benefits were extended in respect of very same asset. We are faced with entirely different and distinct position in present batch of appeals one that involves claim for exemption in respect of income earned from property held for charitable or religious purposes. We see no double benefit that is extended to assessee in this regard. 24. Truth to tell, this Court in matter of Calavala Cunnan Charities, has decided question now under consideration in favour of assessee and we could well have decided this Batch of appeals simply on strength of aforesaid decision. We are however persuaded to proceed further with discussion since conflicting view has been expressed by Kerala High Court in http://www.judis.nic.in 17 case of Lissie Medical Institutions (supra). Though attention of Division Bench of Kerala High court was drawn to decision in Rao Bahadur Calavala Cunnan Chetty Charities (supra) and several decisions along similar lines, court was persuaded to take contrary view preferring to follow rationale of judgment of Supreme Court in case of Escorts (supra). 25. As noted by us earlier, judgment of Supreme Court in escorts turns on entirely different position of law and would not impact issue being discussed in present case. 26. We are supported in our view by plethora of decisions of various High Courts Bombay High Court in case of CIT v. Munisuvrat Jain (1994 Tax Law Reporter 1084) and DIT (Exem) Vs. Framjee Cawasjee Institute (109 CTR 463); Karnataka High Court in CIT Vs. Society of Sisters of St.Anne (146 ITR 28); Madhyapradesh High Court in CIT Vs. Raipur Pallottine Society (180 ITR 579); Gujarath High Court in CIT Vs. Sheth Manilal rachhnoddas Vishram Bhavan Trust 198 ITR 598; Punjab and Haryana High court in CIT Vs. Market Committee Pipli (330 ITR 16) and CIT Vs. Tiny Tots Education Society (330 ITR 21); Madhyapradesh High Court in CIT Vs. Devi Sakuntala Tharal Charitable Foundation (358 ITR 452) and Calcutta High Court in CIT Vs. Silluguri Regulated Market Committee (366 ITR 51). In addition, Delhi High Court in DIT Vs. Vishwa Jagriti Mission 262 CTR 558 and Karnnataka High Court in DIT (Exem) Vs Al-Ameen Charitable Fund Trust (2016) 67 taxmann.com 160 have accepted claim of http://www.judis.nic.in 18 assessee distinguishing both judgment of Supreme Court in Escorts as well as that of Kerala High Court. 27.In view of discussion above, question of law is answered in favour of assessee and against revenue. TCA.No.949 of 2015 28. T.C.A.No.949 of 2015 has been filed by assessee raising following two substantial questions of law. 1. Whether on facts and circumstances of case, Tribunal was right in disallowing claim of depreciation on assets acquired by way of application of funds in earlier years, contrary to judgments of several High Courts? 2. Whether on facts and in circumstances of case, Tribunal is right in law in holding that excess application of earlier year could not be set off against income of current year contrary to judgment of this Honourable Court in case of Matriseva Trust (2000) 242 ITR 20(Mad)? 29. Learned senior counsel appearing for M/s.St. Thomas Orthodox Syrian Cathedral Parish Trust, assessee, Mrs. Pushya Sitaraman would contend that excess application of earlier years was liable to set off against income of current year and relied on decision of jurisdictional High Court in case of Commissioner of Income Tax Vs. Matriseva Trust (242 ITR 20). While Sri.J.Narayanaswamy, learned counsel appearing for Department does not http://www.judis.nic.in 19 seriously object to argument advanced on merits, he would raise technical objection to effect that in present case, claim was made under revised return. original return of income was filed only on 31.10.2007 beyond 31.10.2006 when it was due and as such would debar consideration of claim made in revised return. 30. Records reveal that original return was filed on 31.10.2007 and revised return was filed on 19.2.2008. Notice under Section 148 was issued on 13.9.2010, in response to which, assessee filed original return dated 31.10.2007. In course of re-assessment, assessing authority rejects revised return on ground that it is inadmissible in view of provisions of section 139(5) requiring original return to have been filed within time. He thus, does not take cognizance of revised return and proceeds on basis of original return which had omitted to take into account excess application of previous years as application for present year and assessment was completed on basis of original return alone. Commissioner of Income Tax (Appeals), adjudicated issue on merits, deciding same against assessee which order was confirmed by Income Tax Appellate Tribunal. 31. recent amendment to section 139(5) reads thus; Following sub-section (5) shall be substituted for existing sub- section(5) of section 139 by Finance Act, 2016 w.e.f. 1.4.2017. (5) If any person, having furnished return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement http://www.judis.nic.in 20 therein, he may furnish revised return at any time before expiry of one year form end of relevant assessment year or before completion of assessment, whichever is earlier. 32. import of above amendment is that return may be revised both in cases of original returns filed under sub section (1) or under sub section (4) within extended period of one year from end of relevant assessment year or before completion of assessment, whichever is earlier. amendment is intended to confer benefit on assessee and retrospective application thereof has to be examined by assessing authority. We remand this issue to file of assessing authority for limited purpose of examining applicability of amendment extracted above. If amendment is found applicable to assessee, rationale of decision of this Court in Matriseva (supra) shall be applied on merits. 33. Adverting to question No.1, Tribunal has, in denying benefit of depreciation to assessee, applied provisions of sub section 6 of section 11 reading as follows; (6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as application of income under this section in same or any other previous year. .... http://www.judis.nic.in 21 34.The short point that arises for decision is whether provisions of Section 11(6) inserted by Finance (No.2) Act, 2014 w.e.f. 1.4.2015, operate prospectively with effect from assessment year 2015-16 or retrospectively with respect to earlier years as well. In this regard, M/s.Pushya Sitaraman, learned senior counsel and other learned counsels appearing for assesses refer to provisions of Circular 1 of 2015 dated 21.1.2015 (371 ITR (St) 0022) containing explanatory notes to provisions of Finance (No.2) Act, 2014. relevant portion of circular reads as follows; 7.3 Several issues had arisen in respect of application of exemption regime to trusts or institutions in respect of which clarity in law was required. 7.4 first issue was regarding interplay of general provision of exemptions which are contained in section 10 of Income-tax Act vis- -vis specific and special exemption regime provided in sections 11 to 13 of said Act. As indicated above, primary objective of providing exemption in case of charitable institution is that income derived from property held under trust should be applied and utilized for object or purpose for which institution or trust has been established. In many cases it had been noted that trusts or institutions which are registered and have been availing benefits of exemption regime to not apply their income, which is derived from property held under trust, for charitable purposes. In such circumstances, when income becomes taxable, claim of exemption under general provisions of http://www.judis.nic.in 22 section 10 in respect of such income is preferred and tax on such income is avoided. This defeats very objective and purpose of placing conditions of application of income, etc., in respect of income derived from property held under trust in first place. 7.4.1 Sections 11, 12 and 13of income-tax Act are special provisions governing institutions which are being given benefit of tax exemption. It is therefore imperative that once person voluntarily opts for special dispensation it should be governed by these specific provisions and should not be allowed flexibility of being governed by other general provisions or specific provisions at will. Allowing such flexibility has undesirable effects on objects of regulations and leads to litigation. . .. 7.6 Applicability. These amendments take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-2016 and subsequent assessment years. 35. Para 7.6 of Circular states that amendment would apply to assessment year 2015-16 and subsequent assessment years. Reliance was placed on judgment of Supreme Court in CIT Vs. Alom Extrusions Ltd (2009) and CIT vs Vatika Township (367 ITR 466) for proposition that amendment that increases liability of assessee is liable to be applied only prospectively. Mr. Narayanaswamy would object stating that amendment had been inserted to http://www.judis.nic.in 23 correct existing anomaly and thus was clearly clarificatory, and consequently retrospective in operation. 36. We do not agree with Revenue. amendment, inserted specifically with effect from Assessment Year 2015-2016 seeks to disturb vested right that has accrued to assesee. amendment does not purport to be clarificatory, on other hand Explanatory Memorandum makes it applicable only w.e.f. Y 2015-16 and application of amendment retrospectively would certainly lead to great deal of hardship to assessee. We are thus of view that provisions of section 11(6) of Act inserted with effect from 1.4.2015 shall operate prospectively with respect to assessment year 2015-2016 only. 37. Substantial question of law 1 is answered in favour of assessee and question 2 is answered in favour of assessee by way of remand. No costs. [N.R.R.,J.] & [A.S.M.,J. 08.08.2017 Index: Yes/No Internet:Yes/No msr NOOTY. RAMAMOHANA RAO, J AND http://www.judis.nic.in 24 Dr.ANITA SUMANTH,J msr TCA. Nos.844, 845, 848, 849, 1079 of 2010, TCA.Nos. 99 to 102, 118, 120, 125, 475 to 478 of 2011, TCA.Nos. 457 of 2012 & TCA.No.650 of 2014, TCA.Nos.498, 500, 509, 511, 530, 696, 727, 736, 739, 760, 993, 997, 1099 of 2015 &(TCA.Nos.949 of 2015 and 771 of 2016 08.08.2017 http://www.judis.nic.in Director of Income-tax, Exemption-III, Chennai v. Medical Trust of Seventh Day Adventist