By K. B. Bhujle | Advocate
New Page 1
Reported :
47 Charitable purpose :
Exemption u/s.11 of Income-tax Act, 1961 : A.Y. 2005-06 : Determination of
the percentage of funds to be applied for the purposes of trust depreciation
allowable should be taken into account.
[CIT v. Market
Committee, Pipli, 330 ITR 16 (P&H)]
The assessee is a
charitable trust eligible for exemption u/s.11 of the Income-tax Act, 1961.
For the A.Y. 2005-06, for the purpose of ascertaining whether 85% of the
funds were applied for purposes of trust, the AO disallowed the depreciation
on the ground that since the income of the assessee was exempt u/s.11,
allowing depreciation would amount to conferring double benefit. The
Tribunal allowed the assessee’s claim.
On appeal by the
Revenue, the Punjab and Haryana High Court upheld the decision of the
Tribunal and held as under :
“The income of the
assessee being exempt, the assessee was only claiming that depreciation
should be reduced from the income for determining the percentage of funds
which had to be applied for the purposes of the trust. There was no double
deduction claimed by the assessee. It could not be held that double benefit
was given in allowing the claim for depreciation for computing income for
purposes of S. 11.”
(iv) In the instant
case, the consideration for selling 52% of the site was four flats
representing 48%. All the four flats were situated in a residential
building. Those four residential flats constituted ‘a residential house’ for
the purpose of S. 54. Profit on sale of property was used for residence. The
four residential flats could not be construed as four residential houses for
the purpose of S. 54. They had to be construed only as ‘a residential house’
and the assessee was entitled to the benefit accordingly.
(v) In that view of the
matter, the Tribunal as well as the Appellate Authority were justified in
holding that there was no liability to pay capital gain tax as the case
squarely fell u/s. 54.”
