By TIOL News Service

CHENNAI, AUG 25, 2017: THE issue before the Bench is - Whether if an assessee is registered for Sec 11 benefits and also claims depreciation, this amounts to double benefits. NO is the verdict.

Facts of the case

The assessee is a registered body for charitable or religious purposes. It avails Section 11 benefits. It claimed depreciation benefits along with exemption u/s 11. The Revenue objected to double benefits but the Tribunal allowed the assessees' appeal. On appeal, the counsel for the Revenue submitted that granting depreciation simultaneous with exemption under section 11 would result in a relief over and above 100 % of the income which was not permissible under statute.

The HC held that,

++ the claim of depreciation is part of standard accounting practice which is required for fair presentation of a company's financials. The computation of income in the case of an entity to which section 11 is applicable would be in two stages. Firstly, the determination of the profit arrived at, which would be the total receipts net of expenditure and depreciation incurred in earning the receipts, and secondly the stage of application to Charitable/Religious objects. The two stages are distinct and are required to be complied with consecutively in order to determine the correct income and its application;

++ the question before the Supreme Court in the matter of Escorts related to duel claims under section 35 of the Act in relation to the same asset – the first, weighted deduction and the second, depreciation. Thus, two benefits were extended in respect of the very same asset. We are faced with an entirely different and distinct position in the present batch of appeals – one that involves a 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 the assessee in this regard.

(See 2017-TIOL-1665-HC-MAD-IT)