Depreciation Deduction for Charitable Trusts: Court Upholds Allowance

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Case Name:

Principal Commissioner of Income Tax vs. Sri Sri Adichunchunagiri Shikshana Trust (High Court of Karnataka)

ITA No. 384 of 2016

Date: 28th June 2016

Key Takeaways:

- The court confirmed that charitable trusts can claim depreciation on capital assets, even if the income is exempt under Section 11 (of Income Tax Act, 1961).

- The decision clarifies that allowing depreciation does not equate to a double deduction.

- The ruling aligns with previous judgments, reinforcing the principle that depreciation is a legitimate deduction under normal commercial principles.

Issue:

The central legal question was whether a charitable trust can claim depreciation on capital assets when its income is already exempt, and if this constitutes a double deduction.

Facts:

The case involved the Sri Sri Adichunchunagiri Shikshana Trust, a charitable institution registered under Sections 12AA (of Income Tax Act, 1961) and 10(23)(c) of the Income Tax Act. The dispute arose when the Assessing Officer denied the trust's claim for depreciation on capital assets, arguing it resulted in a double deduction. The trust appealed, and the Tribunal ruled in its favor, prompting the Revenue to challenge this decision in court.

Arguments:

- Revenue's Argument: The Revenue contended that allowing depreciation on capital assets, when the income is already exempt, results in a double deduction, contrary to the scheme of the Act. They relied on Section 11(6) (of Income Tax Act, 1961) and past judgments like Escorts Ltd. vs. Union of India.

- Trust's Argument: The trust argued that depreciation is a legitimate deduction under normal commercial principles and does not constitute a double deduction. They cited previous judgments supporting this view, including Society of the Sisters of St. Anne.

Key Legal Precedents:

- Society of the Sisters of St. Anne: This case established that depreciation is a legitimate deduction for charitable trusts.

- Escorts Ltd. vs. Union of India: The Revenue cited this case to argue against double deductions, but the court found it distinguishable in the context of charitable trusts.

Judgement:

The court dismissed the Revenue's appeal, affirming the Tribunal's decision to allow the trust to claim depreciation. The court reasoned that depreciation does not result in a double deduction and is consistent with commercial accounting principles. The judgment emphasized that Section 11(6) (of Income Tax Act, 1961) applies prospectively from April 1, 2015, and does not affect prior claims.

FAQs:

1. Why was the trust allowed to claim depreciation?

  - The court found that claiming depreciation does not constitute a double deduction and aligns with commercial accounting principles.

2. Does this decision apply to all charitable trusts?

  - Yes, the ruling sets a precedent for similar cases involving charitable trusts claiming depreciation.

3. What is the significance of Section 11(6) (of Income Tax Act, 1961)?

  - Section 11(6) (of Income Tax Act, 1961) was introduced to prevent double deductions but applies prospectively from April 1, 2015, and does not affect claims made before this date.

4. How does this decision impact the Revenue?

  - The decision limits the Revenue's ability to deny depreciation claims by charitable trusts, reinforcing the principle that such deductions are legitimate under the law.

The appellants-Revenue have preferred this present appeal by raising the following substantial question of law:

“Whether on the facts and in the circumstances of the case, the Tribunal is right in law in holding that assessee is entitled to claim depreciation on capital assets when it amounts to double deduction as the income of the assessee is already exempt and amended provisions of the Act also denies such claim for depreciation by Trust?”

2. We have heard Mr. E.I. Sanmathi, learned counsel appearing for the appellants.

3. Learned counsel for the appellants fairly concedes that the Tribunal in the impugned order has relied upon its decision in the case of ACIT –vs- Shri Adichunchunagiri Shikshana Trust in ITA Nos.774 & 775 (Bang) 2011.

4. Learned counsel further brought to our notice

that the aforesaid decision of the Tribunal was challenged

by the Department before this Court in ITA No.1/2013.

This Court vide order dated 22.02.2016 has dismissed

the appeal.

5. We may record that this Court in the

aforesaid decision dated 22.02.2016 had observed thus:

“These appeals are filed by the revenue

under Section 260-A (of Income Tax Act, 1961),

1961(‘the Act’ for short) challenging the orders

passed by the Income Tax Appellate Tribunal,

Bangalore Bench.

2. Since, common question of law is raised

in all these appeals, the matters are heard

together and disposed of by this common

Judgment.

3. The assessees in all these appeals are

the charitable institutions registered under

Section 12AA (of Income Tax Act, 1961) and 10(23)(c) of the Act. The

question herein revolves around Section 11 (of Income Tax Act, 1961) of the

Act. For the purpose of narrating the facts, we

are considering ITA No.62/2010. The

assessments for the assessment year 2005-06

were concluded under Section 144 (of Income Tax Act, 1961)

denying exemption under Section 10(23) (of Income Tax Act, 1961) of the

Act. The addition of income was made on account

of disallowance of depreciation by the Assessing

Officer.

4. Being aggrieved, the assessee preferred

an appeal before the Commissioner of Income Tax

(Appeals), Bangalore. The CIT(A) after calling for

the remand report from the Assessing Officer,

allowed the appeal on merits and deleted all the

additions made by the Assessing Officer.

5. Aggrieved by the same, revenue

preferred appeal before the Tribunal. The

Tribunal after hearing the parties, dismissed the

appeal of the revenue.

6. Being aggrieved by the said order of the

Tribunal, the revenue is in appeal.

7. Similarly, in ITA Nos.233-234/2013,

ITA No.1/2013, ITA No.433/2013, ITA

No.414/2010, on the assessment orders denying

exemption under Section 11 (of Income Tax Act, 1961) read with Section

10(23c) of the Act and making an addition of

income on account of disallowance of

depreciation, the assessee preferred appeals

which were allowed in favour of the assessee.

Revenue challenged the said orders of the

CIT(Appeals) before the Tribunal unsuccessfully.

The orders passed by the Tribunal are challenged

in these appeals.

8. ITA No.431/2013, ITA Nos.56/2013

and 108/2014 are filed by the revenue

challenging the orders passed by the Tribunal

whereby, the orders passed by Revisional

Authority under Section 263 (of Income Tax Act, 1961) are set-

aside, restoring the assessment order, thus,

allowing the depreciation under Section 11 (of Income Tax Act, 1961) of the

Act as claimed by the assessee.

9. In all these appeals, the common

substantial question of law that arises for our

consideration is as under:

“Whether the Tribunal is correct in

holding that depreciation is allowable

under Section 11 (of Income Tax Act, 1961), and there is

no double claim of capital expenditure as

held by the Assessing Officer and the

principles enunciated by the Apex Court

in escorts Ltd., 199 ITR 43 was not

applicable and the principles enunciated

by this Hon’ble Court in Society of

Sisters St.Ann’s 146 ITR 18 was

applicable?”

10. Heard the learned counsel appearing

for the parties and perused the material on

record.

11. Learned counsel Sri. K.V. Aravind

appearing for the revenue would contend that the

depreciation is not allowable as deduction in

computing the total income of a charitable trust

under Section 11 (of Income Tax Act, 1961), as the amount spent

on the capital asset is already allowed as

application of income in the year of such

acquisition. Claim of deduction by way of

depreciation on the same capital asset in the

subsequent years results in allowing double

deduction contrary to the scheme of the Act. It is

further contended that depreciation has to be

computed in terms of Section 32 (of Income Tax Act, 1961). He

also places reliance on Section 37 (of Income Tax Act, 1961) to

point out that any expenditure not being

expenditure of the nature described in Sections

30 to 36, not being in the nature of capital

expenditure or personal expenses of the assessee

expended wholly and exclusively for the purposes

of business or profession shall be allowed in

computing the income chargeable under the head

‘Profit and gains of business or profession’.

Applying the same analogy if, application of

income is allowed under Section 11 (of Income Tax Act, 1961), no

depreciation can be allowed under Section 32 (of Income Tax Act, 1961) of

the Act. Reliance is placed on Section 11(6) (of Income Tax Act, 1961) of

the Act inserted by the Finance Act No.2, Act 14

with effect from 01.04.2015 to contend that the

said amendment applies retrospectively being

clarificatory in nature. Learned counsel for the

revenue placed reliance on the following

Judgments:

(1) [A] COMMISSIONER OF INCOME TAX vs.

SOCIETY OF THE SISTERS OF ST.ANNE ((1984) CTR

9 )

(2) LISSIE MEDICAL INSTITUTIONS vs.

COMMISSIONER OF INCOME TAX ((2012) 348 ITR

0344)

(3) ESCORTS LTD. vs. UNION OF INDIA ((1993)

SC ITR Vol. 199)

12. On the other hand, learned counsel

appearing for the assessee Sri.A.Shankar would

contend that Chapter – III of the Act and Chapter

– IV of the Act play in different fields. Sections 11

to 13(B) covered under Chapter – III of the Act,

governs the manner of computation of total

income and exemption by Charitable Trusts.

Sections 14 to 59 governed by Chapter – IV of the

Act deals with the income under the five heads of

income enumerated under Section 14 (of Income Tax Act, 1961). The

exemption entitlement under Section 11 (of Income Tax Act, 1961)

is based on application of income and ‘permissible

accumulations’ and the ‘balance of income’, if

any, is treated as income which is not applied for

objects of the Trust and is brought to tax under

Chapter III of the Act. Chapter – IV in no way is

applicable to Section 11 (of Income Tax Act, 1961), the claim of

depreciation is not under Section 32 (of Income Tax Act, 1961)

but under normal commercial principles as laid

down by the Courts. It is further contended that

allowing exemption on the application of income

on the capital asset acquired during the relevant

year and further, allowing depreciation in the

subsequent years, at any stretch of imagination,

could not be construed as double deduction.

13. Mr.Parthasarthy, learned counsel

appearing for the assessee in some of the appeals

adopts the arguments advanced by Mr.

A.Shankar.

14. Learned counsel appearing for the

assessee has placed reliance on the following

Judgments:

[1] COMMISSIONER OF INCOME-TAX vs. VATIKA

TOWNSHIP P.LTD., [(2014) 367 ITR 466 (SC)]

[2] COMMISSIONER OF INCOME-TAX vs.

INSTITUTE OF BANKING [(2003) 264 ITR 110]

[3] COMMISSIONER OF INCOME-TAX, TAMIL

NADU-I vs. RAO BAHADUR CALAVALA CUNNAN

CHETTY CHARITIES [1982) ITR 485 (MAD)]

[4] COMMISSIONER OF INCOME-TAX vs.

MARKET COMMITTEE PIPLI [(2011) 238 CTR (P&H)

103

[5] COMMISSIONER OF INCOME-TAX vs.

SOCIETY OF THE SISTERS OF ST. ANNE [(1984) 39

CTR (KAR) 9]

[6] DIRECTOR OF INCOME TAX [EXEMPTION] Vs.

COUNCIL OF SCIENTIFIC AND INDUSTRIAL

RESEARCH in ITA No.331/2013 DD 27.11.2013

15. The question involved in this case is

no more res integra. This question was considered

by this Court as far back as in the year 1984, in

the case of Society of the Sister’s of St.Anne

(supra) wherein the Division Bench of this Court

has held thus:

“9. It is clear from the above

provisions that the income derived from

property held under trust cannot be the

total income because S.11(1) says that

the former shall not be included in the

latter, of the person in receipt of the

income. The expression "total income"

has been defined under S.2(45) of the

Act to mean "the total amount of

income referred to in

S.5 computed in the manner laid down

in this Act". The word "income" is

defined under S. 2(24) of the Act to

include profits and gains, dividends,

voluntary payment received by trust,

etc. It may be noted that profits and

gains are generally used in terms of

business or profession as provided

u/s. 28 (of Income Tax Act, 1961). The word "income", therefore,

is a much wider term than the

expression "profits and gains of

business or profession". Net receipt

after deducting all the necessary

expenditure of the trust (sic).

10. There is a broad agreement on

this proposition. But still the contention

for the Revenue is that the depreciation

allowance being a notional income

(expenditure ?) cannot be allowed to be

debited to the expenditure account of

the trust. This contention appears to

proceed on the assumption that the

expenditure should necessarily involve

actual delivery of or parting with the

money. It seems to us that it need not

necessarily be so. The expenditure

should be understood as necessary

outgoings. The depreciation is nothing

but decrease in value of property

through wear, deterioration or

obsolescence and allowance is made

for this purpose in book keeping,

accountancy, etc. In Spicer & Pegler's

Book-keeping and Accounts, 17th Edn.,

pp. 44, 45 & 46, it has been noted as

follows :

"Depreciation is the exhaustion of the

effective life of a fixed asset owing to

'use' or obsolescence. It may be

computed as that part of the cost of the

asset which will not be recovered when

the asset is finally put out of use. The

object of providing for depreciation is to

spread the expenditure, incurred in

acquiring the asset, over its effective

lifetime; the amount of the provision,

made in respect of an accounting

period, is intended to represent the

proportion of such expenditure, which

has expired during that period."

16. Similar view is taken by the other

High Courts viz., Gujarat, Punjab and Haryana,

Delhi, Madras, Calcutta and Madhya Pradesh in

the following judgments.

[1] COMMISSIONER OF INCOME-TAX, vs

FRAMJEE CAWASJEE INSTITUTE, 109 CTR 463

[GUJ];

[2] COMMISSIONER OF INCOME-TAX, vs RAIPUR

PALLOTTINE SOCIETY,. 180 ITR 571 [MP]

[3] COMMISSIONER OF INCOME-TAX, vs SETH

MANILAL RANCHODDAS VISHRAM BHAVAN TRUST

198 ITR 598 [GUJ];

[4] COMMISSIONER OF INCOME-TAX, vs

BHORUKA PUBLIC WELFARE TRUST [1999] 240

ITR 513 [CAL];

[5] COMMISSIONER OF INCOME-TAX, vs RAO

BAHADUR CALAVALA CUNNAN CHETTY CHARITIES

135 ITR 485 (MAD)]

[6] COMMISSIONER OF INCOME-TAX vs.

MARKET COMMITTEE PIPLI [(2011) 238 CTR (P&H)

103

Allowing depreciation in subsequent years, on

the capital asset, which has already availed the

benefit of deduction in computing the income of

the trust in the year of its acquisition is

considered by the Punjab and Haryana High

Court in the case of Market Committee, Pipli

(supra) and held thus:

“9. In the present case, the

assessee is not claiming double

deduction on account of depreciation

as has been suggested by learned

counsel for the Revenue. The income of

the assessee being exempt, the

assessee is only claiming that

depreciation should be reduced from

the income for determining the

percentage of funds which have to be

applied for the purposes of the trust.

There is no double deduction claimed

by the assessee as canvassed by the

Revenue. Judgment of the Hon’ble

Supreme Court in Escorts Ltd., & Anr.

(supra) is distinguishable for the above

reasons. It cannot be held that double

benefit is given in allowing claim for

depreciation for computing income for

purposes of section 11 (of Income Tax Act, 1961). The questions

proposed have, thus, to be answered

against the Revenue and in favour of

the assessee.

17. High Court of Bombay in the case of

Institute of Banking (supra) after placing

reliance on the Judgment of CIT vs Muniswarat

Jain (1994 TLR 1084) on an identical issue,

held:-

“In that matter also, a similar

argument, as in the present case, was

advanced on behalf of the revenue,

namely, that depreciation can be

allowed as deduction only

under section 32 (of Income Tax Act, 1961)

and not under general principles. The

court rejected this argument. It was

held that normal depreciation can be

considered as a legitimate deduction

in computing the real income of the

assessee on general principles or

under section 11(1)(a) (of Income Tax Act, 1961). The court rejected the

argument on behalf of the revenue

that section 32 (of Income Tax Act, 1961)

was the only section granting benefit

of deduction on account of

depreciation. It was held that income

of a Charitable Trust derived from

building, plant and machinery and

furniture was liable to be computed in

normal commercial manner although

the Trust may not be carrying on any

business and the assets in respect

whereof depreciation is claimed may

not be business assets. In all such

cases, section 32 (of Income Tax Act, 1961) providing for depreciation for

computation of income derived from

business or profession is not

applicable. However, the income of the

Trust is required to be computed

under section 11 (of Income Tax Act, 1961) on commercial

principles after providing for

allowance for normal depreciation and

deduction thereof from gross income of

the Trust. In view of the aforestated

Judgment of the Bombay High Court,

we answer question No. 1 in the

affirmative i.e., in favour of the

assessee and against the

department.”

18. The Judgment in Escorts Limited

(supra) was rendered by the Apex Court in the

context of Section 10(2)(vi) (of Income Tax Act, 1961) and Section 10(2)(xiv) (of Income Tax Act, 1961)

of the 1922 Act or under Section 32(1)(ii) (of Income Tax Act, 1961) and

Section 35(2)(iv) of the 1965 Act. It was the case

of the assessee claiming a specified percentage of

the written down value of the asset as

depreciation besides claiming deduction in 5

consecutive years of the expenditure incurred on

the acquisition of the capital asset used for

scientific research. In such circumstances, the

Apex Court held thus:

“There is an apparent

plausibility about these arguments,

particularly in the context of the

alleged departure in the language

used by S.10(2)(xiv) from that

employed in S.20 of the U.K. Finance

Act, 1944. We may, however, point out

that the last few underlined words of

the English statute show that there is

really no difference between the

English and Indian Acts; the former

also in terms prohibits depreciation

only so long as the assets are used for

scientific research. In our opinion, the

other provisions of the Act to which

reference has been made - some of

which were inserted after the present

controversy started - are not helpful

and we have to construe the real

scope of the provisions with which we

are concerned. We think that all

misconception will vanish and

all the provisions will fall into place, if

we hear in mind a fundamental,

through unwritten, axiom that no

legislature could have at all intended

a double deduction in regard to the

same business outgoing, and if it is

intended it will be clearly expressed.

In other words, in the absence of

clear statutory indication to the

contrary, the statute should not be

read so as to permit an assessee two

deductions both under S.10(2)(vi)

and S.10(2)(xiv) under the 1922 Act or

under S.32(1)(ii) and 35(2)(iv) of the

1922 Act - qua the same expenditure.

Is then the use of the words "in

respect of the same previous year" in

clause (d) of the proviso to S.10(2) (xiv)

of the 1922 Act and S. 35(2) (iv) of the

1961 Act contra-indication which

permits a disallowance of depreciation

only in the previous years in which

the other allowance is actually

allowed. We think the answer is an

emphatic `no' and that the purpose of

the words above referred to is totally

different. If, as contended for by the

assessees, there can be no objection

in principle to allowances being made

under both the provisions as

their nature and purpose are

different, then the interdict

disallowing a double deduction will

be meaningless even in respect of the

previous years for which deduction is

allowed under S.10(2) (xiv) /S.35 in

respect of the same asset. If that were

the correct principle, The assessee

should logically be entitled to

deduction by way of depreciation for

all previous years including those for

which allowance have been granted

under the provision relating to

scientific research. The statute does

not permit this. The restriction

imposed would, therefore, be illogical

and unjustified on the basis

suggested by the assessees. On the

other hand, if we accept the principle

we have outlined earlier viz. that,

there is a basic legislative scheme,

unspoken but clearly underlying the

Act, that two allowances cannot be,

and are not intended to be, granted in

respect of the same asset or

expenditure, one will easily see the

necessity for the limitation imposed

by the quoted words. For, in this view,

where the capital asset is one of the

nature specified, the assessee can get

only one of the two allowances in

question but not both.”

19. Section 11 (of Income Tax Act, 1961) deals with

application of income different from revenue

expenditure or allowance. Thus, the Judgment of

the Apex Court in the case of Escorts Ltd.,

[supra] is distinguishable and as such is not

applicable to the Charitable Trusts where income

is to be computed under Chapter III of the Act.

Accordingly, the judgment of Lissie Medical

Institutions [supra] based on Escorts Ltd.,

[supra], is not applicable to the facts of the

present case.

20. It is also to be noticed that while in

the year of acquiring the capital asset, what is

allowed as exemption is the income out of which

such acquisition of asset is made and when

depreciation deduction is allowed in the

subsequent years, it is for the losses or expenses

representing the wear and tear of such capital

asset incurred if, not allowed then there is no way

to preserve the corpus of the Trust for deriving its

income as held in Society of Sisters of St.Anne

[supra]. This judgment of co-ordinate Bench of

this Court is binding on us and we have no

reasons to disturb the settled position of law at

this length of time/depart from the said

reasoning. As such, the arguments advanced by

the Revenue apprehending double deduction is

totally misconceived.

21. Section 11 (of Income Tax Act, 1961)[6] inserted with effect

from 1.4.2015 by Finance Act No.2/2014, reads

as under:

“(6) In this section where any

income is required to be applied or

accumulated or set apart for

application, then, for such purposes the

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 an application of

income under this section in the same

or any other previous year.”

22. The plain language of the

amendment establishes the intent of the

legislature in denying the depreciation deduction

in computing the income of Charitable Trust is to

be effective from 1.4.2015. This view is further

supported by the Notes on Clauses in Finance

[No.2} Bill, 2014, memo explaining provisions and

circulars issued by the Central Board of Direct

Taxes in this regard. Clause No.7 of the Notes on

Clauses reads thus:

“Clause 7. of the Bill seeks to amend

section 11 (of Income Tax Act, 1961)

relating Income from property held for

charitable or religious purposes. The

existing provisions of the aforesaid

section contain a primary condition

that for grant of exemption in respect

of income derived from property held

under trust, such income should be

applied for the charitable purposes in

India, and where such income cannot

be so applied during the previous

year, it has to be accumulated in the

prescribed modes. It is proposed to

insert sub-sections (6) and (7) in the

said section so as to provide that-

(i) where any income is required

to be applied or accumulated or set

apart for application, then, for such

purposes the 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 an application of income under this

section in any previous year, and

(ii) where a trust or an institution

has been granted registration under

clause (b) of sub-section (1) of section

12AA or has obtained registration at

any time under section 12A (of Income Tax Act, 1961) [as it

stood before is amendment by the

Finance (No.2) Act, 1996] and the said

registration is in force for any previous

year, then, nothing contained in

section 10 (of Income Tax Act, 1961) [other than clause(1) and

clause (23C) thereof] shall operate to

exclude any income derived from the

property held under trust from the

total income of the person in receipt

thereof for that previous year.

This amendment will take effect from

1st April, 2015 and will, accordingly,

apply in relation to the assessment

year 2015-16 and subsequent years”.

The Memo explaining the provisions in Finance

[No.2] Bill, 2014 reads thus:

“ The second issue which has arisen

is that the existing scheme of section

11 as well as section 10(23C) (of Income Tax Act, 1961) provides

exemption in respect of income when it

is applied to acquire a capital asset.

Subsequently, while computing the

income for purposes of these sections,

notional deduction by way of

depreciation etc. is claimed and such

amount of notional deduction remains

to be applied for charitable purpose.

Therefore, double benefit is claimed by

the trusts and institutions under the

existing law. The provisions need to be

rationalized to ensure that double

benefit is not claimed and such

notional amount does not excluded

from the condition of application of

income for charitable purpose”.

23. Paragraphs 7.5, 7.5.1, 7.6 of Central

Board of Direct Taxes Circular reported in 371

ITR 22 makes it clear that the said amendment

shall take effect from 1.4.2015 and will

accordingly apply in relation to the assessment

year 2015-16 and subsequent assessment years.

24. The Constitution Bench of the Apex

Court in Vatika Township [P] Ltd.,’s case

[supra], had laid down general principles

concerning retrospectivity in Paragraphs 33 and

34, and the same is extracted hereunder:

“33. We would also like to

point out, for the sake of

completeness, that where a benefit is

conferred by a legislation, the rule

against a retrospective construction is

different. If a legislation confers a

benefit on some persons but without

inflicting a corresponding detriment

on some other person or on the public

generally, and where to confer such

benefit appears to have been the

legislators object, then the

presumption would be that such a

legislation, giving it a purposive

construction, would warrant it to be

given a retrospective effect. This

exactly is the justification to treat

procedural provisions as

retrospective. In Government of India

& Ors. v. Indian Tobacco Association,

the doctrine of fairness was held to

be relevant factor to construe a

statute conferring a benefit, in the

context of it to be given a

retrospective operation. The same

doctrine of fairness, to hold that a

statute was retrospective in nature,

was applied in the case of Vijay v.

State of Maharashtra & Ors. It was

held that where a law is enacted for

the benefit of community as a whole,

even in the absence of a provision the

statute may be held to be

retrospective in nature. However, we

are confronted with any such

situation here.

34. In such cases,

retrospectively is attached to benefit

the persons in contradistinction to the

provision imposing some burden or

liability where the presumption

attaches towards prospectivity. In the

instant case, the proviso added to

Section 113 (of Income Tax Act, 1961) is not

beneficial to the assessee. On the

contrary, it is a provision which is

onerous to the assessee. Therefore, in

a case like this, we have to proceed

with the normal rule of presumption

against retrospective operation. Thus,

the rule against retrospective

operation is a fundamental rule of

law that no statute shall be

construed to have a retrospective

operation unless such a construction

appears very clearly in the terms of

the Act, or arises by necessary and

distinct implication. Dogmatically

framed, the rule is no more than a

presumption, and thus could be

displaced by out weighing factors”.

25. The Apex Court in the said

judgment, while interpreting the proviso, whether

to be applied retrospectively or prospectively, has

considered the Notes on Clauses appended, the

Finance Bill and the understanding of the Central

Board of Direct Taxes in this regard. The Apex

Court has also taken cognizance of the fact that

the legislature is fully aware of 3 concepts in so

far as amendments made to a statute:

(i) prospective amendments

with effect from a fixed date;

(ii) retrospective

amendments with effect from a fixed

anterior date; and

(iii) clarificatory amendments

which are prospective in nature.

Keeping in view, the aforesaid principles

enunciated by the Apex Court, in Vatika

Township [P] Ltd.,’s case [supra], it would be

safely held that Section 11 (of Income Tax Act, 1961)[6] of the Act is

prospective in nature and operates with effect

from 01.04.2015. This is further clarified when

compared with certain other provisions which

have been made retrospectively in the same

Finance Act.

26. For the foregoing reasons, we

answer the question of law in favour of the

Assessee and against the Revenue.

27. In the result, all the appeals are

dismissed.”

6. In view of the above, as the matter is already

covered by the decision of this Court, we do not find any

substantial question of law would arise for consideration.

Hence, the present appeal is dismissed.

Sd/-

JUDGE

Sd/-

JUDGE