21 May 2008
As per law if any charitable trust made some capital expenditure for charitable purpose, it will be treated as sufficient compliance for application of income for charitable purpose as per senction 11 of the Income Tax Act.
My question is whether the depreciation provided on that assets would also be treated as application of income for charitable porpose. and if yes, would it not be a case of double befefit of an expenditure.
18 August 2011
There is a difference of opinion from Mr Srini's reply. 1.As per the existing provisions of I.T Act and Appropriate Accounting Standards we have to follow only Accrual Basis for the Trust also. After Implementation of ITC only Cash Basis for Trusts shall be followed. 2. All accrued Expenses which may be paid before filig returns can be termed as Application of Income. 3. The Department allowing both Capital Expenses , Depreciation as Application Of Income. Eventhough it seems to be double deduction - for purely charitable trusts -the depreciation allowance is for the purpose of augmentation of corpus purposes. The Double Deduction matter is pending in many Tribunals and Courts and most of the decissions are allowing Double Deduction. 4. After introduction of ITC the problem may not arise, since we have to follow only Cash Basis Accounting for Trusts. 5. Even in that case we should have accrual basis also, if we need a True & Fair view Balance Sheet.for accounting purposes.
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