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AO treated the income received from running a hospital and nursing school as business activity and exemption u/s 11 of the I. T. Act was denied.
AO also denied depreciation on the assets, the cost of which was allowed as application of income. The A. O. further observed that the assessee has failed to get its books of account audited u/s 44AB of the I. T. Act and hence penalty proceedings u/s 271B is to be initiated against the assessee. assessee’s activities of running the hospital and the nursing school is intricately connected and dependent on each other and it is one inseparable activity and both are entitled to exemption u/s 11(1) of the I. T. Act. It is ordered accordingly. As regards the disallowance of depreciation amounting to 31,15,807, we find that the recent judgment of the Hon’ble Apex Court in the case of CIT v. Rajasthan And Gujarati Charitable Foundation [(2018) 402 ITR 441 (SC)] had held in favor of the assessee by holding that the amendment brought about to section 11(6) is not retrospective in effect and is only prospective and applicable for and from 2015- 2016 onwards. Therefore going by the dictum laid down by the Hon’ble Apex Court in the case of CIT v. Rajasthan And Gujarati Charitable Foundation (supra), we hold that the assessee is entitled to depreciation on assets though the cost of the same was allowed as application.

Shanti Prime Publication Pvt. Ltd.

Section 11, 12AA, 13, 32 of Income tax Act, 1961—Denial of exemption u/s 11 of the act—In the instant case, appeal is preferred by Assessee against the order passed by CIT wherein CIT upholds the views taken by AO the AO treated the income received from running a hospital and nursing school as business activity and exemption u/s 11 of the I. T. Act was denied.
AO also denied depreciation on the assets, the cost of which was allowed as application of income. The A. O. further observed that the assessee has failed to get its books of account audited u/s 44AB of the I. T. Act and hence penalty proceedings u/s 271B is to be initiated against the assessee.

Held that—we hold that the assessee’s activities of running the hospital and the nursing school is intricately connected and dependent on each other and it is one inseparable activity and both are entitled to exemption u/s 11(1) of the I. T. Act. It is ordered accordingly.
As regards the disallowance of depreciation amounting to 31,15,807, we find that the recent judgment of the Hon’ble Apex Court in the case of CIT v. Rajasthan And Gujarati Charitable Foundation [(2018) 402 ITR 441 (SC)] had held in favor of the assessee by holding that the amendment brought about to section 11(6) is not retrospective in effect and is only prospective and applicable for and from 2015- 2016 onwards. Therefore going by the dictum laid down by the Hon’ble Apex Court in the case of CIT v. Rajasthan And Gujarati Charitable Foundation (supra), we hold that the assessee is entitled to depreciation on assets though the cost of the same was allowed as application.[M/S. MAJ HOSPITAL EDAPPALLY, ERNAKULAM VERSUS THE DY. COMMISSIONER OF INCOME-TAX (EXEMPTION) , KOCHI] [2018] [7] [ITCD Online] [24] [ITAT COCHIN]