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14. Insofar as the issue of depreciation is concerned, Mr. Aggarwal submitted that the said issue is covered by the decision of the Division Bench of this Court in Director of Income Tax (Exemption) v. M/s Indraprastha Cancer Society: Income Tax Appeal No. 240/2014, decided on 18th November, 2014.

15. Mr. Raghvendra Singh, learned counsel appearing on behalf of the Revenue controverted the above submissions made on behalf of the Assessee. Mr. Singh submitted that the objects of the trust did not permit running of an Allopathic hospital and thus, the activities of the Assessee were in excess of its objects. He further submitted that the AO was fully justified in examining whether income of the Assessee was applied towards its object as that was the pre-condition for grant of exemption under Section 11(1) of the Act. He contended that the expression "such purposes" as used in Section 11(1) of the Act would refer to the objects of the Trust and not to charitable or religious purposes in general. Consequently, even if the income of the Assessee had been applied for charitable purposes, the exemption under Section 11 of the Act would not be available if the same had not been applied towards the objects of the Trust. He stated that in the present case, it was not disputed that the activities of the Assessee fell within the scope of charitable purposes as defined under section 2(15) of the Act, however, this was not sufficient for availing exemption under Section 11(1) of the Act.

23. In Dawoodi Bohara Jamat (supra), the Supreme Court had referred to Section 11 of the Act and observed as under:-

"...... The income of a charitable or religious trust is exempt from taxation under the correlated provisions of sections 11, 12, 12A, 12AA and 13. Section 11 deals with income from trusts for charitable and religious purposes and sets out which income shall be exigible to taxation. Section 11(1) relates to application of income towards the objects of the trust and exempts income of trusts with objects wholly charitable or religious or parts of income which relate to such objects."

24. Mention may also be made of the decisions rendered by this Court in CIT v. Hotel & Restaurant Association: (2003) 261 ITR 190 (Del.), Bharat Kalyan Pratisthan v. Director of Income-Tax (Exemption): (2008) 299 ITR 406, Director of Income-Tax (Exemption) v. Daulat Ram Education Society: (2005) 278 ITR 260 (Del.), Director of Income-Tax (Exemption) v. Mamta Health Institute for Mother and Children: (2007) 293 ITR 380 (Del.) and NBIE Welfare Society (supra). In these decisions, the Court affirmed that if income is accumulated for applying towards the object of the Trust, which is wholly charitable or religious, the exemption under Section 11(2) of the Act would be available to the Assessee, provided the conditions as specified under Section 11(2) of the Act are met. Although these decisions were rendered in the context of Section 11(2) of the Act, the same would also be applicable while interpreting Section 11(1)(a) of the Act, as Section 11(2) of the Act also uses the expression "such purposes" which has been interpreted to mean the charitable/religious objects for which the properties are held in Trust. At this stage, it is necessary to refer to Section 11(2) of the Act, which reads as under:-

Tax Act constituting as a section of public and not a body of individuals?

(B) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fait accompli to hold the Assessing Officer back from further probe into the objects of the trust?"

31. A Division Bench of the Gujarat High Court held that the questions of law raised by the Revenue were covered by its earlier decision in the case of Hiralal Bhagwati v. CIT: (2000) 246 ITR 188 and dismissed the appeal filed by the Revenue. The Revenue preferred a Special Leave Petition against the decision of the Gujarat High Court. Whilst the Supreme Court declined to entertain the SLP in respect of the first question on the ground that the same was covered by the decision in the case of Hiralal Bhagwati (supra) and the same had not been challenged by the Revenue, the Supreme Court granted special leave in respect of the second question. Subsequently, the Supreme Court found that the second question was also covered by the decision of the Gujarat High Court in Hiralal Bhagwati (supra) and, accordingly, dismissed the appeal. In Hiralal Bhagwati (supra), the Gujarat High Court had held that once registration is granted under Section 12A of the Act, after accepting that the objects of the Trust are charitable, the AO cannot take a decision to the contrary. This would stand to reason because once a higher income tax authority i.e. a Commissioner had accepted the application of an Assessee and had accepted that the object of the Trust was wholly charitable, it would not be open for the AO to take a contrary view. Thus, it may not be open for an AO to examine whether the object of the Trust registered under Section 12A of the Act is charitable or not. However, the same would not preclude the AO from examining whether the income derived from the property held in Trust have been applied for the object of the Trust. It is necessary for the AO to conduct this exercise for each assessment year and the grant of registration under Section 12A of the Act would not prevent or in any manner impede the AO from conducting this exercise.